The strategies of MNEs at the start of the twenty-first century were shaped by the turbulent international environment that redefined global competition in the closing decades of the twentieth century. It was during that turmoil that a number of different perspectives and prescriptions emerged about how companies could create strategic advantages in their worldwide businesses.

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 book focuses on the management challenges associated with developing the strategies, building the organizations, and managing the operations of companies whose activities stretch across national boundaries. Operating in an international rather than a domestic arena clearly presents managers with many new opportunities. Having worldwide operations not only gives a company access to new markets and low-cost resources, it also opens up new sources of information and knowledge and broadens the options for the strategic moves the company might make to compete with its domestic and international rivals. However, with all these new opportunities come the challenges of managing strategy, organization, and operations that are innately more complex, diverse, and uncertain.

As earlier chapters have made clear, the twenty-first century multinational enterprise (MNE) is markedly different from its twentieth century ancestors. It has been transformed by an environment in which multiple, often conflicting forces accelerate simultaneously. The globalization and deglobalization 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.

In the preceding chapters, we described how changes in the international environment have forced MNEs to simultaneously respond to the strategic need for global efficiency, national responsiveness, and worldwide learning. Implementing a complex, three-pronged strategic objective would be difficult under any circumstances, but the very act of “going international” multiplies a company’s organizational complexity.

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.

In Chapter 3, we described how MNEs competing in today’s global competitive environment are required to build layers of competitive advantage: i.e. the ability to capture global-scale efficiencies, local market responsiveness, and worldwide learning capability. As many of these companies found ways to match one another in the more familiar attributes of global-scale efficiency and local responsiveness, they had to find new ways to gain competitive advantage. In this process, competitive battles among leading-edge MNEs (particularly those in knowledge-intensive industries, such as telecommunications, biotechnology, and pharmaceuticals) have shifted their ability to link and leverage their worldwide resources and capabilities to develop and diffuse innovation.

The international business environment has always been characterized by continual change. The task facing MNE managers is to manage that change. The situation in the third 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 in the early 2000s. 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 disputed.

For most transnational companies, the twenty-first century offers exciting prospects of continued growth and prosperity. Yet, in the poorest nations on Earth, the reputation of large MNEs from the world’s most developed countries was shaky from 2000 onwards, and in some quarters, in complete tatters. Indeed, a series of widely publicized events in the early decades of the twenty-first century led many to ask what additional constraints and controls needed to be placed on their largely unregulated activities.