Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. In order for organizations to effectively execute strategic management, they must consider many different factors such as operations. Operations refer to how a company creates value for its stakeholders by transforming inputs into outputs. Domestic operations are those which take place within a single country’s borders while multinational operations involve activities in multiple countries (Armstrong & Taylor 2014). Strategic management of domestic and multinational operations differ in several ways which can affect how well an organization achieves their goals.
One difference between domestic and multinational operations is scale. Multinational corporations tend to be much larger than those with only domestic operations (Brewster 2017). This larger size presents unique challenges when it comes to managing not just one but several locations across the globe that may have diverse cultural backgrounds or languages spoken. Additionally, due to their large size, multinationals also face higher levels of complexity when it comes to decision making with regards to operational strategies since there will be more stakeholders involved who may have conflicting interests or views on what should be done (Liu et al., 2018). As such, this can lead them into costly errors if not properly managed due to their global scale thus highlighting the importance of having effective strategic management systems in place for these types of businesses.
What are the major differences between domestic and multinational operations that affect strategic management?
Multinational companies also tend to have greater risks associated with their international presence compared with those only operating domestically (Gurau 2016). These risks could include political changes in host countries where they operate or fluctuations in exchange rates between two currency markets which could significantly impact the profitability of these firms during certain periods even if nothing else has changed in terms of activities conducted by the firm itself. Furthermore, there may also exist regulatory differences between different countries that could pose a challenge for multinationals given that they need comply with all laws applicable both at home and abroad depending on where their various subsidiaries are located (Hill 2019). Again this emphasizes why strategic management systems need be carefully designed so as anticipate potential issues before they occur rather than after something goes wrong—which would end up being more costly overall.
Finally, another major distinction between domestic and multinational companies is access foreign direct investment capital—basically money invested from outside sources either directly into business projects or through acquiring equity stakes in the business itself—which can provide additional resources necessary for expansion (Kumar 2008 ). Multinationals typically benefit more from this infusion cash since they often possess investments vehicles like venture funds or private equity groups which allow them pool money from investors around world thus providing them greater access capital than what would available domestically only firms (Isidro 2013). Moreover, engaging foreign investors can create further opportunities networking contacts thereby allowing firm tap into potentially new markets even ones beyond those currently operated upon by existing business units contributing overall growth strategy employed enterprise wide level whatever geographic jurisdiction considered be focus point(Müller et al., 2016).
In conclusion, while domestic and multinational operational strategies share some common features there are three key elements differentiate these two approaches: scale, risk exposure ,and access foreign direct investment . Understanding all nuances associated each approach being implemented helps ensure proper coordination execution activities needed ultimately reach desired goal within any organization irrespective whether endeavors taking shape exclusively inside country boundaries overseas concurrently both locations simultaneously .