Internationalisation strategies – Unit 4 – Module 1

Complex Toolbox for Volunteers

[nextpage title=”SHORT DESCRIPTION”]In this lesson three different internationalisation strategies will be presented and studied: Multidomestic strategy; global strategy; and transnational strategy.

[nextpage title=”TRAINING CONTENT”]

There are several different strategies that an organisation can follow in its internationalisation process. These strategies are different approaches to the internationalisation of its activity, and each organisation should decide which one fits best its interests, purpose and goals with the process. We will present the main three strategies that both enterprises and organisations follow when going international. It has to be noticed that these are not closed categories, as each organisation will end up following its own particular strategy, that maybe does not fit completely in none of these strategies, but it is a mix of some of them. Let’s check’em out!

[nextpage title=”Multidomestic strategy”]

The multidomestic strategy is an approach to internationalisation that focuses the efforts of the organisation, as well as the use of its resources, on the local necessities of each specific zone seperately, instead of adopting a global or standardised approach to it. This means that the organisation studies those specific necessities of that zone/region/city/country, and creates a project accordingly, taking into account its cultural and social factors too.  With this approach, the organisation makes a great effort to adapt its’ activity to those necessities and tries to engage locals instead of a more widespread audience.

For a multidomestic strategy to succeed it is crucial to invest resources into local research, which contributes to an early increase on costs. Notwithstanding, this approach will provide incredibly valuable information about the necessities of that specific zone, which brings the chance of achieving great levels of achievement in the purpose of your organisation and the specific project being conducted in that zone. Nevertheless, efficiency on the use of resources will be sacrificed, turning this strategy into the most expensive to manage.

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By taking the time to learn how to connect with locals and its necessities, it is possible to use the multidomestic strategy to create a wide range of tactics that can be adapted to fit zones and regions that share a lot of similarities. The main flaws of adopting this strategy are the huge costs for research that have to be conducted at the beginning of the internationalisation project. Moreover, nothing assures that this research will provide positive results, as  your activity may not fit the necessities of that specific zone, and all the effort and resources put into research would be “wasted”. Notwithstanding, these costs would be smaller than starting an internationalisation process without this previous research and failing as a result.

This strategy best fits small organisations that want to spread their activity into one or maybe only a few countries, without needing much capability regarding resources or finances.

[nextpage title=”Global Strategy”]

This strategy is the complete opposite of a multidomestic strategy. It sacrifices responsiveness to local requirements within each of its zones and regions in favour of emphasizing efficiency. This does not mean that minor modifications or adaptions in the activity will be made regarding those zones/regions/countries, but in general terms a global strategy will be adopted, and management decisions will be taken following global objectives, without taking local necessities into account.

As previously stated, this strategy aims at achieving the greatest possible levels of efficiency in the use of resources and finances, by deleting the costs of researching and adapting the activity to the needs of specific zones of the world. This reduces the complexity of managing the organisation, but also creates a lot more risks: the lack of adaption to local necessities reduces the reaction possibilities against events on those zones, as well as compromises the usefulness of the activity and service provided by your organisation.

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When we conclude that this strategy is easier to manage than others, we are not stating that it is an easy task at all: Making global decisions and managing an organisation spread into several countries without much information about each of those projects is really complex. A global following and analysis of the organisation situation is mandatory.

This strategy best fits big organisations that want to spread their activity globally, into dozens of countries, and already having the capability to do so (a good network of donors and funders, installations, access to resources…)

[nextpage title=”Transnational Strategy”]

This strategy is a middle ground between a multidomestic strategy and a global strategy, trying to balance efficiency with adaptation to local necessities within several zones, regions, or countries. It takes advantage of globalisation and tries to work on a global level, but at the same time does not forget about local necessities, trying to learn about different environments and cultures, in order to adapt its activity into those zones, regions and countries and make it useful for locals.

The level of domestic versus global approach in this strategy depends on each organisation and its own purpose. Some organisations will adopt a more domestic strategy, doing research and trying to help with local necessities, but with global aspects like a global decision-making process or some level of sacrifice on adaption??? What does this mean?? to save on resources.  Or, on the other hand, other organisations will follow a global strategy, trying to save costs and manage decisions globally, but then doing some follow up on the local implementation of their activity, and providing changes and adaptations to it in order to make it useful for locals and their needa. Considering these factors, a transnational strategy can be difficult to manage, as following both local and global necessities can be really stressful and expensive for an organisation. A correct balance between efficiency and adaptation is the key to success in this strategy.

Photo by Ash from Modern Afflatus on Unsplash

This strategy is highly mouldable to each organisation’s approach, so it fits any type of organisation with a minimum capability to spread globally, but also to work on local needs.

[nextpage title=”Comparative analysis”]

In the following graphs we are able to analyse several factors and their respective impact regarding the three different strategies that we just studied. The X axis corresponds to time and the Y axis to the level of each aspect analysed.

In the graph “Efficiency through different strategies”, several conclusions can be extracted. Whereas the percentage of efficiency achieved with a global strategy starts at the top, it decreases constantly due to the lack of adaption and corrective measures concerning the local necessities. This does not translate into a progressive increase on costs, but on a lack of utility of the resources used for that project. On the other hand, a multidomestic strategy is considerably more expensive at the beginning of the internationalisation project, but it eventually becomes more efficient, as the adaptation to the local necessities helps to achieve a better use of the given resources. Lastly, a transnational strategy should aim at keeping a good level of efficiency without sacrificing too much adaptation to the local necessities.

[nextpage title=”EXTERNAL RESOURCES”]

https://www.globalnegotiator.com/international-trade/dictionary/multidomestic-strategy/ – What is a multidomestic strategy?

https://smallbusiness.chron.com/differences-between-multidomestic-transnational-company-33807.html – Differences between a multidomestic & a transnational company

https://study.com/academy/lesson/multidomestic-strategy-definition-examples.html – Multidomestic strategy: definitione & examples

https://opentextbc.ca/strategicmanagement/chapter/types-of-international-strategies/ – Types of international strategies

https://www.prucommercialre.com/que-es-una-estrategia-multidomestica/ – Multidomestic strategy (SP)

[nextpage title=”QUIZZES/INTERACTIVE EXERCISES”]