Compare and contrast firms pursuing a global business strategy and a transnational business strategy

What will be an ideal response?

A global business strategy involves functioning in a centralized fashion. As the decisions are made at the headquarters, the organization can be characterized as a centralized hub. The headquarters gives the overall strategic direction. Hence, it has control of the entire company and the knowledge that is generated within the company. However, the need to achieve economies of scale prohibits implementation of local strategies, and thus, a global company cannot quickly react to local challenges and opportunities. Here, data flows extensively from the subsidiaries to the home location, and the home location exerts strong control on the subsidiaries.

Companies using a transnational business strategy selectively decide which aspects of the organization should be under central control and which should be decentralized. This business strategy allows companies to leverage the flexibility offered by a decentralized organization (to be more responsive to local conditions) while at the same time reaping economies of scale enjoyed by centralization. However, this business strategy is also the most difficult as the company has to strike a balance between centralization and decentralization. In contrast to global organizations where most of the resources are centralized in a company's home country, different resources in a transnational company can be centralized in different countries depending on where the company can achieve the greatest returns or cost savings.