Question 64 - CITM-001 discussion

According to the CITM study guide, an international firm can adopt different business models depending on its degree of global integration and local responsiveness. The study guide identifies four types of business models: international, multidomestic, global, and transnational. These are similar to the typology of multinational companies proposed by Bartlett and Ghoshal (1989). The study guide defines each business model as follows:

International: The firm operates in multiple countries but has a low degree of global integration and local responsiveness. The firm's subsidiaries are largely independent and follow the parent company's strategy and culture. The firm exploits its core competencies and capabilities across different markets without much adaptation. This business model is also known as theinternational projectoror thecentralized exporter.

Multidomestic: The firm operates in multiple countries and has a high degree of local responsiveness but a low degree of global integration. The firm's subsidiaries are highly autonomous and tailor their products and services to the specific needs and preferences of the local markets. The firm sacrifices efficiency and standardization for differentiation and customization. This business model is also known as themultinational drivenor thedecentralized federation.

Global: The firm operates in multiple countries and has a high degree of global integration but a low degree of local responsiveness. The firm's subsidiaries are highly dependent on the parent company and follow a standardized and centralized strategy and culture. The firm leverages economies of scale and scope to achieve cost efficiency and competitiveness. This business model is also known as theintegrated global ITor thecoordinated federation.

Transnational: The firm operates in multiple countries and has a high degree of both global integration and local responsiveness. The firm's subsidiaries are interdependent and collaborate with each other and the parent company to share and transfer knowledge, resources, and best practices. The firm balances efficiency and adaptation to achieve innovation and learning. This business model is also known as theintellectual synergyor theheterarchical network.

Based on these definitions, the three business models that an international firm might adhere to are B, C, and D. Option A is not a valid business model, but rather a characteristic of the transnational business model.Reference:

CITM Study Guide, Chapter 4: International Business Strategy, pp. 63-66

Bartlett, C.A. and Ghoshal, S. (1989). Managing across borders: The transnational solution.Harvard Business School Press1