Assume you are in charge of developing the strategy for an international company selling products in 50 different countries around the world. One of the issues you face is whether to employ a multi-domestic strategy, a global strategy, or a transnational strategy.
- If your company’s product is mobile phones, do you think it would make better strategic sense to employ a multi-domestic strategy, a global strategy, or a transnational strategy? Why?
- If your company’s product is dry soup mixes and canned soups, would a multi-domestic strategy seem to be more advisable than a global strategy? Why?
- If your company’s product is large home appliances such as washing machines, ranges, ovens, and refrigerators, would it seem to make more sense to pursue a multi-domestic strategy, a global strategy, or a transnational strategy? Why?
- If your company’s product is apparel and footwear, would a multi-domestic strategy, a global strategy, or a transnational strategy seem to have more appeal? Why?
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Question asked by devi_ghimire
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Being incharge for formulating strategies for an international company selling products in 50 different countries around the world, it’s crucial to identify the right strategy to use. The selection needs to be made between using a multi-domestic strategy, a global strategy or a transnational strategy hypothetically based on different product focus of the company. The reasoning for each of the sectors are as explained below.
Mobile Phones as Product
The best strategy for an international company selling mobile phones would be to use a global strategy. The needs of a majority of people from one part of the world to another is very similar and thus need not many customizations to cater to the need of a certain market (Yip, 2001). And, if the company starts to cater to the need of every market segment specifically it’s going to be very difficult for people don’t know what they want clearly and even for ones who do, the cost will be really high that they won’t buy at that price. Thus, the company not being able to keep the price at the same point while customizing it to the needs of an individual along with the needs of people being similar is what makes me think that global strategy will be best for these products.
Dry Soup Mixes and Canned Soups as Product
The taste and preferences of people differ from country to country. The availability of resources also shapes up to the needs of the people. For someone living in a nation surrounded by oceans from all sides are more likely to be habituated to fishes and like the taste of it more. Whereas for other same may not be true. Thus, a company needs to ensure that they cater to the needs of these different people and market segment. Thus, it needs the company to embrace the multi-domestic strategy. This strategy allows the company to produce its product keeping in mind the nation and the community’s preferences as opposed to the global strategy which would ship out the same product with very minor changes to the global market (Svensson, 2001). Also, as per the country, the cultural beliefs would make adopting global strategy difficult for such business types. Thus, a multi-domestic strategy is better for such businesses.
Large Home Appliances as Product
For a company selling large home appliances as a product, it’s best to make use of global strategy. The use of such a strategy allows the company to enter all the marketplace while also make some customization to their product to cater to the national needs. Like a region may use a different voltage system which the company should cater to. Also, the company can make customizations at a very low cost from one country to another allowing to sell worldwide with a minor change to each country it is sold in. For home appliances, one change that’s required would be for plugs as the one in the United States, EU, and Asia are different and also need different voltage levels.
Apparel and Footwear as Product
A transnational strategy would best suit the company selling apparel and footwear as a product. This strategy allows the company to expand to a global market segment while also considering the local cultural and societal structuring (Lovelock, 1999). The company can thus cater to the needs of a community by mass producing the product as per their preferences like a distinctive color, style, pattern, and as such. The sizes, fitting requirement differ from country to country thus one need to look at the target market to know what works best for them. A product in this category designed for American people would not be suitable for people living in Antarctica as anyone going there would demand more cozy warm clothes.
Lovelock, C. (1999). Developing marketing strategies for transnational service operations. Journal Of Services Marketing , 13 (4/5), 278-295.
Svensson, G. (2001). Glocalization of business activities: a glocal strategy approach. Management Decision , 39 (1), 6-18.
Yip, G. (2001). Total Global Strategy (2nd ed.). New Jersey: Prentice Hall.
For a product such as mobile phones, it would be better to undertake transitional strategy of thinking globally and acting locally. Taking an example of Xiaomi phones, we see that they have outsourced their manufacturing and distribution in India and Brazil. In the past four year since its entry into the Indian market in 2014 with strategic alliance of Foxconn, they have been able to gain 33% of the market in India. Indian market is considered to be among the top 3 largest mobile markets and so far Xiaomi in such little time has been able to initiate 6 manufacturing companies in India. "Xiaomi now accounts for over 30% of India’s smartphone sales, according to industry estimates. At the end of last year, it broke Samsung’s (SSNLF) six-year dominance of the country’s fast-growing market (Iyengar, 2018).” Thus this strategy has worked for Xiaomi in India.
For a product such as soup mixes and canned soup it would be better to use multi-domestic strategy over global strategy as people preference and cultural factor is the deciding point in its acceptance. Since multi-domestic strategy is focused in customizing products to offer specific market condition and buyer preference in the host country and also involving local managers who know more about the domestic market in strategy formulation (Gamble, Peteraf, & Thompson Jr, 2015) it would be more customer centric. In comparison global strategy mandates same product in all the countries. For example in India and Nepal, where culturally fresh ingredients are preferred to make food as compared to the west where preserved and canned food are accepted. Therefore to enter into the market here it would be best to choose the multi-domestic strategy.
Large home appliances are depicted and categorized as per their brand and so therefore requires the stamp of excellence to be choses by the customers. For this a global strategy would be best suited. For example in Nepal LG is a company trusted by many customers. Chaudhari Group (CG) assemble LG products locally and also sells same products but in the name of CG at a cheaper price. Customers still do not have as much faith in CG as they do in LG. Even in my home we have products of LG such as TV, washing machine etc. even though we could get it in CG for a cheaper price.
Footwear and apparels are a little different and cannot be termed into general applicable strategy. In Nepal people have started to accept locally manufactured apparels and footwear such as KTM city and Goldstar. But it is still in its infancy and people would still prefer branded products such as Nike, Addidas, NewBalance etc. over local and Chinese products. Therefore I believe global strategy and transitional strategy both would work well in these products segments.
These are some ways in which strategies should be adopted for different products based on consumer perception. It is important to understand the cultural aspect and local people perception before undertaking any strategy.
Gamble, J. E., Peteraf, M. A., & Thompson Jr, A. A. (2015). Essentials of Strategic Management The quest for competitive management. NewYork: McGraw-Hill Education.
Iyengar, R. (2018, May 1). How China’s Xiaomi took India’s smartphone market by storm. CNN Business .
The international strategy creates value by transferring the product, skill, human resource in a global market, which opportunity lack the local competitors (Daniels & Radebaugh, 2003). Basically, the multinational company developed a product then it distribute the product all over the world. They always try to differentiate a product that local product. They have developed centralized system all the decisions are controlled from headquarter. Some of multinational company first undertake the popular local company and then only expand their market on that area. When coca cola first time entered in India, Pepsi already exist in market and thumb - ups is another popular brand in India. So coca cola didn’t penetrate the market of both companies after that coca cola decide that first we undertake the one local company which was thumb - ups company then after only expanding the market. Then they acquire thump - Ups Company three times more than its market value (David, 2011). So sometimes these strategies would be useful for other multinational companies. An international strategy make sense if a company has valuable unique competitions than that local competitor in international market lack and if the company faces relatively weak pressures for local responsiveness and cost reduction (). There are three different international choice
Multi - Domestic Strategy (Think Locally and Act Locally)
Global Strategy ( Think Globally and Act Globally)
Transnational Strategy ( Think Globally and Act Locally)
Multi - Domestic Strategy: A Multi - Domestic strategy makes most sense when there are high pressure for local responsiveness and low pressure for cost reductions (Wheelen & Hunger, 2012). It’s locally think and locally act strategy. In multi - domestic strategy always manufacture the local responsive product as per the customer. They have used local human resource and local raw materials. Indian Patanjali Company is based on that strategy.
Global Strategy: Companies that follow a global strategy focus on increasing profitability by earning the benefits of cost reductions that come from experience - curve effects and local economy (Hofer, 1997). They are focus a low cost strategy and deliver their product all over the globe. The different activity like marketing, production, and research and development performed from central location. In global strategy, product can’t be customize as per local wants/conditions. The product is equal and same for all over the world. They have think globally and act globally strategy. In this strategy company must follow the same process, channel and marketing technique all over the world not for specific target market. For example, Courier service DHL and boing manufacturing company Air Bus applied the global strategy.
Transitional strategy: Companies whose operations are not confined to any country or a region and which pressure low cost and product differentiation at the same time are referred to as transitional companies (Hofer, 1997). Companies are basically operate on a think globally and act locally is that strategy. Company has always high pressure to maintain the high quality product in global market at low cost. So that they also have a high pressure on developing a differentiate product on a local/global market. Coca cola has followed the transitional strategy. They have same product quality all over the world but different is they applied local distribution marketing channel.
In my point of view, the mobile phones companies have global strategy would be best the best for taking market all over the world. Mobile phones are technical product and they should have same specification all over the world and they are available in same price in a market. I can buy an iPhone or Samsung in a same price all over the globe. They have same types of marketing and distribution system. They provide equal feature product to all not individual customization. Their control is from head office so I can say that they have centralized system.
Similarly as per my understanding, dry soup and canned soups followed a multi - domestic strategy and it would be best fit for them. Company can manufacture the soap and canned soup from local resources and local raw materials and they can make it as per customer choice. There is different in choices of customer, south Asian customer choice different soup than European and American customer. South Asian people are more religious than European and American. So they value their culture and religion and only use those foods which their culture easily accept. In south Asian culture not openly used Beefs and other meat items and soup so when the company designed a product they don’t manufacture a product to all. So that these food items have a multi - domestic strategy.
In my point of view, large home appliances have transitional strategy would be best fit. In transitional strategy is think globally and act locally strategy. The home appliances products are different in size, and shape and price on geographically. South Asia has different culture than Europe’s and Americas. So they want to make a design as per their locality so as a manufacture design a product to all in a differentially.
Similarly I think appeal and software has a transitional strategy. Company should always design the software and appeal product as per geography. Chinas, Japanese and Koreans people have minimum height and weight and European and American people are max height and weighty. So we sure always keeps those thinks in our mind then only design a product.
Furthermore, because of the duplication of manufacturing facilities, companies that pursue an international strategy tend to incur operating costs. Therefore, this strategy is often unsuitable for industries in which cost pressures are high (Michael & Hitt, 2004).
Daniels, J. D., & Radebaugh, L. H. (2003). Sullivan, International Business: Environments and Operations. Prentice Hall; 10 edition .
David, F. (2011). Strategic Management: Concept and Cases. New Dheli. : Pearson Education.
Hofer, C. (1997). Conceptual for Formulation Corporate and Business Stretagies . New York: Dover, MA: Case Publising.
Michael, A., & Hitt, R. (2004). Strategic Management: Competitiveness and Globalization, Concepts and Cases. South-Western College Pub; 6 edition .
Wheelen, T., & Hunger, J. (2012). Strategic Management and Business Policy. New Dheli: Pearson Education.
The multinational companies have to adapt to the changes and complexities in the global landscape to survive and thrive in the competition. In such case, the strategy adopted by the company plays vital role as it defines the approach with which the company will be offering its products and services in the international market (Hitt, Xu, & Li, 2015). The multinational companies use global, multi-domestic or transnational strategy depending upon the nature of the products offered. As an in-charge of developing strategy, I would use the following strategy for given products:
For mobile phones, using global strategy would make a better sense. The global strategy is a think global and act global approach to strategy making where same products are sold under same name using same distribution channels in all the countries. The fundamental competitive approach of the companies also remains the same worldwide (Gamble, Petaraf, & Thompson, 2015). The people in every part of the world want similar features in mobile phones like long battery life, user friendly design so the technologies, design, features, style remain same for every country. It can be offered in any part of the world with minor adjustments to accommodate with the specific situations in host countries.
Dry Soup Mixes and Canned Soups
In case of dry soup mixes and canned soups, it is more advisable to use multi - domestic strategy than global strategy. Multi-domestic strategy is think local and act local approach to strategy making where the same products can be sold under different brand names in different countries. There is significant differences in the consumers’ tastes, preferences and buying habits regarding the food items. For example: People in some countries like spicy food while some like boiled foods without ant spices. Similarly some like non-veg food items while some are inclined towards vegetarian items. So, to address the different food preferences of people living in different part, we need to produce and sell different products for different regions implying multi-domestic strategy.
For home appliances like washing machines, ranges, ovens and refrigerators. It would be better to use global strategy. As mentioned earlier, global strategy emphasizes on gaining economies of scale by offering the same products or services in every market. However, we need to make certain minor adjustments and modifications can be made to address the issue regarding voltage, power consumption and power outlet of the host countries at lower cost (Creative Commons, 2012). As a producer of home appliances, we need to follow certain global standards while manufacturing the products and focus on building a global brand for which there is no better option than using global strategy.
Apparel and Footwear
As a company producing apparel and footwear, it is wise to use transnational strategy. It is think global and act local approach to strategy making that incorporates country-specific variation to accommodate cross- cultural variations and strive for benefits of standardization at the same time (Gamble, Petaraf, & Thompson, 2015). It allows the company to remain a global brand by considering the cultural and societal value of the host country. The quality of the product remains same in all country while the production, distribution and marketing strategy can be customized to address the sentiment of people of a particular country.
These strategies vary in terms of their emphasis on achieving efficiency around the world and addressing the needs of local people. The company needs to carefully look at the nature of their product, rules and regulations of host countries and consumption pattern of the people before decision on which strategy to use.
Creative Commons. (2012). Types of International Strategies. In Strategic Management: Evaluation and Execution. Retrieved from 2012books.lardbucket.org/books/str...
Gamble, J. E., Petaraf, M. A., & Thompson, A. A. (2015). Essentials of Strategic Management: The Quest for Competitive Advantage (Fourth ed.). New York: McGraw Hill Education.
Hitt, M. A., Xu, K., & Li, D. (2015). International Strategy: From Local to Global and Beyond. Journal of World Business . doi:10.1016/j.jwb.2015.08.016