Global expansion strategies enable organizations to work internationally, reaching markets outside of their own domestic market and gaining access to business opportunities in other parts of the world.
Multinational companies operate in multiple countries—in contrast with domestic companies, which operate in a single country. This strategy is often pursued to gain access to more consumer markets or become a supplier to new customers in other business-to-business (B2B) markets.
Generally, companies expanding globally follow one of these 4 key global expansion strategies:
Applying an international strategy involves entering a new market without significantly changing product features or pricing strategy. Products or services are sold at similar price points and with the same branding, functionality, and design.
To casual observers, your product would probably be identical regardless of which country or region they buy it in. It wouldn’t be cheaper than it was before, even if local competitors offer a similar product at a different price. An International strategy doesn’t involve lowering the price to compete with local alternatives.
Essentially, it’s as if you “drag and drop” your product directly into the new market without reframing how it’s sold based on cultural differences or expectations. Buyers may see your product as more appealing if they prefer to purchase a product they perceive as foreign—they may also buy your product because they like what they see about your company and overall brand.
Rolex watches are a great example of international strategy at work. A Rolex timepiece is made in Switzerland and appeals to buyers based on the brand’s reputation for quality. Wherever you are in the world, if you look for a Rolex watch, you’ll probably find similar pricing and the same designs and options available. You can generally expect Rolex watches that are designed for the Swiss market to look the same and have the same quality that Rolex watches sold in the United States (US), Italy, France, the UK, or anywhere else have.
By using a multi-domestic strategy, other companies take a different approach that adapts to local cultures and markets. Each country’s unique local tastes and preferences are accounted for with products or services that are customized to be more competitive within that particular market. Similar to an international strategy, a multi-domestic strategy doesn’t compete primarily on pricing.
Your brand, within a different domestic market, may very well offer a significantly different version of the product you currently sell today. Modifying what you offer to fit different customs could potentially make your products more profitable if customers see the changes as a sign that your company is now a better fit for their needs and preferences.
For some companies, this approach of unique modifications for each market could be expensive, but a multi-domestic strategy doesn’t focus on reducing prices to gain market share. Your products will still have the same pricing in a different market.
Lay’s, a potato chip brand based in the US and a wholly owned subsidiary of PepsiCo, has other brand names operating in other countries. UK customers buy Walkers’ crisps in flavors such as paprika that would be uncommon or unavailable in Lay’s domestic market.
In direct contrast to multi-domestic, a global strategy involves building cost-effective operations for international markets, which minimize local and regional variation. Products or services are largely the same in every market to reduce costs as much as possible and become an industry leader. Companies following this approach want to undercut competitor pricing in every market they operate in.
If you follow a global strategy, your company will probably differentiate from competitors through pricing leadership. You will seek to win market share in the countries you operate in by offering the best prices, but your products won’t adapt uniquely to each culture—even if there are local preferences you could consider.
For products where the price is important but customization isn’t, a global strategy is a particularly good fit.
Components supplied for manufacturing consumer products are one example.
Perhaps one of the best-known companies using a global strategy is Coca-Cola. This popular brand’s soft drinks are fairly uniform around the world—a “Coke” may be packaged, distributed, or promoted differently in different markets, but it’ll probably taste the same whether you buy it in the US or Germany
For companies that want to build both customization and reduced costs into their global expansion strategy, a transnational strategy may be the best choice. Transnational strategy looks for ways to optimize product fit within each market while also managing costs and process efficiencies. Most of the products are very similar, making it possible to use the same suppliers and avoid having to create separate supply chains, reducing the costs associated with selling to multiple markets. Some minor customization is easily added on without creating too much change or extra costs.
Ice cream company Baskin Robbins sells different flavors of ice cream in different countries, often taking inspiration from local cuisines. In Asia, you might find matcha and chocolate ice cream—but not at all Baskin Robbins stores around the world.
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