Rugman, A. M.: The Regional Multinationals, MNEs and “Global” Strategic Management

Abstract

Rugman, A. M.: The Regional Multinationals, MNEs and "Global" Strategic Management, Cambridge: Cambridge University Press 2005 A Capsule Summary of the Book and its Review In his book "The Regional Multinational", Alan M. Rugman identifies globalization as a myth. The author points out that--against the common belief--only very few MNEs are truly global and that most firms operate on a regional level instead. Rugman's reasoning is based upon the results of a comprehensive empirical data collection of sales figures of 365 firms of the "Fortune Global 500" from the year 2001 presented in the book. The firms are classified as home-region oriented, bi-regional, host-regional or global according to the distribution of their sales within the regions of the triad (America, Europe and Asia). Rugman comes to the result that only nine MNEs of the 365 analyzed firms are truly global (e.g., IBM, Sony, Coca Cola), defined as "having sales of 20 percent or more in each of the three regions of the triad but less than 50 percent in any region" (p. 4). The author develops several conceptual frameworks and further analysis takes place in the form of industry studies and case studies of prominent MNEs from different manufacturing industries and the service sector. Rugman comes to the conclusion that there is a lack of empirical evidence for global strategy in the sense of selling the same products or distributing the same services to different countries. In economic reality, most business activity occurs on a regional level and firms may operate internationally within regions of the triad where homogeneity and economic integration are prevalent. This idea is supported by a transaction cost explanation. As a result to his findings, regionalization and not the design of global strategies and structures is the crucial issue in international business and thus managers will need to design regional strategies. Below, the objective, targeted audience and structure of the book as well as contents of the individual chapters are discussed, followed by some recommendations and critique. Objective and Targeted Audience The book's objective is to provide empirical evidence for the statement that not globalization but regionalization dominates international business. Opposite to what is widely claimed, the use of global strategy remains a myth according to Rugman. The author claims that research in the field of international business should head for a new direction. Emphasis in research and practice has to be laid on the need for distinct regional strategies. Rugman's book addresses to "academics and students in International Business, Organization and Strategic Management as well as those with an interest in finding out how multinationals really work and how future strategy must respond" (first page). Some of the case studies on firms and industries may be very helpful in MBA classes. However, for the use as a textbook, a more didactic elaboration of the book (such as highlighting of important statements, more illustrations and short presentations of the criticized concepts, e.g., of Bartlett and Ghoshal) would have been desirable. Readers who wish to obtain some knowledge on single MNEs and selected industries will find a very competent and well-founded starting point for further studies. The great amount of data on sales and distribution of sales within the triad may constitute a valuable basis for further research in the field of international business. The main statement of the book, globalization as a myth, will certainly be fruitful for further discussion among academics, researchers and practitioners. Structures and Contents The book is divided into twelve chapters, amounting to a total of 241 pages. It starts with an introduction that states the key themes of the book, the empirical database and the prominent regional and global case studies. …