International Business Strategy: Know about Its Types and Strategic Decisions

International business strategy is crucial in today’s globalized economy because it helps companies navigate the complexities of doing business across borders, cultures, and regulatory environments. It is important for companies to have a clear understanding of the various types of international business strategies, such as multi-domestic, global, transnational, and hybrid, in order to choose the one that best fits their goals and resources. Besides, strategic decisions in international business, such as market entry, product adaptation, and organizational structure, have a significant impact on a company’s success in global markets.It is important for companies to have a clear understanding of the various types of international business strategies and strategic decisions in international business in order to choose the one that best fits their goals and resources, then achieve the success in global market By implementing effective international business strategies, companies can not only expand their customer base and revenue streams but also enhance their competitive advantage in the global marketplace.

1. Types of International Business Strategies

Multidomestic strategy, global strategy, and transnational strategy are all types of international business strategies. These strategies are used by companies to expand their operations beyond their domestic markets and to compete effectively in foreign markets. Each strategy has its own set of characteristics, advantages, and disadvantages, and companies must choose the most appropriate strategy based on their goals, resources, and market conditions.

1.1. Multi-domestic Strategy

Multi-domestic strategy is a business approach that involves tailoring a company’s products, services, and marketing strategies to meet the specific needs of each local market in which it operates. This strategy is typically used by multinational corporations with a presence in multiple countries or regions.

A company that uses a multi-domestic strategy is McDonald’s. McDonald’s has restaurants in over 100 countries, and the menu in each country is tailored to local tastes and preferences. For example, in India, McDonald’s offers a range of vegetarian options, while in Japan, they offer a Teriyaki Burger. In France, McDonald’s offers a range of gourmet burgers, and in the United States, they offer larger portion sizes and different menu items such as the McRib sandwich. By adapting to local tastes and preferences, McDonald’s has been able to build a strong brand presence in each market and appeal to local customers.

1.1.1. Advantages of Multi-Domestic Strategy

• Localized Marketing: This strategy allows businesses to tailor their marketing and advertising campaigns to specific local markets, which can increase customer engagement and brand awareness.

• Adaptability: The multi-domestic strategy allows companies to adapt quickly to changing market conditions, customer preferences, and cultural differences in each market.

• Customer Loyalty: By catering to local tastes and preferences, companies can build strong relationships with customers and develop brand loyalty.

• Greater Autonomy: Multi-domestic strategy gives individual subsidiaries or regions greater autonomy to make their own business decisions and respond to local needs.

1.1.2. Disadvantages of Multi-Domestic Strategy

• Higher Costs: Developing and implementing a multi-domestic strategy can be costly, as companies must create different products, marketing campaigns, and sales strategies for each local market.

• Lack of Efficiency: The localization of products and services can lead to a lack of efficiency in production and distribution processes.

• Inconsistency: Multi-domestic strategy can result in inconsistencies in product quality, branding, and customer service across different markets.

• Coordination Issues: With each subsidiary or region having greater autonomy, it can be difficult for the parent company to coordinate and implement a unified strategy across all markets.

1.2. Global Strategy

Global strategy is a business approach that involves standardizing products, services, and marketing strategies across multiple countries or regions to achieve economies of scale and cost savings. This strategy is typically used by multinational corporations with a strong global brand and a standardized product offering.

For instance, Coca-Cola is a global brand that operates in over 200 countries, and their products and marketing campaigns are standardized across all markets. This approach has allowed Coca-Cola to achieve economies of scale in production and distribution, as they can produce and distribute the same products worldwide. The company has also been able to build a strong global brand by maintaining consistency in their product offering and marketing campaigns.

1.2.1. Advantages of Global Strategy

• Economies of Scale: Global strategy allows companies to achieve economies of scale in production and distribution by standardizing products and services across multiple markets.

• Cost Savings: By standardizing marketing and operational processes, companies can reduce costs associated with marketing, research and development, and supply chain management.

• Consistency: Global strategy ensures consistency in product quality, branding, and customer service across all markets, which can help to build a strong global brand.

• Better Coordination: By standardizing business processes, companies can improve coordination and communication across different markets, which can help to improve efficiency and reduce errors.

1.2.2. Disadvantages of Global Strategy

• Lack of Adaptability: Global strategy can result in a lack of adaptability to local market conditions and customer preferences, which can limit the company’s ability to compete effectively in some markets.

• Cultural Differences: Differences in culture and customer preferences can make it difficult to standardize products and marketing strategies across all markets.

• Limited Innovation: Global strategy can limit the ability of companies to innovate and develop products that are tailored to specific market needs.

• Risk of Failure: Global strategy can be risky, as failure in one market can impact the company’s overall performance and reputation.

1.3. Transnational strategy

Transnational strategy is a business approach that seeks to balance the benefits of global standardization and local customization. It involves integrating various functions of the business across different countries to achieve a high level of efficiency and coordination while also adapting to local market conditions and customer preferences. This approach requires a high level of integration, collaboration, and communication across different parts of the business.

For example, Unilever operates in over 190 countries and has a wide range of products and brands that are tailored to local tastes and preferences. However, the company also has a standardized approach to production, procurement, and supply chain management, which allows them to achieve economies of scale and cost savings.

1.3.1. Advantages of Transnational Strategy

• Adaptability: Transnational strategy allows companies to adapt quickly to changing market conditions and customer preferences while also achieving economies of scale.

• Brand Consistency: By maintaining a consistent brand image and quality across all markets, companies can build a strong global brand and reputation.

• Localization: By tailoring products and services to local market conditions, companies can increase customer engagement and loyalty.

• Cost Savings: Transnational strategy allows companies to achieve economies of scale in production and distribution, which can result in cost savings.

• Innovation: Transnational strategy encourages innovation and creativity by allowing local teams to develop new products and services that are tailored to local market needs.

1.3.2. Disadvantages of Transnational Strategy

• Coordination Challenges: Transnational strategy requires a high degree of coordination and communication between the company’s headquarters and its subsidiaries or regions, which can be challenging to achieve.

• Cultural Differences: Differences in culture and customer preferences can make it difficult to standardize products and marketing strategies across all markets.

• Increased Complexity: Transnational strategy can be more complex to implement than other business strategies, as it requires balancing the need for standardization with the need for localization.

• Risk of Failure: Transnational strategy can be risky, as failure in one market can impact the company’s overall performance and reputation.

1.4. A hybrid strategy

A hybrid strategy is a business approach that combines elements of two or more different strategies, such as global, multi-domestic, and transnational strategies, to create a unique and effective approach to business operations. It involves finding a balance between standardization and localization based on the specific needs of the business and the markets it operates in.

Toyota uses a hybrid strategy to produce and market its vehicles, using a standardized production system to achieve cost savings globally while tailoring its products to local market conditions and customer preferences. For instance, Toyota produces different models of its vehicles for different markets based on local needs and preferences, while also adapting its marketing strategies to local cultures and languages. This approach has helped Toyota achieve success in global markets while maintaining local relevance and customer engagement.

1.4.1. Advantages of Hybrid Strategy

• Flexibility: Hybrid strategy allows companies to adapt quickly to changing market conditions and customer preferences while also achieving economies of scale.

• Improved Customer Satisfaction: By tailoring products and services to local market conditions and customer preferences, companies can increase customer engagement and loyalty.

• Cost Savings: Hybrid strategy allows companies to achieve economies of scale in production and distribution while also maintaining local relevance, which can result in cost savings.

• Improved Brand Image: By maintaining a consistent brand image and quality across all markets while also adapting to local market conditions, companies can build a strong global brand and reputation.

1.4.2. Disadvantages of Hybrid Strategy

• Coordination Challenges: Hybrid strategy requires a high degree of coordination and communication between the company’s headquarters and its subsidiaries or regions, which can be challenging to achieve.

• Increased Complexity: Hybrid strategy can be more complex to implement than other business strategies, as it requires finding a balance between standardization and localization based on the specific needs of the business and the markets it operates in.

• Risk of Failure: Hybrid strategy can be risky, as failure to find the right balance between standardization and localization can impact the company’s overall performance and reputation.

2. Strategic Decisions in International Business

Strategic decisions in international business are high-level decisions made by an organization’s top management that sets the direction and goals for the company on a global scale. It involves considering various factors such as the competitive landscape, market trends, financial considerations, and the company’s strengths and weaknesses.

Strategic decisions often have long-term implications for the organization and can impact its overall success. Examples of strategic decisions include expanding into new markets, investing in new technologies, launching new products or services, merging with or acquiring another company, and restructuring the organization’s operations.

To make effective strategic decisions, businesses typically conduct extensive research and analysis to evaluate potential options and assess the risks and benefits associated with each option. They also consider the potential impact on stakeholders, such as customers, employees, shareholders, and suppliers.

It can be seen that international business involves a variety of strategic decisions that need to be made by firms operating across national boundaries. To be more specific, some of the key strategic decisions in international business and the process of making strategic decisions in business will be shown below:

2.1. 7 key strategic decisions in international business

• Market Selection: One of the most important strategic decisions in international business is the selection of the right market. Companies need to analyze the political, economic, and cultural factors in a country to determine if it’s a viable market for their products or services.

• Mode of Entry: Once a company has identified a viable market, it needs to decide on the best mode of entry. The options include exporting, licensing, franchising, joint ventures, and wholly-owned subsidiaries. Each mode of entry has its own advantages and disadvantages, and companies need to choose the one that best suits their objectives.

• Product Adaptation: Companies need to adapt their products to meet the needs and preferences of customers in different markets. This can involve changing the design, packaging, or features of the product to make it more appealing to local customers.

• Marketing Strategy: Marketing strategies that work in one country may not be effective in another country. Companies need to develop marketing strategies that take into account cultural and linguistic differences, as well as differences in consumer behavior and preferences.

• Supply Chain Management: Managing the supply chain is a critical aspect of international business. Companies need to find reliable suppliers, manage logistics, and deal with customs and other regulatory requirements.

• Legal and Regulatory Issues: Companies need to be aware of the legal and regulatory environment in the countries where they operate. This includes issues related to intellectual property rights, labor laws, and environmental regulations.

• Currency Management: Companies need to manage currency risks when operating in multiple countries. This involves hedging strategies to protect against currency fluctuations that can impact profits.

Overall, strategic decisions in international business require careful analysis and consideration of a variety of factors, including market selection, mode of entry, product adaptation, marketing strategy, supply chain management, legal and regulatory issues, and currency management.

2.2. The process of making strategic decisions in international business.

• Define the problem or opportunity: The first step in making a strategic decision is to clearly define the problem or opportunity that needs to be addressed. This involves identifying the root cause of the problem or exploring potential areas of growth for the business.

• Gather information: Once the problem or opportunity is defined, the next step is to gather relevant information. This may involve conducting market research, analyzing financial data, and seeking input from stakeholders such as customers, employees, and suppliers.

• Analyze the data: After gathering the necessary information, it is important to analyze it to identify patterns and trends. This helps to evaluate the potential impact of different options and assess the risks and benefits associated with each.

• Consider options: Based on the analysis of the data, a range of options should be considered. These could include expanding into new markets, developing new products or services, or making changes to the organizational structure.

• Evaluate options: Each option should be evaluated against key criteria such as feasibility, cost, and potential impact. This helps to narrow down the options and identify the most viable course of action.

• Make a decision: Once the options have been evaluated, a decision can be made. This decision should be based on a thorough understanding of the problem or opportunity, as well as an analysis of the risks and benefits associated with each option.

• Implement and monitor: After a decision has been made, it is important to implement it effectively and monitor its progress. This involves putting a plan into action and tracking the results to ensure that the desired outcomes are achieved.

To make effective strategic decisions in international business, companies must conduct extensive research and analysis to understand the unique challenges and opportunities of operating in different countries and regions. They must also consider the potential impact on stakeholders such as customers, employees, shareholders, and suppliers. By doing so, businesses can make informed decisions that support their growth and success in the global marketplace.

In conclusion, understanding the types of international business strategy and giving strategic decisions in international business are extremely important for a successful global business. The selection of the right market, mode of entry, product adaptation, marketing strategy, supply chain management, legal and regulatory compliance, and currency management are all significant considerations for firms operating across borders. A well-designed international business strategy can help companies to mitigate risks and take advantage of new opportunities in the global marketplace. It is essential for companies to carefully analyze these strategic decisions and make informed choices to achieve success in international business.