Global Expansion

Global Expansion

Introduction

The ability of corporations expanding in global markets to adjust their internal business strategies and management practices to changing external conditions is crucial for increasing revenues and gaining market share. Ideally, firms coordinate their market penetration, organizational, and management decisions to create a seamless business strategy for expansion. But often, multinational corporations (MNCs) make expansion decisions in isolation from those about how to restructure their organizations to compete in international markets, how to adapt their management practices to international conditions, and how to reconfigure their operations to the new demands of global competitiveness. Multinationals in diverse industries — IBM, Xerox, Compaq, Procter & Gamble, Sunbeam, DaimlerChrysler and others — with worldwide operations and engaging in complex mergers and acquisitions have all faced the struggle for realignment over the past decade. The pace of globalization, the need to expand market share, and the acceleration of strategic alliances will make managing realignment an urgent and familiar process for more companies in the future. Attention to creating or maintaining alignment is crucial because when international expansion decisions create misalignment with business strategy, organizational structure, and managerial processes, MNCs can lose sales and market share, incur increasing costs and inefficiencies, generate discontent among customers and suppliers, engender internal organizational conflicts, and lose strategic direction.

In this article, we explore the concepts and components of strategic alignment in multinational corporations. Drawing on extensive interviews with managers of the company and on archival data, we illustrate the challenges of maintaining alignment by delving deeply into the experiences of one MNC that penetrated new markets without simultaneously adjusting its business strategy, organizational structure, and management processes to changing global business conditions and to the diverse cultures and economies in which it operated. We draw lessons from that experience that can help guide managers and executives in firms with growing international operations.

The concept of strategic alignment

As markets for goods and services become more global in scope, creating and maintaining alignment among market expansion, organizational, and management decisions becomes a critical aspect of business strategy in MNCs. Bartlett and Ghoshal (1998) argue that alignment must be a continuing process for companies when they manage across national borders. All aspects of the firm's organizational structure and management processes must be consistent and reinforcing in order to maintain competitiveness, develop flexibility, facilitate learning, legitimize diversity, manage complexity, and build commitment. Although all of these decisions are related and should, ideally, be made to complement and reinforce each other, Fiegenbaum and Lavie (2000, p. 93) contend that in making international expansion decisions '…most companies seem to ignore the long-term perspective and concentrate mainly on the entry decision itself.'

Porter's (1990) contention that a firm's competitive advantage rests on its ability to organize, perform, and coordinate discrete activities so that they add value for customers is an argument for alignment. Porter (p. 41) emphasized that a firm's value chain 'is an interdependent system or network of activities, connected by linkages.' As firms expand internationally they must realign components of the value chain through reconfiguration and coordination...