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Multinational Strategies
Chapter 5, pages 148-154
Globalization orNational Responsiveness?
Globalization 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
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 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 ofInternational Business Strategies
Multidomestic Transnational Compromise strategies
International Regional
Some companies use a combination of strategies
Multidomestic Strategy A strategy that attempts to maximize national
responsiveness Firm usually has product development,
production, and marketing in each country 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
National responsiveness is more important than cost pressures.
Multidomestic Strategy (2)
Legal and trade restrictions may require a multidomestic strategy in some countries.
Problems with multidomestic strategies 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 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)
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
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
Products and value-chain activities are managed on a regional basis 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 Example: Procter and Gamble