Week 10 - Topic 6A: International Strategies

International Strategy

Competitive strategy used by a business to gain strategic advantages in foreign markets

Three Basic International Strategies

1. Global

2. Multi-domestic

3. Transnational

Goal of a Global Strategy

To achieve a low-cost position across all national markets

In order to achieve a low-cost position in different national markets, a Global Strategy...

Emphasizes the standardization of products, that is, the same product is offered in different countries with little or no adaptation. Can be thought of as a "one size fits all" approach

Why Standardized Products?

By making products the same, regardless of the country they are sold in, the producer can achieve economies of scale and reduce unit production costs

To Implement a Global Strategy...

Business typically centralize strategic decisions from their home office

Advantages

Can increase competitiveness IF there is significant customer demand in foreign national markets for low-priced products (and less preference for unique products)

Disadvantages

- Because this strategy emphasizes standardization, by definition it may not respond to differences in customer preferences across different national markets

- Requires resource sharing and management coordination across borders (hard to manage)

What is the Goal of a Multi-Domestic Strategy?

To adapt products and services to local market preferences.

Why Adapted/Customized Products?

In some industries, customers in different countries or regions have very different preferences

How to Multi-Domestic Strategies Adapt?

By emphasizing the use of different product varieties, different marketing and branding, and different product features, depending on the national market

Advantage of using Multi-Domestic Strategies

Can increase competitiveness IF customers in different national markets have very different preferences and are less concerned with low-price products

Disadvantages of Multi-Domestic Strategy

- May increase costs, because it's hard to achieve economies of scale when products are not standardized

- Can be challenging for the home office to manage different approaches in different national markets

Transnational Strategy

Seeks to achieve both global efficiency (low costs) and local responsiveness. Can be thought of as a "hybrid approach"

Why is a Transnational Strategy hard to Achieve?

- Close global coordination, which requires central control

- Local responsiveness, which requires local autonomy and flexibility

When do we see a Transnational Strategy being used?

When one part of the customer value proposition (or value chain) is standardized and another part of the CVP is adapted to local market preferences