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23/24 Summary Strategy and Nonmarket Environment (Radboud, MAN-MST025 1) - Articles & Lectures
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Lecture 1 (week 1)Why does global strategy matter?
In this meeting, we introduce the general course set-up, approach to learning, and overall
expectations. We also form a basic understanding of global strategy, drawing from both the
international business (IB) and the strategic management (SM) field. We discuss why global strategy
– both with respect to market and non-market elements - is important in today’s interconnected
world to generate a competitive advantage, and how it may help to disentangle the complex nature
of the internationalization performance relationship.
Global Strategy: involves the study of cross-border activities of economic agents or the strategies and
governance of firms engaged in such activity. Why Global Strategy is important:
- Global trends in technology, society, politics, economics, etc.
- Variations in the sociocultural, politico-legal, techno-economic and geographic characteristics
of countries
Examples: global value chains become complex, sustainability goals, cyber security,
COVID-19.
Buckley, P. J. (2022). Navigating three vectors of power: Global
strategy in a world of intense competition, aggressive nation states,
and antagonistic civil society.
Introduction
- The article by Peter J. Buckley explores the evolving complexities faced by multinational
enterprises (MNEs) in the contemporary global environment, characterized by three
powerful external forces: state policies, market competition, and pressures from civil
society.
- The global landscape has been significantly altered by events such as the global financial
crisis, the rise of protectionism, anti-globalization sentiment, and the impact of the COVID-19
pandemic.
- These changes demand a rethinking of global strategy, as MNEs must now navigate a world
with increasing governmental oversight, active civil society scrutiny, and intensified market
competition.
- The article emphasizes that MNEs’ core strengths—innovation and flexibility—are essential
for adapting to these challenges, enabling them to thrive despite the constraints posed by
the external environment.
The Governance Triangle
Buckley introduces the Governance Triangle, a framework that captures how MNEs are governed
through interactions with three external forces:
1
, 1. Governance through Coordination (State): This refers to the role of governments in
regulating and overseeing MNE activities, which has increased significantly in recent years.
2. Governance through Argumentation (Civil Society): This involves the influence of civil society
actors, such as NGOs, activist investors, and social movements, on corporate behavior and
decision-making.
3. Governance through Competition (Market): The competitive pressures that arise from global
market dynamics, including technological change, emerging competitors, and shifting
consumer preferences.
Key Vectors of Power
1. The State: Governance through Coordination
o The role of the state in regulating MNEs has become more pronounced, particularly
in the wake of the global financial crisis and the COVID-19 pandemic.
o Governments have increased their leverage over businesses through various
measures, including conditionality in loans, stricter regulations, and policies aimed at
achieving broader societal goals like climate action.
Examples include the emphasis on Environmental, Social, and Governance (ESG)
goals, with countries like India mandating a portion of revenue to be spent on societal
causes.
o The rise of techno-nationalism (= a focus on protecting strategic industries for
national security reasons) further complicates the landscape, with countries like
China and the US adopting divergent approaches to technology and economic policy.
o States also grapple with implementing policies like BEPS 2.0 (Base Erosion and Profit
Shifting) and enforcing stricter tax compliance, adding to the regulatory burden for
MNEs.
2. Civil Society: Governance through Argumentation
o Civil society actors, including NGOs, activist investors, and socially conscious
consumers, play a critical role in shaping MNE strategies through advocacy for ethical
practices and sustainable business models.
o The rise of the ESG movement has made it imperative for companies to align their
operations with societal expectations around environmental responsibility, social
equity, and good governance.
o This has led to increased focus on corporate social responsibility (CSR) and corporate
political activity (CPA), where companies actively engage with governments and
other stakeholders to maintain their legitimacy.
2
, oMNEs face challenges in balancing the expectations of local stakeholders with those
of international audiences, as differing norms and values can create tensions in
strategy.
o The concept of corporate diplomacy has emerged as a way for MNEs to navigate
these pressures, using relationship-building and engagement with various societal
groups to secure a favorable operating environment.
3. The Market: Governance through Competition
o The pressures of market competition remain a dominant force, pushing MNEs to
innovate, improve efficiency, and adapt to rapidly changing market conditions.
o The rise of new competitors from emerging markets, technological advancements,
and changes in consumer behavior necessitate continuous adaptation.
o MNEs must contend with global value chains (GVCs) that are subject to pressures
from both market dynamics and external regulations, requiring flexibility in managing
their supply chains.
o The competition extends to the capital markets, where hedge funds and investors
can exert pressure on companies to optimize performance or break up inefficient
structures.
o The need to balance these market-driven imperatives with compliance to
government regulations and civil society demands makes strategic decision-making
more complex for MNEs.
Challenges in the Fractured Global Economy
- Buckley highlights the fractured global economy, where geopolitical divides, particularly
between China and Western countries, create challenges for global trade and investment.
- This division is evident in the emergence of the “splinternet,” where different regions adopt
varying standards for internet governance and data privacy, such as China’s “Great Firewall”
versus the more open models seen in the US and Europe.
- MNEs must choose between focusing on one part of the divided global market or developing
strategies that span across these geopolitical divides, such as adopting multi-domestic
operations or forming regional alliances.
- The fracturing extends to global value chains, where shifts in trade policies and consumer
preferences require MNEs to rethink their sourcing and manufacturing strategies to maintain
resilience.
Strategies for MNEs in a Changing Landscape
1. Government and Regulation
o MNEs must adapt to the heightened role of the state in economic activities,
especially as governments become more involved in shaping industries deemed
strategic.
o Building local embeddedness is crucial, where subsidiaries are not just seen as
foreign outposts but as integral parts of local economies and institutions, fostering
closer relationships with regulators and communities.
2. Civil Society Pressure
3
, o Transparency and accountability are key for maintaining a positive reputation among
civil society actors, requiring MNEs to set clear and measurable ESG (environmental,
societal & governance) goals.
o MNEs are encouraged to engage in genuine CSR efforts rather than symbolic actions
like “greenwashing” (= practice of misleading consumers by falsely portraying a
company's products, services, or practices as more environmentally friendly than
they actually are) to ensure long-term trust with consumers and stakeholders.
o Aligning with United Nations Sustainable Development Goals (SDGs) can provide a
strategic framework for MNEs to demonstrate their commitment to global
sustainability and social equity.
3. Market Pressures
o MNEs need to enhance the resilience of their GVCs by incorporating flexibility and
redundancy to better handle disruptions, such as those caused by trade tensions or
supply chain shocks.
o Strategies like servitization (= process of shifting from selling products to offering
integrated products and services that provide ongoing value to customers), where
products become part-service (e.g., subscription-based services in automotive
sectors), are increasingly important as companies look to diversify revenue streams.
o Maintaining competitiveness requires a focus on innovation in products and
processes, as well as leveraging digital transformation to improve efficiency and meet
new consumer demands.
4. New Corporate Strategies
o Buckley suggests that MNEs may need to explore alternative organizational
structures like multi-domestic strategies, where firms operate more independently
in each market to better navigate geopolitical divides.
o Non-market strategies, such as engaging with social movements and aligning with
societal goals, can serve as insurance policies against regulatory and social risks.
o At a strategic level, fostering a culture of innovation and flexibility is crucial for long-
term survival, enabling MNEs to adapt quickly to external changes and seize
emerging opportunities.
Conclusion: Adapting Global Strategy
- The article concludes that MNEs must integrate a deeper understanding of the interplay
between government regulation, civil society demands, and market pressures in their
strategic planning.
- The “web of constraints” created by these forces is also a “web of opportunities,” where
MNEs can leverage their unique strengths to develop new strategies and thrive in a complex
global environment.
- Successful MNEs will be those that balance adaptation to the current environment with
proactive innovation, influencing external conditions through engagement with stakeholders
and introducing new products and services that address global challenges.
- Flexibility and innovation remain at the heart of effective global strategy , allowing MNEs to
navigate a world where external pressures are ever-changing and success depends on the
ability to adapt quickly and creatively.
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