Companies operating in global markets choose from among three basic international strategies: (1) multidomestic, (2) global, and (3) transnational. Each of these strategies responds to the local markets and business efficiency in different ways.
A multidomestic strategy emphasizes local needs rather than pushing products and services from the company’s home country. For example, the television show Master Chef customizes the programming that is shown in different countries.
A global strategy emphasizes operational efficiency to benefit from economies of scale. It offers the same products in different locations. Examples include Microsoft and Intel, where local preferences do not dominate. Consumer goods makers such as Levi’s and L’oreal develop global brands to gain efficiency.
A transnational strategy emphasizes balance between local country preferences and the efficiency of standard products. For example, McDonald’s relies on its brand name but adjusts its offerings in different countries. It does not serve beef in India and it sells wine with food in France.
The three types of international strategies are compared in the figure below.
Approaches to International Strategy
Whichever international strategy is chosen, the entry strategy for international markets needs to present a comprehensive plan that sets goals, allocates resources, and establishes policies to guide international operations over a period long enough to achieve sustainable growth in world markets, often three to five years.
Without a well-integrated entry strategy, there is only a sales approach to international markets. The sales and entry strategy approaches are contrasted in the table below.
Entry strategy approach
No systematic choice. Take opportunities as they come
Systematic choice of most appropriate mode
No systematic selection
Selection based on analysis of market/sales potential
Build market position
Only enough to get immediate sales
Whatever is necessary to gain market position
Long run (say, 3 to 5 years)
Exclusively for home market
For both home and foreign markets
Only mandatory adaptations (to meet legal/technical requirements) of domestic products
Adaptation of domestic tests and services to foreign preferences
No effort to control
Implement control to support market objectives
Determined by domestic costs with some adjustments to specific sales situations
Determined by demand, competition, objectives, and other marketing policies, as well as costs
Mainly confirmed to personal selling
Advertising and sales promotion
While the sales approach may be justified as a first attempt, a prolonged adherence to this approach would not be sustainable in the long run.
Choosing a Market and Entry Modes
The assessment and choice of target markets would include the following tasks:
- define the market—Consider the demographics, location, and common interests or needs of your target customers.
- perform market analysis—Gain an understanding of market growth rates, forecasted demand, competitors, and potential barriers to entry.
- assess internal capabilities—Which of the company’s core competencies can be leveraged? Are the sales channels, infrastructure, and relationships in place? What are the time-to-market considerations?
- prioritize and select markets—What are the gaps in the marketplace that the company can fill better than its competitors?
- develop market entry options
The selected entry mode could be one or more of the options in the table below.
As the company develops its international strategy, it is useful to visualize the long-term evolution of the company in world markets. As seen in the table below, in Stage 1 the company is constrained to one or two entry modes. At Stage 4, the company is able to evaluate all possible entry modes to select the most appropriate one. Stage 4 denotes that the company has become multinational, meaning its foreign market entry strategies is designed from a global perspective rather than a single-country perspective.
Entry Mode Stages
The choice of entry mode also depends on the degree of control, financial outlay, and risk in each mode over a period of time, as shown in the figure below.
The actions in the international marketing plan include the following:
- service—a combination of tangible and intangible attributes that confer benefits on users
- price—pricing discretion to achieve differentiation in the market. Together with sales volume, price determines sales revenue
- channel—wwn none, some, or all channel agencies
- logistics—physical movement of samples, including transportation, handling, and storage, as well as the choice of location of collection centers and labs
- promotion—includes personal selling, advertising, sales promotion, and publicity
The following evaluation matrix can be used for each of the countries to decide on an entry strategy.
Local sales office