When Transnational Management was first published in 1992, the world was a different place.
"The global economy was radically restructuring in the wake of an era of accelerating globalization in the 1980s," says Harvard Business School professor emeritus Christopher A. Bartlett, who coauthored the textbook and its updates with the late Sumantra Ghoshal (HBS DBA '86) and Paul W. Beamish of the University of Western Ontario. "The Japanese juggernaut had just come driving through the United States, challenging the international strategy of so many companies."
“Having eyes and ears around the world is critical”
Nearly 20 years later and in its sixth edition, Bartlett's case-filled textbook (which he describes as a "continuing passion") offers the opportunity to reexamine the ever-changing nature of multinational corporations (MNCs) and cross-border management while confirming and further exploring some basic challenges that have, more or less, remained the same.
"There are three core strategies that any MNC has to pursue to build layers of competitive advantage," Bartlett says. "The first is to use worldwide operations to build global scale efficiency. If you're Ford or Toyota, for example, you have to compete in the world market to capture the minimum efficient scale."
The second requirement, often in conflict with the first, is a sensitivity and responsiveness to national differences. "It's a closeness to the market that enables you to adapt and modify, not just produce one single, standardized product. The simplest example might be the need for a right-hand drive Toyota Corolla in the UK," Bartlett says.
The third imperative is to leverage the world for information, knowledge, and expertise. "The latest consumer trend or technological development may be emerging in Germany or Japan, not your home market," Bartlett says. "Having eyes and ears around the world is critical, as is having the response capabilities to tap into the best and brightest, wherever they may be. Companies can no longer assume that all the smart people in the world are born within a 20-mile radius of their headquarters."
This last factor—of being able to develop and diffuse innovation rapidly around the world—has emerged to become much more important as companies constantly renew their product line or service business, Bartlett says. "That's a big change that's taken place."
The World's Communication Pipeline
Another seismic shift is the broader context in which companies now operate, forgotten all too easily in today's hyper-connected world. "Back in 1992, the Internet was a very narrowly used technology," Bartlett says. "It is now the communication pipeline of the world."
The organizational capability of a company to rapidly develop and diffuse innovation is incredibly important but difficult to cultivate, he continues.
"Back when the book was first published, it required a huge amount of travel, with communications mailed and faxed around the world. Things are obviously different now, with the Internet, satellite phone connections, and video conference calls on Skype."
Those communications channels are of critical importance, Bartlett adds, when it comes to resolving the inherent tensions between headquarters—where the focus might be on standardizing products to drive down cost—and subsidiaries lobbying to adapt products to meet the specific needs of a local market.
Making The Global Manager
What are the requisite characteristics of a "global manager," if there is such a thing anymore?
"Today, I would argue that you don't put that qualifying adjective in front of manager—we all simply operate in a global environment," Bartlett says. "It used to be that you would make a career choice to be in the 'international division.' "
And in the 1960s and '70s, a foreign assignment could be far from a promotion: "It was sometimes the failed domestic managers who were sent abroad."
“Companies can no longer assume that all the smart people in the world are born within a 20-mile radius of their headquarters”
In today's world, however, a shortage of human capital, not financial capital, is the bigger constraint. "Companies look for bright, capable managers all over the world; there's much more fluidity across the organization in that sense." (A case in point is Carlos Ghosn, a Brazilian-Lebanese who serves as chairman and CEO of the Japanese and French automakers Nissan and Renault.)
Managers operating in a global environment obviously need a broad perspective and the ability to relate to other people and cultures in an open, engaged way. Beyond that, Bartlett points to the need for the mental flexibility that enables a manager to negotiate, adapt, and modify the layers of competitive advantage and various strategic imperatives that are part of any multinational company.
"We talk about building a matrix into the organization's structure that enables people to be responsible for the global product line, the geographic area, the functional expertise of R&D or marketing," says Bartlett. "That's still necessary, but much more important is to build a matrix in the manager's mind so that he or she sees the world in terms of the tensions, conflicts, and trade-offs that are part of operating in today's world."
Envisioning The Future
Bartlett describes Transnational Management as being in a constant state of evolution. The most recently added chapter, "The Future of the Transnational," includes a case study on the pharmaceutical company Genzyme and its efforts to establish Humanitarian Assistance for Neglected Diseases (HAND), a corporate social responsibility program focused on treatments for diseases that typically affect too small a population to warrant the attention of drug development companies.
"As the organizational model of the transnational has evolved, it's become a critical player in the development of the global political and social economy," Bartlett says. "With that enormous power comes an increased responsibility; this most recent chapter highlights the role that the transnational company has in bringing about change to the world."
As the Genzyme case shows, that responsibility is accompanied by considerable complexities and trade-offs. The company's initial focus on developing a treatment for Gaucher disease extends to malaria, TB, and Chagas disease, with various global partnerships and constituencies cropping up along the way. The crux of the case becomes apparent soon enough: Can Genzyme's HAND program manage all of these initiatives successfully without stretching itself too thin? Given its priorities, what should its partnering strategy look like?
"This is really the next frontier for the transnational company," Bartlett says. "How does it move beyond its role as an economic entity and recognize itself as a key player in the sociopolitical environment in which it has responsibility as well as power?"
Given the scope and influence of today's global corporations, the answer to that question promises to shape the world as we know it for years to come.