What are some disadvantages of a transnational strategy?

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gsenviro's profile pic

gsenviro | College Teacher | (Level 1) Educator Emeritus

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A transnational strategy refers to a scenario when an organization decides to expand beyond its national soil and operate on foreign soil. Here the various subsidiaries of the company are controlled through a central office/headquarters. While it certainly offers some advantages (the tag of "multi-national" and access to additional market or production facilities), it also exposes the organization to some risks:

  • cultural challenges (need to incorporate differences of opinion, beliefs, values, tastes and preferences)
  • political challenges (the possible censorship of a regime, political interference, etc.)
  • economic challenges (capital investment in another country, changes in economic policy that may affect the company, etc.)
  • infrastructural challenges (capital investment, challenges of transportation, basic infrastructure, limited resources including skilled workforce, etc.)

Examples of the disadvantages of operating on foreign soil are Google's pullout from China due to censorship, India's ban of Coca-Cola (in the 1970s), etc. 

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farouk23's profile pic

farouk23 | College Teacher | (Level 1) Associate Educator

Posted on

A transnational strategy is when an organization or company decides to operate beyond their national borders, in essence becoming international or multi-national. Such a strategy has tremendous advantages but can also come with a lot of potential difficulties. Some issues that an organization may face while pursuing a transnational strategy include:

  1. Over-extension of resources
  2. Political turmoil
  3. Threat to home market position
  4. Duplication of effort
  5. Financial risk 

Before an organization pursues a transnational strategy they should first ensure that such a move is absolutely int their best interest and that it provides a reasonable return on investment. 

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