Transcript Multinational Strategies - Winthrop University College of

Multinational Strategies
Chapter 5, pages 148-154
Globalization or
National Responsiveness?
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Globalization
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Production and distribution of products and services of a
uniform type and quality on a worldwide basis
Many customers of MNCs have similar tastes, which helps
spread global products and services
National responsiveness
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Understand different consumer tastes in segmented national
or regional markets
Respond to different national standards and regulations
imposed by governments and regional trade blocs (Example:
the EU)
Reasons for Globalization
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Economies of scale: cost savings that result from
producing a high volume of goods in one location
Location economies (location advantages): cost
savings that result from low costs for doing a value
chain activity in a particular location
 research and development
 manufacturing
 technical service or customer service
 low-cost financing
Types of
International Business Strategies
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Multidomestic
Transnational
Compromise strategies
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International
Regional
Some companies use a combination of
strategies
Multidomestic Strategy
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A strategy that attempts to maximize national
responsiveness
Firm usually has product development, production,
and marketing in each country
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This strategy does not take advantage of economies of scale
and location economies
No coordinated global strategy or global brand
Often used by companies that serve niche markets
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National responsiveness is more important than cost
pressures.
Multidomestic Strategy (2)
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Legal and trade restrictions may require a
multidomestic strategy in some countries.
Problems with multidomestic strategies
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High costs
Product designs, production knowledge, and marketing
expertise is not transferred among subsidiaries in
different countries
If a competitor switches to a strategy based on global
production or global products, a multidomestic company
can no longer charge the prices needed to make a profit
Transnational Strategy
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A strategy that seeks to
 Achieve low costs by using economies of scale and
location economies
 Maintain a global brand
 Transfer core competencies within the firm
 Achieve a high degree of national responsiveness
Home-country headquarters maintains tight control
Some firms that use this strategy: Toyota, Caterpillar, AT
&T
Transnational Strategy (2)
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Requirements for success:
 Transfer of knowledge throughout the company
(global learning)
 Coordination of production, purchasing, and
marketing throughout the company
 A corporate culture that encourages mutual trust,
coordination, and knowledge sharing
Difficult strategy to implement, but often the most
successful
Exhibit 5.1: Content of the Four Basic
Multinational Strategies
International Strategy
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Attempts to sell global products and use similar
marketing techniques worldwide
Global brand
Home country headquarters maintains tight control
R and D is usually located in the home country
Manufacturing used to be located in the home
country – that is not always possible today
Local facilities are replicas of those in the home
country
Companies that use this strategy: Boeing, IBM
Regional Strategy
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Products and value-chain activities are
managed on a regional basis
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This strategy is often used to compete in the EU
and NAFTA
Companies that once used a multidomestic
strategy often switch to a regional strategy,
particularly in a trade bloc
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Example: Procter and Gamble