As earlier chapters have made clear, the twenty-first century MNE is markedly different from its twentieth century predecessors. It has been transformed by an environment in which multiple, often conflicting forces accelerate simultaneously. The globalization of markets, the acceleration of product and technology life cycles, the assertion of national governments’ demands, and, above all, the intensification of global competition have created an environment of complexity, diversity, and change for most of today's MNEs.

As we have seen, the ability of a company to compete based on a single dominant competitive advantage has morphed into a need to develop multiple strategic assets: global-scale efficiency and competitiveness, national responsiveness and flexibility, and worldwide innovation and learning capabilities. In turn, these new strategic demands have put pressure on existing organization structures and management processes. Traditional hierarchical structures, with their emphasis on either/or choices, have evolved toward organizational forms that we have described as transnationals. Such organizations are characterized by their abilities to manage integrated networks of assets and resources, multidimensional management perspectives and capabilities, and flexible coordinative processes.

Continual change in the international business environment has always characterized the task facing MNE managers, and the situation at the end of the second decade of the twenty-first century is no different. Important shifts in political, social, economic, and technological forces have combined to create management challenges for today's MNEs that differ fundamentally from those facing companies just a couple of decades ago. Yet despite intense study by academics, consultants, and practicing managers, both the nature of the various external forces and their strategic and organizational implications are still widely disputed.

When Levitt's classic Harvard Business Review article, “The globalization of markets,” was first published, his ideas provoked widespread debate. In Levitt's view, technological, social, and economic trends were combining to create a unified world marketplace that was driving companies to develop globally standardized products that would enable them to capture global economies. Critics, however, claimed that Levitt presented only one side of the story. They suggested that, like many managers, he had become so focused on the forces for globalization that he was blind to their limitations and equally powerful countervailing forces.

Most domestic companies find it difficult enough to balance business units with corporate staff functions, so the thought of adding a geographically oriented management dimension to the organization can be daunting. It implies maintaining a three-way balance of perspectives and capabilities among organizational units responsible for the MNE's businesses, functions, and regions. The difficulty is further increased because the resolution of the inevitable tensions must be accomplished in an organization whose operating units are divided by distance and time, and whose key members are separated by barriers of culture and language.

Beyond Structural Fit

Because the choice of a basic organizational structure has such a powerful influence on the management process in an MNE, much of the attention of managers and researchers alike was historically focused on trying to find which formal structure provided the right “fit” in various conditions. The most widely recognized early study on this issue was Stopford and Wells’ research on the 187 largest US-based MNEs. Their work resulted in a “stages model” of international organization structure that defined two variables to capture the strategic and administrative complexity most companies faced as they expanded abroad: the number of products sold internationally (“foreign product diversity” in Figure 4.1) and the importance of international sales to the company (“foreign sales as a percentage of total sales”). Plotting the structural changes made by the sample companies, they found that these MNEs adopted different organizational structures at different stages of international expansion. This led Stopford and Wells to develop their international structural stages model.

According to this model, in the early stages of foreign expansion, MNEs typically managed their overseas operations by creating a separate international division. Subsequently, those companies that expanded further by entering more countries with a limited range of products typically adopted an area structure (e.g., European region, Asia–Pacific region). Other MNEs that chose to grow overseas by increasing their foreign product diversity in fewer countries tended to adopt a worldwide product division structure (e.g., chemicals division, plastics division).

Few managers operating in today's international business environment would dispute that this is an extremely exciting time to be engaged in almost any aspect of cross-border management. Fast-changing global developments have created big challenges that appear unusually complex, but at the same time they have opened up new opportunities that seem almost limitless.

Around the world, managers are asking questions like the following: How does the unraveling of the long anticipated Trans-Pacific Partnership (TPP) trade agreement affect our business? What can we do to manage the political disruption and economic dislocation following Brexit? How can we take advantage of the continued rise in Asian markets? How should we deal with the threat of new competitors emerging from developing countries? Can we exploit the impending boom in big data to track and exploit new global trends? How might we harness fast-growing social networks to leverage our cross-border management connections and organizational processes?

Before we launch into these and the other such rich and engaging discussions, perhaps we should step back for a moment to review the broad territory we will be exploring on our voyage of discovery. A good place to start might be with the title of this book. What exactly does Transnational Management mean?

Transnational: What Does That Imply?

The first word on the cover of this book may not be familiar to some. While the terms “multinational,” “international,” and “global” are in widespread general use, it may not be entirely clear to you why we chose to use the less familiar description “transnational” in the title of this book.

Good question. And we promise to respond to it by the end of Chapter 1. By the end of that opening chapter it should be clear to you that we use those four terms quite specifically. Furthermore, you will find that our distinction between “multinational,” “international,” “global,” and “transnational” will become a strong theme that runs through this book in our discussion of strategy, organization, and management.

But more of that later. For the purpose of this introduction, let's just recognize that the “transnational” qualifier indicates that our focus will be on the management challenges that face companies whose operations extend across national boundaries.

Historically, the strategic challenge for a company has been viewed primarily as one of protecting potential profits from erosion through either competition or bargaining. Such erosion of profits could be caused not only by the actions of competitors but also by the bargaining powers of customers, suppliers, and governments. The key challenge facing a company was assumed to be its ability to maintain its independence by maintaining strong control over its activities. Furthermore, this strategic approach emphasized the defensive value of making other entities depend on it by capturing critical resources, building switching costs, and exploiting other vulnerabilities.

This view of strategy subsequently underwent a sea change. The need to pursue multiple sources of competitive advantage simultaneously (as we discussed in detail in Chapter 3) led to the need to build both an interdependent and integrated network organization within the company (Chapter 4) but also collaborative relationships externally with other firms, be they competitors, customers, suppliers, or other institutions.

This important shift in strategic perspective was triggered by a variety of factors, including rising R…D costs, shortened product life cycles, growing barriers to market entry, increasing needs for global-scale economies, and the expanding importance of global standards.

This book grew out of the authors’ strongly held belief that the best research in the academic fields of international business and cross-border management did more than capture the activities, challenges, and best practices from the field. It also translated those findings into practical and relevant lessons for managers and students of management. That philosophy and commitment has shaped the content of Transnational Management over the 25 years since it was first published, and remains at the core of this eighth edition.

Indeed, it was our commitment to deliver current, relevant, and practical research in an engaging format to the students who will be tomorrow's business leaders that led us to make an important change with this new edition. As we became increasingly concerned that many textbooks – including this one – were being priced beyond the means of many of those we were trying to reach, we decided to work with a publisher whose commitments more closely aligned with ours. So this eighth edition of Transnational Management begins our exciting new relationship with Cambridge University Press, a publisher that shares our values.

In the quarter-century since the first edition of Transnational Management was published, much has changed in the field of multinational enterprise management. In the rapidly evolving global environment, new external demands have required innovative new strategic responses, flexible new organizational capabilities, and adaptive new management capabilities. But many seasoned observers who have operated in the global business environment for decades will insist that despite these differences, the core agenda remains remarkably constant. They make a convincing case that beyond ongoing and inevitable adjustments and refinements, the tensions that characterize cross-border management remain much as they have always been: understanding the world's inexorable evolution toward an integrated strategic whole, yet being sensitive to the constantly evolving impediments and constraints to that ideal; recognizing global and regional opportunities while also being aware of cross-cultural differences and responsive to host country demands; developing the ability to be fast, flexible, and adaptive while also overcoming the barriers to such seamless implementation due to the reality of the distance, language, time, and culture that separate worldwide operations.