Definition: A transnational strategy is a set of planned actions defined by a company to have operations in markets abroad. This term generally applies to the methods and structures that allow a firm to initiate and maintain functions in foreign countries while preserving central coordination at one specific location.
What Does Transnational Strategy Mean in Business?
A transnational strategy is assumed to take advantage of the benefits provided by simultaneous operation in multiple countries. The objective might be to expand sales, to produce at lower cost or to achieve economies of scale. There is a central coordination or headquarter and several decentralized organizational structures located abroad.
The complexity and size of the relationships among the different sites depend on the specific business model. The degree of control maintained by the central office also varies from one company to another.
It is necessary to have uniform business policies and technologies but at the same time enough capacity to adapt to the conditions of every foreign operation. The ultimate goal is to improve the overall corporate performance through the concurrence of resources and markets available in several countries.
Prisma is a large Spain-based manufacturer of mid-cost furniture. It has two production facilities located in Spain and they export to several foreign markets. After some research and analysis, the Board of Directors concluded that a production and marketing facility placed in Asia would allow the company to have lower costs and to expand sales significantly in that region.
But the Board also identified that design professionals were massively available in Latin America at low cost. The firm then designed a transnational strategy to be implemented in five years. The strategy included three new manufacturing facilities in countries abroad and only one of the original production sites in Spain. It also embraced a design and innovation division placed in Latin America and marketing and sales structures in some European, Latin American and Asian countries. The ultimate objective was to diminish the average unit cost and increase sales substantially.