Running a business in the globalized environment is one of the most challenging tasks, mostly because it demands not only to integrate various business approaches but also to be able to take major cultural differences of the business partners into the account. Even though running a business presuppose following universal rules, the approaches adopted towards various business aspects may differ considerably depending on the origin of the entrepreneurs; also, a culture clash becomes highly possible in the given scenario, which begs the question whether business choices can be based on cultural, national or ethical grounds. Even though operating a transnational company seems an extraordinarily complicated and challenging task, the given type of global business environment is the most reasonable choice given the opportunities that it offers to the company and its leader.
In contrast to a multidomestic company, a transnational one allows transcending the boundaries of a specific state or country and, therefore, allows for more opportunities for expansion into the world market. Even though it is very complicated to promote to the people of a different culture, entering a transnational business environment presupposes getting the opportunity to expand to the global market, whereas in a multi-domestic company, there is no other way in which the attention of the customers of a different national, ethnical or, for that matter, even social background can be attracted to the organization. Therefore, the given strategy can barely be approved for a company that is willing to expand into the world market.
International firms could also be a decent pick for the company to expand into the global market. However, unlike a transnational one, an international business environment does not allow for placing investments outside of the home country, which creates several inconveniences when it comes to the financial operations, namely, the financial transactions that must be carried out for the affiliates located in different parts of the world to coordinate their actions and at the same time be able to solve local financial issues on their own.
It could be argued that a multinational business environment could also be used as a decent premise for building strong relationships with foreign partners and integrate into the world market efficiently. However, it must be admitted that, for the most part, a multinational business setting presupposes that the product offerings in different countries are not coordinated; quite on the contrary, the products are adapted towards the local markets. The given feature might seem quite positive, seeing how it helps market the products more efficiently by appealing to the customers’ culture and mentality; however, the lack of control over the production processes and marketing in different affiliates of the company cannot but raise concerns.
Another alternative to the transnational business environment, global companies also provide more than ample chances for expanding overseas and at the same time being successful in the home country. According to what the existing sources say, global companies use the same coordinated image for marketing their products worldwide (Bateman & Snell, 2011). In other words, global companies are the simplified version of transnational companies. Therefore, it could be argued that the former is a much better option since they provide the same amount of room for a company evolution and at the same time demand fewer efforts to make the chosen strategies work. It should be mentioned, though, that for several reasons, transnational companies are more efficient than the global ones, because they provide more room for the company’s affiliates or business partners. The existing definition of global companies says that the latter are under the strict control of the office headquarters. In other words, in global companies, the localization of a brand becomes hardly possible, and the same marketing strategies are used within the entire organization. It must be admitted that the given strategy affects the customers’ perception of the product negatively and might even lead to several confusion due to cultural differences of even simple language barriers (Meredith & Shafer, 2010).
With that being said, it is necessary to admit that of all types of global business environment, transnational firms seem the most promising and at the same time the most challenging business environment for a company to enter. While it provides a tough control over the production and promotion processes, as well as helps coordinate the work of different departments and affiliates efficiently, it still gives enough air for the latter to adapt towards the unique environment of a specific market. Also, the chosen strategy must lead to further expansion into the global market, therefore, increasing the company’s chances for growth. Finally, the transnational business environment strategy contributes to the analysis of the factors shaping the customers’ attitude towards the brand, therefore, making it possible for the company to come up with new ideas on what new brands to create and how to promote them to the target audience successfully.
Bateman, T. S. & Snell, S. A. (2011). International management. In Management: Leading and collaborating in the competitive world (9th ed.) (pp. 176–210). New York, NY: McGraw-Hill/Irwin.
Meredith, J. R. & Shafer, S. M. (2010). Operations strategy and global competitiveness. In Operation management for MBAs (4th ed.) (pp. 25–47). Hoboken. NJ: Wiley & Sons.