Page 295 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes international strategy

Firms that pursue an international strategy try to create value by transferring valuable skills and
products to foreign markets where indigenous competitors lack those skills and products. Most
international skills hence created value by transferring differential product offerings developed
at home to new markets overseas Accordingly, they tend to centralize product development
functions at home (e.g. R&D). However they tend to establish manufacturing and marketing
functions in each major country in which they do business. But while they may undertake some
local customization of product offering and marketing strategy, this tends to be limited. In most
international firms, the head office retains tight control over marketing and product strategy.
An international strategy makes sense if a firm has a valuable core competence that indigenous
competitors in foreign markets lack and if the firm faces relatively weak pressures for local
responsiveness and cost reductions (as is the case for Microsoft).

multi-domestic strategy

Firms pursuing a multi-domestic strategy orient themselves toward achieving maximum local
responsiveness. The key distinguishing feature of multi-domestic firms is that they extensively
customize both their product offering and their marketing strategy to match different national
conditions. Consistent with this, they also tend to establish a complete set of value creation
activities, including production, marketing and R&D, in each major national market in which
they do business.
A multi-domestic strategy makes some sense when there are high pressures for local responsiveness
and low pressure for cost reductions.
Global strategy

Firms that pursue a global strategy focus on increasing profitability by reaping the cost reductions
that come from experience curve effects and location economies. That is, they are pursuing a
low cost strategy. The production, marketing, and R&D activities of firms pursuing a global
strategy are concentrated in a few favourable locations. Global firms tend not to customize their
product offering and marketing strategy to local conditions because customization raises costs
(it involves shorter production and the duplications of functions). Instead, global firms prefer
to market a standardized product worldwide so they can reap the maximum benefits from the
economies of scale that underlie the experience curve. They may also use their cost advantage to
support aggressive pricing in world markets.

Did u know? Multi domestic strategy is best suited incase of high pressure for local
responsiveness and low pressure for reduction in costs.
This strategy makes most sense where there are strong pressures for cost reductions and where
demands for local responsiveness are minimal e.g. semi-conductor industry.

transnational strategy

Christopher Bartlett and Sumantra Ghoshal have argued that in today’s economic environment,
competitive conditions are so intense that to survive in the global marketplace, firms must exploit
experience-based cost economies and local economies, they must transfer core competence within
the firm, and they must do all of this while paying attention to pressures for local responsiveness.
Bartlett and Ghoshal maintain that the flow of skills and product offerings should not be all one
way, from home firm to foreign subsidiary, as in the case of firms pursuing an international
strategy. Rather, the flow should also be from foreign subsidiary to home country, and from
foreign subsidiary-a process they refer to as global learning.

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