An empirical study of the desirability and challenges of implementing transnational marketing strategies.

ABSTRACT

The integration-responsiveness (I-R) framework was employed to study the relationship among the alternate international marketing strategies (multidomestic, multifocal, global, transnational). Specifically, the study investigated whether firms which employ marketing strategies that are closer to the transnational model perceive their marketing performance to be higher than those of firms that employ other international marketing strategy types. Data were obtained from a survey of SBUs in large U.S.-based MNEs and then analyzed to evaluate the performance of the SBU's marketing under the alternate international marketing strategies. Results indicate a significant, positive relationship between the extent to which the SBU international marketing strategy approaches that of the transnational type, and the perceived marketing performance of the SBU. The findings suggest that greater improvements in MNE SBU marketing performance are obtained as the efficiencies from global integration and the flexibilities from national responsiveness are pursued without a tradeoff of one for the other. However, the findings also suggest that there may be limitations to the desirability and attainment of transnational strategies from increasing national responsiveness and/or global integration.

INTRODUCTION

Globalization has generated increased demands on multinational enterprises (MNEs) to formulate and implement international strategies that respond to pressures for both external flexibility and internal efficiency (Yip, 1989, 1995). Which international strategy is actually pursued will depend upon the characteristics (e.g., opportunities, constraints) of the external environment, the firm's internal capabilities, and the tradeoffs associated with responding to the pressures for external flexibility, via national responsiveness, and internal efficiency, via global integration. However, prior research has advocated the pursuit of transnational strategies based on the arguments that these strategies reflect overcoming the tradeoffs and, thus, provide for the simultaneous attainment of both external flexibility and internal efficiency. MNEs that pursue transnational strategies are, therefore, argued to obtain greater performance results than those MNEs that do not pursue such strategies (Bartlett and Ghoshal, 1991). However, empirical research to support such results is generally lacking. Building upon and extending the ideas from prior research, this study employs the integration-responsiveness (I-R) framework (Doz, 1980) in an exploratory attempt to further the understanding of these relationships and tradeoffs. The paper reviews the relevant literature on international strategies and the (I-R) framework, with key underlying assumptions identified. A hypothesis is developed, a methodology to test the hypothesis presented, and test results for international marketing strategies reported. Finally, the results are discussed.

PRIOR RESEARCH

Globalization

Made possible by innovations in transportation, communications, and information technology (Macharzina, 1999), globalization is a pervasive and important phenomenon for MNEs that involves the geographic and temporal spread of multitudes of factors, including products, services, people, capital, and operations, throughout a world marked by increasingly porous national boundaries (Boudreau, Loch, Robey, and Straud, 1998; Braga, 1996; Kanter and Dretler, 1998). This spread has led to the acceleration of interdependence within and among MNEs, nation-states, and their stakeholders in economic, political and socio-cultural arenas and across many boundaries (e.g., nations, cultures, economies, technologies, and so forth). Because a fundamental characteristic of interdependence is the existence of relationships in both the MNEs external and internal environments (Gladwin and Wasilewski, 1986), acceleration of interdependence often translates into an acceleration of relationships, prompting MNEs to give heightened attention to the development and management of both the internal and external relationships in the global arena (Bartlett and Ghoshal, 1991; Boudreau, et. al., 1998). In the face of increasing globalization, competitive and prosperous MNEs are likely to be those that more understand and more successfully manage interdependence and relationships in both their external and internal environments. Globalization, through the heightened global interdependence and management of relationships, thus generates increasing demands on the MNE to formulate and implement international strategies which respond to both the external and the internal environmental pressures.

International Strategies

In developing international strategies, managers in MNEs need to be responsive to the demands imposed by local environmental forces (which differ, for example, in terms of political and economic features, customers and competitors) and to attempt to achieve congruence between subunits and their local environments through managerial and operational approaches tailored to local conditions. However, managers in MNEs also need to be responsive to the wider global forces and to also attempt to achieve internal congruence and benefits for the MNE as a whole through standardization and efficiency in operations (Leontiades, 1985; Lorange, Scott Morton and Ghoshal, 1986; Yip, 1995). The former approach reflects the necessity of being flexible, of adjusting policies, practices, operations, and products to satisfy differing local demands that stem from the different external environmental conditions facing the MNE's international subsidiaries; in this way lost opportunities through non adaptation are reduced. The latter approach reflects an attempt by managers in the MNE to standardize operations and products, to integrate international subsidiaries into one entity, to attain the economic advantages that accrue from internal efficiencies through economies of scale; in this way, lost economies from non standardization are reduced. In essence, the former promotes external flexibility at the expense of internal efficiency, whereas the latter promotes internal efficiency at the expense of external flexibility (Wortzel, 1991). The focus selected thus reflects the benefit-cost tradeoff selected between these two countervailing forces (Johansson, 1997).

Historically, these dual approaches have been labeled, respectively, by Fayerweather (1978) as fragmentation versus unification, by Robock and Simmonds (1989) as differentiation versus standardization, and by Doz (1980) (see also Doz, Bartlett and Prahalad, 1981; Doz and Prahalad, 1984; Prahalad and Doz, 1981, 1987) as national responsiveness versus global integration.

I-R Framework

A principal means for studying international strategy has been through the integration-responsiveness (I-R) framework (Prahalad and Doz, 1987; Roth and Morrison, 1990). As shown in Figure 1, the framework is represented as a 2-dimensional grid with the degree to which national responsiveness being pursued is placed on the horizontal axis and the degree to which global integration is pursued being placed on the vertical axis; each axis ranges from low to high, reflecting the managers' perceptions of the international strategy pursued by the firm (Ghoshal and Nohria, 1993).

Alternate international strategies may be differentiated by the extent to which managers pursue the dual approaches. Thus, the I-R grid becomes a convenient means of mapping the alternate international strategies. As indicated in Figure 1, prior research has generally identified four alternate international strategies on the I-R grid (Bartlett and Ghoshal, 1987a; Hitt, Ireland, and Hoskisson, 1997). Because this typology has been generally confirmed by prior empirical studies (Harzing, 2000), it was employed in this investigation.

In a multidomestic strategy, the focus on external flexibility through national responsiveness dominates (high degree of national responsiveness plus low degree of global integration), with strategic decisions decentralized to each country to enable adaptation of products, services, and/or products to local demands (Ghoshal, 1987). In a global strategy, the focus for internal efficiency through global integration dominates (low degree of national responsiveness plus high degree of global integration), with strategic decisions centralized to offer standardized products, services, and/or operations across national markets (Ghoshal, 1987). A multifocal strategy attempts to attain both national responsiveness and global integration by seeking a tradeoff between the conflicting demands (e.g., decision making decentralization versus centralization, adaptation versus standardization, and external flexibility versus internal efficiency) of the two approaches; thus, a multifocal strategy is an intermediate strategy, between the multidomestic and global strategies, possessing moderate levels of national responsiveness and global integration (Prahalad and Doz, 1987). (A multifocal strategy may also be viewed as a response to regional, as contrasted with national and global demands (Morrison, Ricks, and Roth, 1991).) A transnational strategy seeks to achieve high levels of both national responsiveness and global integration simultaneously by overcoming the tradeoff between the conflicting demands of the two pressures (Bartlett and Ghoshal, 1991).

The foregoing discussions suggest that those MNEs with international strategies closer to the transnational model will likely have greater performance than those with an international strategy that is further from the transnational model (Bartlett and Ghoshal, 1991). However, a survey of the extant literature indicates that empirical evidence to support this argument is generally lacking. Focusing on international marketing strategies, this study is an exploratory attempt to fill that void by offering empirical evidence in support of or against the desirability for MNEs to pursue transnational strategies over the other types shown in Figure 1. In addition, if support is found for the general desirability of pursuing a transnational marketing strategy, how might movement towards the transnational strategy be approached is explored.

Hypothesis

For international marketing strategies of MNE SBUs, the foregoing discussion suggests the following hypothesis:

The closer the MNE SBU's international marketing strategy is to the

transnational model, the more successful the international marketing

strategy will be perceived to be.

This hypothesis is consistent with the following rationales. A transnational marketing strategy, at the extreme, would be found at the upper right-hand corner of Figure 1. Consider an MNE pursuing a non-transnational marketing strategy (e.g., multidomestic, multifocal, global). Then, from a given level of national responsiveness, movement toward the transnational marketing strategy model means both a vertical (upward) and horizontal (rightward) movement of, respectively, greater global integration and national responsiveness--achieving greater internal efficiencies and external flexibility. This suggests that, if the MNE were able to achieve that movement, its position would be improved, as it was able to overcome the tradeoff between the pressures for national responsiveness and global integration to attain an improved position in internal efficiency without sacrificing (and even gaining) external flexibility. Note that even if only an upward vertical movement was attained, the MNE's position would still be improved as it would achieve greater internal efficiencies at the same level of external flexibility.

On the other hand, from a given level of global integration, movement toward the transnational marketing strategy model means both a horizontal (rightward) and a vertical (upward) movement of, respectively, greater national responsiveness and global integration--achieving greater external flexibility and internal efficiency. This suggests that if the MNE were able to achieve that movement, its position would be improved, as it was able to overcome the tradeoff between the pressures for national responsiveness and global integration to attain an improved position in external flexibility without sacrificing (and even gaining) internal efficiencies. Note that if only an rightward horizontal movement was achieved the MNE's position would still be improved, as it would achieve greater external flexibility at the same level of internal efficiency.

This study specifically investigates the question of whether firms closer to the transnational marketing strategy type perceive a higher level of marketing performance; whether pursuit of a transnational marketing strategy is more desirable than pursuit of alternate international marketing strategies. The investigation was carried out through a survey of MNE SBU managers in large U.S.-based MNEs. The managers were asked to complete a questionnaire about the international marketing strategies employed at their SBU.

METHODOLOGY

This study focuses on the desirability of pursuing a transnational strategy over alternate international strategies. However, Bartlett and Ghoshal (1991) found that the particular combination of pressures for national responsiveness and pressures for global integration faced by an MNE, and thus the international strategy which the MNE employs to respond to the pressures, may differ by function (e.g., marketing, research and development, manufacturing) within the MNE. To avoid the potential problem of needing to incorporate the variable of organization function, which is beyond the scope of this study, it was deemed desirable, therefore, to focus on one function. This study focused on the MNE's international marketing strategies.

Measurement of International Marketing Strategy

The international marketing strategy of the firm is determined by its long-term objectives, and is indicated by the kind of decisions the firm makes about product, pricing, promotion, and distribution policies; for example, whether and to what extent the various policies should be uniform versus adapted to local conditions. Drawing on the works of Fayerweather (1978), Grein, Craig, and Takada (2001), Negandhi (1987), and Rugman, Lecraw, and Booth, (1985), two sets of statements were developed that measure the degree to which the international marketing strategy of the respondent's SBU emphasizes global integration and/or national responsiveness. Each set consisted of six statements. Respondents indicated their level of agreement or disagreement with each of the twelve statements on a seven-point Likert scale, with "1" being "Strongly Disagree," "2" being "disagree," "3" being "tend to disagree," "4" being "neutral," "5" being "tend to agree," "6" being "agree," and "7" being "strongly agree."

Global integration is manifested in terms of an international marketing strategy that aims to achieve worldwide economies of scale in the marketing of goods, which is usually attained by using standardized products for sale around the world, a uniform pricing policy, a standardized approach to advertising and promotion, a standardized approach to distribution, and by implementing product innovations uniformly on a worldwide basis. In the first set of statements, six items were used to measure the degree to which the firm was committed to a global integration strategy. Each began with the phrase "My SBU's international marketing strategy aims to: ..." and continued: 1) market standardized products throughout the world; 2) employ a standardized worldwide pricing policy; 3) employ uniform advertising processes and techniques in different markets for the same product; 4) use similar distribution channels in different markets; 5) apply product changes on a worldwide basis; and 6) treat the world as a single market for a given product.

In contrast, national responsiveness is manifested in terms of an international marketing strategy that aims to tailor the marketing policies (e.g., product, pricing, promotion and distribution) to local situations. In the second set of statements, the six items that were used to measure the degree to which the firm was committed to a national responsiveness strategy began with the same phrase. These statements were: 1) tailor product characteristics to the local market; 2) set a minimum price and then adjust it for local conditions; 3) employ customized advertising and promotion approaches for each market; 4) use distribution channels that are consistent with local practices, 5) introduce product innovations/changes selectively, according to local market characteristics; and 6) treat the world as unique, individual markets.

The pressures for global integration and national responsiveness are simultaneously existing countervailing forces which impose conflicting (opposing) demands on the firm. The two sets of statements were developed to describe the international marketing strategy being employed in order to obtain a measure of the degree to which the firm's international marketing strategy addresses pressures for, respectively, global integration and national responsiveness. Thus, the two sets of statements, first versus second, ought also to represent conflicting (opposing) conditions, which is indeed the case. Also, having the two separate sets of statements reduced the likelihood that the respondent would respond in such a way that the answers to the first set will be treated as necessarily opposite to the answers to the second set.

Measurement of Performance

The performance of the international marketing strategy was measured on a seven-point scale (with "1" being "lowest 20 percent," "4" being "middle 50 percent," and "7" being "top 20 percent"), asking the respondents to rate the perceived level of overall international marketing performance for their SBU from the question: "On the average over the past five years, how do you rate your SBU's overall marketing performance/success, as compared to other firms of similar sales volume in your industry and region?"

Because international marketing performance at the SBU level is generally unavailable from secondary data sources, and MNE managers are often reluctant to disclose such specific performance data, and there is evidence of the general reliability of self-reported performance measures (e.g., Dess and Robinson, 1984; Venkatramen and Ramanujam, 1986, 1987), it was deemed satisfactory to employ this approach to measuring the SBU's international marketing performance.

Sample Selection

The following criteria guided the selection of this sample. Regarding MNE nationality, research has suggested that because managerial values, attitudes, and behaviors differ across cultures, different national cultures are likely to elicit different practices in the management of enterprises (Newman and Nollen, 1996). Thus, the international marketing strategies of U.S.-based MNEs may differ from those of MNEs based in other countries due to, for example, sociocultural influences. For example, research studies have found differences in the strategic decision orientations and processes of U.S., Korean, and Japanese executives (Hitt, Dacin, Tyler, and Park, 1997; Kotha, Dunbar, and Bird, 1995) and in the international marketing strategies of Japanese versus European firms (Grein, et. al., 2001). To avoid the potential problem of needing to incorporate such factors that are beyond the scope of this study, the sample was restricted to U.S.-based MNEs.

Regarding large U.S.-based MNEs, studies have suggested that firm size may influence the manner in which international marketing is conducted: because larger MNEs are likely to possess greater resources to devote to international marketing activities and to enjoy economies of scale in the use of these resources, larger firms may have a greater opportunity to incorporate national responsiveness into their international marketing strategies (cf., Stopford and Wells, 1972). To avoid the potential problem of needing to incorporate the variable of firm size, which is beyond the scope of this study, the sample included only large MNEs.

Regarding SBUs of MNEs, more than one of the international strategies shown in Figure 1 may be employed by an MNE. An MNE, containing strategic business units (SBUs) in a diversity of industries that face different combinations of national responsiveness and global integration pressures, is unlikely to employ one international strategy exclusively, but instead is more likely to employ simultaneously a variety of international strategies of differing degrees or mixtures (Bartlett, 1986; Bartlett and Ghoshal, 1987a, 1987b, 1991; Doz, et. al., 1981; Doz and Prahalad, 1984; Prahalad and Doz, 1981, 1987, 1991). For example, from their case studies of large MNEs, Bartlett and Ghoshal (1987b) found that firms such as Unilever employed different international strategies for different SBUs and different functions within an SBU. Large MNEs are, thus, likely to contain various SBUs that vary in their international strategy orientation, organizational structure and the nature of their external environments. To focus the questionnaire to a target sample, the SBU was selected as the unit of analysis.

The target sample of large U.S.-based MNEs was derived as follows. First, the companies listed in the Forbes 500s, the Fortune industrial 500, the Fortune service 500, and the Business Week top 1000, were combined to produce a list of the 1385 largest U. S. corporations. Then, the list of 1385 companies was pruned: preference to retaining those U.S. firms listed in the Business Week "global 1000" and Forbes "largest U.S. multinationals" while excluding non-MNEs (such as local public utilities, domestically-oriented savings and loan institutions), majority-owned subsidiaries of non-U.S. based firms, and "smaller" firms (those not listed in at least two of the four sources for the list of 1385 corporations). The resulting master mailing list comprised 532 firms likely to represent large U.S.-based MNEs.

Data Collection

The data were collected via a mail questionnaire. The letter explaining the study and soliciting cooperation as well as the questionnaire were pretested with several corporate managers from large U.S.-based MNEs. The revised letter and questionnaire were sent to the top manager (CEO or President) of each of the 532 firms requesting that the senior manager of an SBU within the firm complete and return the questionnaire. When cooperation was obtained, the appropriate SBU managers within each firm were mailed the questionnaires. The initial and follow-up mailings yielded a total of 113 usable questionnaires from 113 SBUs of 100 large U.S.-based MNEs (19 percent of the 532 MNEs contacted). The number of usable questionnaires (and responding SBUs) is larger than the number of responding MNEs: ninety five MNEs each responded with one questionnaire each for one SBU within each firm, and five MNEs each responded with one questionnaire each for several SBUs within each firm.

In evaluating the data, two assessments were made. The first considered that some MNEs responded with one questionnaire each (i.e., one SBU each) and other MNEs responded with several questionnaires each (one questionnaire for each of several SBUs). Because the SBU is the unit of analysis in this study and the questionnaires are focused on SBUs within an MNE, it was deemed appropriate to retain all of the 113 usable questionnaires in analyzing the data. Second, t-tests were used to make an assessment of the representativeness of the respondents to this study. As compared both to the population surveyed in this study and to the nonrespondents, the total sales and gross profits of the respondents were significantly greater (p < 0.05). Since this study sought to survey large firms, the respondents were deemed appropriate for this study.

Respondent Characteristics

Following are key characteristics of the respondents. The sample of 100 MNEs had: worldwide revenues ranging from U.S.$ 500 million to over U.S.$ 80 billion with a mean of U.S.$ 9 billion and median of U.S.$ 3 billion. The sample of 113 SBUs had: worldwide revenues ranging from U.S.$ 10 million to U.S.$ 28 billion with a mean of U.S.$ 1.9 billion and median of U.S.$ 553 million. Forty-three, or 38.1 percent, of the sample of 113 SBUs are from MNEs listed in the Forbes 120 largest U.S.-based MNEs.

Both the MNE and the SBU samples cover 7 of the 9 SIC (Standard Industrial Classification) divisions with the majority (71 percent of MNE and 72 percent of SBU samples) being primarily manufacturing firms. In terms of primary 2-digit SIC categories, the MNE and SBU samples cover 33 and 31 categories, respectively; the more populous SIC codes were 28 (chemicals and allied products), (15 percent of MNEs, 18 percent of SBUs) and 35 (industrial & commercial machinery & computer equipment), (10 percent of MNEs, 11 percent of SBUs).

DATA ANALYSIS AND RESULTS

To view overall international marketing strategy on the I-R grid, additive scales labeled NATRESP6 and GLOBINT (each ranging from a minimum possible value of 1 to a maximum possible value of 7). Each scale was composed of the six items representing the degree to which the international marketing strategy is characterized as national responsiveness and global integration respectively. The scale items were presented in the methodology section. The standardized alpha for the GLOBINT scale was found to be 0.8012 and 0.7325 for the NATRESP6 scale; both scales are deemed to have satisfactory internal reliability for exploratory research (Nunnally, 1978; Peter, 1979; Van de Ven and Ferry 1980). As indicated in Figure 2, the location of each of the sample MNE SBU's international marketing strategies in the I-R Grid were obtained by simply plotting their corresponding computed values of GLOBINT and NATRESP6. Table 1 shows the descriptive statistics for the key variables in this study.

[FIGURE 2 OMITTED]

The "ideal transnational marketing strategy" is located at the upper right hand corner of the I-R Grid in Figure 2, where both GLOBINT = 7 and NATRESP6 = 7. The degree to which an MNE SBU's international strategy approached the transnational model was computed as the distance, D, from the MNE SBU's international marketing strategy location plotted in Figure 2 to the upper right hand corner of the I-R Grid in Figure 2. Specifically, the value of D was computed from the following equation:

D = absolute value {square root [((7 - NATRESP6) squared) + ((7 - GLOBINT) squared)]}.

For example, the value of D for an MNE SBU with NATRESP = 5, GLOBINT = 4 would be D=3.606. The smaller the absolute value of D, the closer the international marketing strategy approaches that of the `ideal' transnational model.

To determine whether an MNE SBU's international marketing strategy was perceived as more successful as the international marketing strategy approached the `ideal' transnational model, a Pearson's correlation was computed between the variables D and MPRAT. The resultant Pearson's correlation was: r = -0.1852, p = 0.0574. Applying the criteria recommended by Labovitz (1968) for selection of statistical significance in research studies, this significance level is considered to provide support for the hypothesis. The relevant criteria are: (1) convention, which has promoted the use of significance levels of 0.01 and 0.05; (2) the practical consequences of the study, i.e., the gravity of an error to an individual or society if the decision is incorrect, which is relatively low in this study, permitting a less stringent significance level; (3) the plausibility of alternatives, relatively few of which exist in this case, thus permitting a less stringent significance level; (4) degree of control in the design of the test, i.e., the degree to which other factors are controlled, with lower control, as in this study, promoting a more stringent significance level; and (5) the degree to which the study is exploratory, with highly exploratory studies such as this needing a less stringent significance level. From the foregoing, and in view of the highly exploratory nature of this study, a significance level of p = 0.057 is considered good support for the hypothesis. The results show a significant negative correlation supporting the hypothesis of this study, namely, the closer the MNE SBU's international marketing strategy is to the transnational model, the more successful the international marketing strategy, in terms of marketing performance, is perceived to be.

DISCUSSION

The results of this study provide empirical support for Bartlett and Ghoshal's (1991) arguments of the desirability for the MNE to attempt to pursue strategies that approach the transnational model. In particular, an international marketing strategy that is increasingly transnational improves the MNE's position in internal efficiencies and/or external flexibilities without sacrificing one for the other. Furthermore, as the earlier discussions in this paper about the nature of globalization and its impacts suggest, increasing globalization is likely to increase the need to, and hence, the desirability of pursuing transnational marketing strategies over the other international marketing strategy types. However, pursuit of a transnational marketing strategy requires that the MNE overcome the tradeoff between the pressures for national responsiveness and global integration. As such, in the face of increasing globalization, more successful MNEs are likely to be those that are more able to overcome this tradeoff--thus, becoming more `global' may be insufficient as becoming more `transnational' is likely to be more desirable.

The foregoing does not support the skepticism of researchers and those that have questioned the desirability of pursuing transnational strategies in general (Roth and Morrison, 1990; Leong and Tan, 1993), and transnational marketing strategies in particular (Fleenor, 1993; Szymanski, Bharadwaj and Varadarajan, 1993; Morrison and Roth, 1991; Douglas and Wind, 1987) for reasons that include: globalization is no panacea because global imperatives are being eclipsed by a rise in regional pressures (Morrison, Ricks, and Roth, 1991) leading to an increased emphasis on multifocal strategies, and increasing divergence in the characteristics of national markets (Craig, Douglas, and Grein, 1992) leading to increased emphasis for localized approaches (Ozosomer and Prussia, 2000). Rather, the findings of this study provide encouragement to pursue a transnational model for international marketing strategies, the success from which is perceived to be greater than that obtained from the other international marketing strategies.

However, questions arise--given the general desirability of pursuing a transnational marketing strategy, Figure 2 shows that transnational approaches to international strategy are relatively uncommon--why the relative scarcity of such strategies? Secondly, to pursue a transnational strategy, how should the trade-off between the conflicting demands of national responsiveness and global integration be approached? Although the answers to these questions are beyond the scope of the data in this study, following are some exploratory considerations to stimulate discussion and future research.

In pursuing national responsiveness, greater adaptability and decentralization of control of business activities are required, which contain the benefits (greater revenues from an improved ability to meet the differentiated needs of the local national market) and costs (greater costs from reduced economies of scale in operations) associated with the strategy. In contrast, in pursuing global integration, greater standardization and centralization of control of business activities are required, which contain the benefits (reduced costs from increased economies of scale in operations) and costs (lower revenues from a reduced ability to meet the differentiated needs of the local national market) associated with the strategy. Given these conflicting requirements of external flexibility and internal efficiency, there results a benefit-cost tradeoff in the pursuit of an international marketing strategy (Johansson, 1997). Thus, the ability of firms to pursue a transnational strategy that provides for both external flexibility and internal efficiency may be limited. For example, simultaneous pursuit of the conflicting goals adaptation-standardization and decentralization--centralization that may be addressed, in part, by "flexible coordination" attained through development of a shared vision and individual commitment through an integrated network (Bartlett and Ghoshal, 1991; Hitt, Ireland, and Hoskisson, 1997). But, attainment of the quality and quantity of "flexible coordination" may be limited perhaps due to a variety of exogenous factors (e.g., the norms and rules of competitive behavior that constrain managers' strategic behaviors (Birkinshaw, Morrison, and Hulland, 1995); local pressures that require that management practices be congruent with national cultures in order to promote improved financial performance (Newman and Nollen, 1996) and endogenous factors (e.g., managerial myopia; lack of sufficient resources). Thus, the firm may not be able to pursue a transnational marketing strategy to the degree necessary to effectively respond to the "dual pressures" and benefit-cost tradeoff.

Another limitation to increasing the degree to which an international marketing strategy becomes transnational may be due to the `diminishing returns' from increasing the external flexibility (via national responsiveness) and/or internal efficiency (via global integration) of an international strategy. Consider an MNE SBU with an international marketing strategy located at some point on the I-R Grid. To make the international marketing strategy more `transnational,' attempts could be made to increase: the degree of national responsiveness only, or the degree of global integration only, or the degree of both national responsiveness and global integration, of the strategy. Analyses were performed in an exploratory attempt to determine whether one direction was more desirable than another.

First, an assessment was made to determine whether the perceived performance of an MNE SBU's international marketing strategy increased as the strategy increased in national responsiveness alone. This was accomplished by measuring the degree to which an MNE SBU's international marketing strategy was national responsiveness, computed as the distance, DNR, from the MNE SBU's international marketing strategy location plotted in Figure 2 to the extreme right hand side (where NATRESP6 = 7) of the I-R Grid. The smaller the value of DNR, the greater the degree of national responsiveness of the international marketing strategy. Then, a Pearson's correlation was computed between the variables DNR and MPRAT. The resultant Pearson's correlation, r = -0.0194, p = 0.8438, indicates the lack of a significant correlation. This suggests that, for the data in this study, only increasing the degree of national responsiveness of an international marketing strategy will not necessarily result in a greater perceived performance of the strategy.

Then, an assessment was made to determine whether the perceived performance of an MNE SBU's international marketing strategy increased as the strategy increased in global integration alone. This was accomplished by measuring the degree to which an MNE SBU's international marketing strategy was global integration, computed as the distance, DGI, from the MNE SBU's international marketing strategy location plotted in Figure 2 to the extreme top side (where GLOBINT = 7) of the I-R Grid. The smaller the value of DGI, the greater the degree of global integration of the international marketing strategy. A Pearson's correlation was then computed between the variables DGI and MPRAT. The resultant Pearson's correlation, r = -0.1725, p = 0.0743, was deemed significant. This suggests that, for the data in this study, only increasing the degree of global integration of an international marketing strategy will likely result in a greater perceived performance of the strategy.

These analyses raise the question--why does increasing global integration lead to a perceived increase in international marketing strategy performance, but increasing national responsiveness does not?

Figure 2 provides a clue to the answer to this question-in general, the MNE SBUs in this study have international marketing strategies that are relatively closer to the maximum degree of national responsiveness (NATRESP6 = 7) than they are closer to the maximum degree of global integration (GLOBINT = 7). For example, the mean value of DNR = 2.0409 (std. dev. = 1.013) was smaller than that of the mean value of DGI = 3.548 (std. dev. = 1.249), with the difference between the means being highly significant (paired sample t-value = -7.91, p < 0.00001) (the ratio DNR/DGI had a mean = 0.742, with std. dev. = 0.618). Thus, one possible interpretation of these analyses is that, as the international strategy approaches its maximum value (be it in terms of national responsiveness, or in terms of global integration, or in terms of both), the less likely is there to be an associated increase in (or the more likely there is to be a lesser increase in) the perceived performance of the international strategy. That is, in terms of perceived increases in international marketing strategy performance, there may be `diminishing returns" to increasing the external flexibility (via national responsiveness) and/or internal efficiency (via global integration) and/or both (via pursuit of a transnational model) of an international marketing strategy. For MNE SBUs, the foregoing suggests that, if the international marketing strategy is relatively closer to the maximum national responsiveness than to the maximum global integration, then a greater improvement in perceived international marketing strategy performance is more likely to be obtained by increasing the degree of global integration (i.e., greater internal efficiency) than by increasing the degree of national responsiveness (i.e., greater external flexibility) of the strategy. On the other hand, if the international marketing strategy is relatively closer to the maximum global integration than to the maximum national responsiveness, then a greater improvement in perceived international marketing strategy performance is more likely by increasing the degree of national responsiveness (i.e., greater external flexibility) than by increasing the degree of global integration (i.e., greater internal efficiency) of the strategy.

For MNE SBUs attempting to increase the degree to which their international marketing strategies approach the transnational model, the foregoing discussion suggests that it may indeed make a difference as to whether the approach is made via greater national responsiveness and/or via greater global integration firms. To increase the likelihood that a greater improvement in international marketing strategy performance is achieved, the MNE SBUs need to carefully assess the location of their current strategy on the I-R Grid, the direction toward the transnational model, and the relative increases in external flexibility and internal efficiency needed to be generated. However, as there may be limitations as to the relative increases in external flexibility and internal efficiency that are desirable, there may also be `diminishing returns" in the pursuit of a `transnational strategy."

CONCLUSION

In conclusion, while this paper has provided an initial set of empirical results with respect to the desirability of pursuing a transnational strategy, the foregoing discussion suggests that more work needs to be done to understand the MNE's needs, capabilities, and limitations related to effective international strategy formulation and implementation. For example, the present study has a number of limitations that could be addressed by further research. The sampling frame included primarily manufacturing businesses of large U.S.-based MNE SBUs. Research should extend this frame to MNEs from other countries, nonmanufacturing businesses and smaller firms. In this study, international strategies were restricted to marketing; a study of other international strategies, such as manufacturing, is called for. A longitudinal study should be conducted to ascertain whether and what changes are taking place in the "dual pressures" faced by the firms and their response to the pressures.

Overall, this study suggests that firms designing international marketing strategies should attempt to pursue the transnational model, but they also need to develop means to overcome the tradeoffs associated with the external flexibilities derived from national responsiveness and the internal efficiencies derived from global integration. It is important that future studies develop means to overcome these tradeoffs. In addition, greater understanding of the limitations to the desirability and attainment of transnational strategies via increasing national responsiveness and/or global integration warrant further investigation. TABLE 1 Descriptive Statistics of Key Variables

Mean Std. Range

Dev. GLOBINT 3.452 1.249 1.00 - 5.83 NATRESP6 4.959 1.013 2.00 - 7.00

D 4.312 0.912 1.67 - 6.30 MPRAT 5.523 1.259 3.00 - 7.00 FIGURE 1 The Integration-Responsiveness Grid

Degree of

National Responsiveness Degree of

Global Integration Low High High Global Transnational

Strategy Strategy

Multifocal

Strategy

Multidomestic Low Strategy Source: Adapted from Bartlett and Ghoshal (1987a) and Hitt, Ireland, and Hoskisson (1997)

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Nikolai Wasilewski is Associate Professor of Strategy at The George L. Graziado School of Business and Management, Pepperdine University. He received his Ph.D. in international business and management from the Stem School of Business, New York University. His research interests include international strategy, strategic information systems, strategic thinking and decision-making.