The Multinational Enterprise of the Future: Leading Scenarios

John D. Daniels • Lee H. Radebaugh • Daniel P. Sullivan • Reid W. Click

Evolving workflows, changing technologies, and shifting markets intensify globalization trends.
MNEs respond in kind, rethinking visions, clarifying missions, adjusting strategies, and
reconfiguring value chains to compete in the brave new world. Forecasts of accelerating change
due to digitization, frugal innovations, robotic cells, and activist transnational institutions, among
others, spur MNEs to identify the ideal path to bundle resources, capabilities, and competencies.
Let’s look at some high concept forecasts of the MNE of the future.
The Globally Integrated Enterprise
The evolutionary perspective sees MNEs responding systematically to the steadily unfolding
imperatives of globalization. As policies and practices progressively connect countries, MNEs
similarly respond, progressively integrating their international operations. The former CEO of
IBM has a provocative take. Reflecting on IBM’s evolution, he contends that it has passed
through three strategic phases, each fitting the prevailing circumstances and collectively
foreshadowing the MNE of the future.
First, there was the nineteenth century “international model, whereby the company was
headquartered both physically and mentally in its home country; it sold goods, when it was so
inclined, through a scattering of overseas sales offices.” Headquarters focused on business
activities in its home country and configured international operations with little input from
overseas units. As such, it used an international strategy to engage a world composed of
erratically connected countries.
Phase two of the evolution ushered in the classic multinational firm of the late twentieth century.
Echoing the localization strategy, this phase saw HQ build smaller versions of itself abroad to
respond to highly differentiated markets.
Steadily, the expanding connection among countries, by supporting concentrated value chains
geared toward exploiting location economies and scale economies, highlighted the inefficient
economics of the “minime” option. Steadily, escalating redundancy costs—each country
essentially ran a standalone operation—grew unacceptable given intensifying competition.
The third phase, the “globally integrated enterprise,” speaks to the dawn of globality in which
“business flows in every direction. Companies have no centers. The idea of foreignness is
foreign. Commerce swirls and market dominance shifts.” Competing with everyone from
everywhere for everything requires putting investments, people, and work anywhere in the world
“based on the right cost, the right skills and the right business environment [with] workflow[ing]
to the places where it will be done . . . most efficiently and to the highest quality.” Earlier models
saw configuration and coordination barriers constrain knowledge flows, production
opportunities, and organizational options. Now, like the Internet, the globally integrated
enterprise designs its strategy, configures its activities, and coordinates its processes to connect
everything, everywhere.
The Metanational
In the future, goes this scenario, worldclass operational efficiency will no longer determine an
MNE’s competitive advantage. Nor will an MNE build superior competitiveness from unique
features of its home country or, for that matter, from a set of national subsidiaries. Rather,
success will go to those who move from designing multinational operations to synthesizing
metanational competencies.
The metanational seeks unique ideas, activities, and insights that complement its existing
operations as well as create new leverage points. It expands its mission from selling stuff
worldwide to mining the treasure trove of ideas, resources, and capabilities that emerge
anywhere and everywhere. It scans the world, identifying and interpreting the untapped potential
of the specialized knowledge that lies latent in unique market situations. Exploiting these
opportunities positions managers to “build a new kind of competitive advantage by discovering,
accessing, mobilizing, and leveraging knowledge from many locations around the world.”
Metanationals, goes the theory, orient strategic planning to:
• Prospect for and access untapped technologies and unidentified consumer trends.
• Leverage globally the specialized knowledge scattered throughout local subsidiaries.
• Mobilize fragmented knowledge to generate innovations that produce, market, and
deliver value globally.
• Apply superior project management skills across teams to foster a strong collaborative
culture.
Which sorts of MNEs aspire to be a metanational? Generally, those facing pressures for global
integration and
local responsiveness yet seeing opportunities in prospecting, leveraging, mobilizing, and
applying knowledge that is fragmented across countries. Finding ways to integrate fragmentation
sets the metanational up for the big time. Until recently, the metanational option attracted few
companies. Communication and collaboration barriers complicated sharing knowledge.
Moreover, national differences posed problems. Today, environmental conditions, institutional
agendas, and technology trends, by easing sensing, mobilizing, and operationalizing knowledge,
steadily open the era of the metanational.
MNEs, like Shiseido, ARM, McDonald’s, STMicro electronics, Procter & Gamble, SAP, and
Tata, are emergent metanationals, able to convert local insights into global innovations. Consider
McDonald’s in Russia. It has more than 700 outlets and plans to add hundreds more, given that
Russia is one of its fastest growing and most profitable markets. In metanational style,
McDonald’s leveraged its Russian experiences worldwide to develop new competencies;
notably, it began its worldwide pushback against coffee chains by tapping knowledge it
developed with test runs in Russia. It opened McCafés there in 2003, finetuned its espresso style
drinks, and then successfully moved the concept to the United States in 2009 and, from there, to
the world.
The MicroMultinational
The future frontier for the MNE is set by the matter of size, say others. Historically, MNEs were
colossi that straddled the globe. Today, the number of MNEs grows worldwide, but the average
size is falling—many firms operating internationally employ fewer than 250 folks and, in many
cases, some count just a handful. This anomaly signals the era of so-called micromultinationals:
nimble, small firms that are born global, operating internationally from day one. Unlike their
bigger counterparts that expanded internationally by gradually entering new markets,
micromultinationals go global immediately. They go where they wish, typically following the
circuit paths of the Internet, but always targeting markets with plentiful customers and innovative
environments. The born global does not see international markets as a refuge when sales slow at
home. Rather, it begins with the belief that the domestic market is just one of the many
opportunities in the world.
The micromultinational’s distinctive break from the past follows from its global focus at startup.
Folks who found born global firms often have a strong international orientation gained from
living or studying abroad. Take SoundCloud, a Swedish audio sharing web service. Its
cofounders—one born in England and one in Sweden—were previously knowledgeable enough
about the German and U.S. markets to move into both within months of starting up. Other
startups, like Airobotics of Israel, maker of the “Swiss Army Knife of drones,” develop
compelling technical solutions.87 Akin to the idea “build a better mousetrap, and the world will
beat a path to your door,” they have
customers worldwide from the go. Often, too, we see a seasoned executive, motivated by an
entrepreneurial vision and aware of a worldwide market niche, leave a large MNE and launch a
firm that goes global from day one. For instance, Zoom Video Communication provides remote
teleconferencing services using cloud computing technologies. It began when a lead engineer
from Cisco Systems, an early adopter of video conferencing, saw expanding opportunities
worldwide. He left Cisco, launched his startup, and, within a few months, registered more than
one million users worldwide.
Increasingly, the micromultinational moves from theory to practice precisely because
circumstances let it do so. The ongoing globalization of markets, marked by trade liberalization,
growing demand for specialized products, and improving technologies, enables bornglobals to
implement their vision cheaply and quickly. Clever folks exploit these changes, ingeniously
leveraging platforms to develop and deliver innovations in niche markets that span the world.
The Glorecalized MNE
Advocates of regionalization endorse the awkward term Glorecalization as the next step in the
evolution of the MNE. Glorecalization, a portmanteau of Globalization Regionalization
Localization, champions a global vision and customized local mission through a value chain
configured to exploit location economies within a regional market. Essentially, rather than “think
global, act local,” the glorecalized MNE opts to “go global, think regionally, act local.” It
configures neither a global nor local system, but rather a regional network that, given the size of
the regional market, enables it to achieve the requisite efficiencies to support competitive
positioning. Correspondingly operating within the context of a well defined region, where
geographically proximate countries share political, economic, and cultural characteristics,
enables it to optimize local effectiveness. Various conditions support the glorecalized MNE. First
and foremost, the institutional structure, regulatory framework, and system integration of
regional trade blocs (e.g., AU, ASEAN, CARICOM, EU, OBOR, and USMCA) create
sustainable sanctuaries.
The European Union, for example, unites 27 countries and creates a common “home” for 445
million who share similar outlooks, overlapping national interests, and convergent consumption
preferences. Efficient flows of people, capital, information, products, and processes throughout
the EU streamline how an MNE acquires resources, develops capabilities, and crafts
competencies. Similarly, regionalizing production exploits location effects and scale economies,
but without sacrificing the flexibility to adapt goods and services. China’s One Belt, One Road
(OBOR) Initiative might prove to be the ultimate market frontier for the Glorecalized MNE. This
plan progressively integrates, via an expanding network of roads, pipelines, railways, seaways,
ports, power plants, digital networks, and cultural centers, countries in Asia, Africa, Europe, and
Oceania.
Combined, these nations include 70 percent of the world’s population, 45 percent of current
global GDP, and more than 90 national economies. If successful, the scale and scope of the
OBOR market offers the well positioned glorecalized MNE a robust gameboard.
The DigiCorp
The digicorp, a form unimaginable a generation ago, is increasingly a reality today. The digicorp
does not organize products, consumers, or markets to reflect or respect the geography set by
quaint lines on a map. Instead, the digital connectivity of the Internet, not national borders,
defines its operational boundaries. Facebook, for instance, exists physically in its California
headquarters, but its workforce of about 45,000 runs a company that serves more than 2.25
billion “customers” in nearly 200 nations through a website interface translated into more than
100 languages.
Digicorps develop competencies that help them react in real time to changes in customers,
markets, and environments. They engage perspectives and strategies that bias value chains
toward virtuality to link resources, capabilities, and competencies within dynamic digital
networks that encircle the globe. For instance, Nike and Reebok own no plants, instead relying
on contract manufacturers to make and distribute their products. Apple, Cisco, and Qualcomm do
the same, outsourcing production to third-party manufacturers, like Pegatron, TSMC, and
Foxconn; each then does what each does best. Though nominally independent, communications
and collaboration systems integrate agents into the network, thereby creating virtual capabilities.
Nike, for example, focuses on increasing value creation by leveraging its competencies in design
and marketing, confident in its manufacturers’ expertise to adjust product mixes as consumer
behavior evolves.
The digicorp builds on crowdsourcing, swarm intelligence, and artificial intelligence to tap the
collective insight developed in self organizing systems that are remotely executing, global,
always on, and endlessly configurable. It, in collaboration with partners, operates in the infinity
of cyberspace. Many of these agents were, just a generation earlier, far off the global grid. Now,
innovations enact a techno utopia that connects everyone to the “evolving nervous system of
civilization.” The digicorp, built to engage strategies that learn, evolve, and transform, has the
outlook and orientation to navigate the workplace of the future.
Make the Call
Indisputably, calling the MNE of the future is more speculation than stipulation. No matter the
standard that ultimately emerges, we expect it will showcase the historic markers of companies
that are built to last: a down to earth, pragmatic, committed to excellence framework run by
bright people who articulate an insightful vision, practical mission, and clever strategy that
changes the game. Still, we watch, tracking the contenders, waiting to see whose performance
ultimately sets the standard.

Questions?
1. You have a choice to work for a globally integrated enterprise, a metanational, a
glorecalized, a micro-multinational, or a digicorp. Which would you choose? Why?
2. Looking out over the next decade, estimate the likely standards of how the “typical”
MNE will create value. In your opinion, which form of MNE from this set seems best
positioned for this scenario? Why?
3. The MNE of the future, in whatever form it takes, will face pressures for global
integration and local responsiveness. In your opinion, which form of MNE from this set
seems best positioned to reconcile that challenge?