Foreign Direct Investment

Martin
A perspective on regional and global strategies of multinational enterprises, A.Rugman and A.Verbeke; Regional strategies for global leadership, Pankaj Ghemawat
The importance of globalization and crucial role of MNEs are amplified in first article. However, not all MNEs worldwide are considered to be global but rather regional or semi-globalized. Also, the article talks about the concept of triad power as power of market penetration and exploitation as well as avoiding blind spots (unpredictable moves from competitors). Also, author proposes a classification of the top 500 MNEs as Home region orientated (50% and sales, 325 MNEs), Bi-regional (at least 20% in each region, but less than 50% in any one region, 25 MNEs), Host region orientated (50% of sales in a triad market other than home region, 11 MNEs), Global (20% or more in each region, but less than 50% in any one region, 9 MNEs). Moreover, the paper mentions about two terms of international business, upstream end(offshore sourcing, rational manufacturing which is easy to organize due to management similarities and being used through international arbitrage across nations, and downstream end (distribution channels, branding and value adding thorough capitalization of cross market).
As quoted in second article, “It’s often a mistake to have a worldwide strategy; however, better results come from strong regional strategies, brought together into a global whole.” Author also emphasises the importance of regionalization as geographic proximity, cultural, administrative and economic proximity. Five regional strategies in the article are declared as Home based strategy (setting up R&D, manufacturing in their country of origin & reaching foreign market nearby home), The Portfolio Strategy (placing “operations outside the home region that report directly to the home base”), The Hub Strategy (setting up regional bases creating shared resources and services to local market operations leading to value adding at regional level), The Platform Strategy ( cost effective approach across countries within a region), The Mandate Strategy (economies of specialization as well as Scale). Also, it should be taken into account that regional strategies can be used at different geographic levels. Also, it should be pointed out that current structure of the organization might be inconsistent with regional strategy; As a result, the concept of region can be affected by the firm’s own decisions.
Two aforementioned articles try to magnify the importance of globalization in today’s economy, yet with different approaches. First article takes an analytical approach regarding the MNEs who are not really global yet and it offers different strategies in order to get their act together and broaden their market scale internationally. Second article argues that it is better for firms to set their start up strategies region-wise and then get them together as global strategy. In my opinion, a firm can also set its competitive strategy globally from the beginning, only if it has a potential and capability to act globally; since the concept of “Global City” has led the globalization process more efficient and congruent. I think companies can analysis their weakness and strength and invest on those areas and turn them into positive aspects of the company both internally and externally. Also, companies can benchmark from top market players and adopt their framework according to the culture and structure of company. What’s more, firms can create their own value through niche market creation and attract specific group of customers accordingly which would lead to the competitive advantage both regionally and globally.