The Globalization of Service Multinationals Alexandra J. Campbell and Alain Verbeke T zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA HE CHALLENGE OF STRENGTHENING AND zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA eXplOiting zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDC cross-border synergies within multinational corpora- tions (MNCs) has recently emerged as one of the major issues in global strategic management. The fundamental challenge of balancing local demands while maintaining a global vision has been the topic of several influential works about the design of MNCs.’ The central theme of these frameworks is how multinational managers can design an organiza- tional structure that allows firms to cope with the twin pressures of central co-ordination of activities across borders and autonomous subsidiary respons- iveness to local market demands. This involves developing multiple strategic capabilities which allow MNCs to capitalize on the key advantages of national responsiveness, scale economies and scope economies. Without exception, analytical frameworks used to guide multinational managerial decision-making have been based upon an analysis of data collected in the manufacturing sector. Much of the recent restructuring occurring in manufacturing MNCs such as downsizing, a renewed focus on core businesses and a growing disenchantment with con- glomerate operations are consistent with the norma- tive prescriptions of these frameworks. However, in contrast to these trends, the service sector has been characterized by a different pattern of organizational restructuring. This pattern includes continuing internationalization and increasing firm size and scope.2 This suggests that the key challenges facing service MNCs may be quite different from those facing manufacturing MNCs. The differences between the inherent characteristics of services vs manufactured goods suggests that there may also be critical differences in the principles which guide the strategic management of service MNCS.~ Many of the traditional rules of business strategy shaped in the manufacturing environment may not be relevent to services. Trade in international services represents an increasingly important share of world exports due to service trade liberalization, technological change and socioeconomic trends.4 Competition in the service sector is intensifying and globalizing which has prompted a fundamental restructuring of many service industries. This restructuring means there is a greater need for managers in service MNCs to think strategically and develop effective competitive strategies to create and sustain competitive advant- ages worldwide. But currently, there are few tools available for managers of service MNCs to guide their strategic thinking. In this article, we examine how the unique charac- teristics of services affect the strategic capabilities necessary to deal with the competitive challenges facing service MNCs. Based upon an analysis of nine service MNCs, we argue that service MNCs build upon different core competencies as compared to manufacturing MNCs. The nine service MNCs in our research sample operate in four major service sectors: financial services (Citicorp Banking PeTgalXlOn Long Range Planning Vol. 27, No. 2, pp. 95 to 102, 1994 0024~6301(93)EOO14-H Copyright 0 1994 Elsevier Science Ltd Printed in Great Britain. All rights reserved 0024~6301/94 $s.oo+.oo