From capital mobility to enhanced communications, globalization has made entering a foreign market easier than ever. Yet global expansion still requires companies to adopt a business strategy that matches their goals and capabilities. The four main international strategies used to target new markets include: international, global, transnational, and multidomestic. In this third installment of our series, we explore multidomestic strategies and what makes them unique.
As is the case with the other three international business strategies, a multidomestic strategy requires a certain level of commitment around four major factors. These include local responsiveness, global integration, standardization, and customization. Below is a brief overview of each.
Local responsiveness refers to the degree to which a company localizes its products and services to meet the conditions and cultural nuances of a foreign market.
Global integration refers to a company’s local presence in the global market and the degree to which it can offer the same products and services in different countries.
Standardization refers to the ways in which a company develops a “one size fits all” model for the same products and services in different countries.
Customization refers to the process a company uses to adapt a standardized product offering, message, or procedure to better meet the demands of different countries.
What is a Multidomestic Strategy
A multidomestic strategy focuses on creating multiple, country-specific brands instead of one global brand, and involves developing different sales tactics, marketing strategies, and product portfolios based on the local market.
Unlike an international strategy, a multidomestic strategy prioritizes local responsiveness over global standardization. This "local-first" approach may require completely reimaging the product, messaging, go-to market strategy, and even customer support.
Standardization, International, and Transnational Strategies
To help you better understand what makes a multidomestic strategy unique, let’s see how it compares to three other international business strategies.
- Standardization strategy. This strategy involves treating the world as one market with little variation. It’s developed around the assumption that a product can meet the needs of people everywhere. Standardization allows companies to centralize activities such as product design, scale manufacturing, and simplify the supply chain.
- International strategy. This strategy, also known as an export strategy, ranks low on global integration and local responsiveness. It involves selling standardized products globally, without adjusting the model or price for each market. An international strategy works well for products that don’t require a high degree of local responsiveness or localization. Companies that want to focus on domestic operations, but have low-cost pressures to enter foreign markets can benefit from this strategy.
- Transnational strategy. This strategy leverages a high level of standardization, local responsiveness, and global integration. In some ways, it’s a combination of international and multidomestic strategies. Companies often use a transnational strategy to benefit from the efficiency of standardization while relying on global branches to localize their products and messaging for local customers.
Ultimately, whether or not a multidomestic strategy is right for your business comes down to standardization vs. customization. The degree to which you need to adapt your products to match local preferences will help you determine which strategy increases your odds of success.
Developing a Multidomestic Strategy
As we mentioned above, multidomestic strategies prioritize a high degree of local responsiveness over global integration. In practice, a multidomestic corporation is often a multinational company that acquires global brands to cater to those same local customers.
The parent company may operate using a transnational or global strategy, and launch smaller, regional brands to meet the needs of the target market. Depending on business structure, each brand may have its own operations, such as an entirely local team, or use a blend of local and company-wide resources.
High Local Responsiveness and Low Global Integration
If you choose a multidomestic strategy, you'll need an in-depth understanding of the target market's demographics, culture, and preferences before you launch. This will help ensure your offerings meet the needs of local customers. As you develop a strategy, consider:
- Product or service variations, including potential new ones for the target market
- Brand and/or product names, and how they translate into the local language(s)
- Design and packaging, including colors, fonts, and imagery
- Price points for different markets, and whether the offering would be profitable there
- Payment processing options such as credit card brands, bank types, and payment apps
- Website localization and multilingual website options
- Marketing and advertising campaigns, and whether they can be adapted
Keep in mind that a higher degree of local responsiveness will result in lower global integration. This refers to a company's ability to use similar products, services, and business techniques in different markets. Low global integration makes scaling more difficult, but a high degree of local responsiveness offsets this by allowing you to develop a loyal customer base.
Advantages and Disadvantages of Multidomestic Strategies
Like all business strategies, multidomestic strategies have their benefits and drawbacks. And it's important to consider how they could impact your success in a new market. Although a multidomestic strategy helps you create stronger connections with customers, you have to forgo the quick wins you can achieve by selling standardized products. Think of the business returns in terms or years or decades instead of months.
Advantages of a multidomestic strategy:
- Highly localized products and services help ensure local product-market fit and give you a local competitive advantage.
- Operating in different countries gives you better access to local market advantages such as labor, shipping lanes, and natural resources.
- Local subsidiaries are easier to scale up or down based on performance.
- Expanding through mergers and acquisition is easier than introducing an existing brand to a new market.
Disadvantages of a multidomestic strategy:
- Initial costs for entering a new market are higher due to the need to customize offerings.
- Success hinges on your ability to match customer preferences because you are fundamentally altering the product or service.
- Decentralized decision-making across local subsidiaries may require building multiple teams that perform the same function in different regions or markets.
Examples of Multidomestic Strategies
Now that you know more about multidomestic strategies, let’s take a look at five global companies that have successfully implemented them.
The American multinational chain of convenience stores tailors its product selection, payment methods, and marketing across the 19 countries and territories where it operates. In the Philippines, for example, customers can purchase items using the GCash mobile wallet by scanning barcodes. And in Taiwan, the company introduced Open-Chan, a rainbow-haired
extraterrestrial dog who serves as a corporate mascot.
The American multinational food processing company manufactures thousands of food products and markets them in over 200 countries. They adapt popular food items to match local tastes. For example, customers in India can buy standard Tomato Ketchup and Tomato Chili Sauce. They also have subsidiaries in different markets, such as "Wattie's" in New Zealand.
The Swiss multinational food and drink processing conglomerate owns more than 2,000 companies, including Gerber, Häagen-Dazs, Lean Cuisine, Perrier, and Toll House. They sell products in over 186 countries, and curate their offerings to match local preferences. For example, Nestle Japan launched a 'Heart-full Care Program' to offer products and nutrition-related consulting services to the elderly.
The American subscription streaming service and production company has 220.7 million subscribers and is available in over 190 countries. The company not only localizes English language movies and television shows for international audiences, but produces content specifically for international markets. It owns and operates three subsidiary studios including: the US-based Netflix Studios, the German-based Netflix Services Germany GmbH, and the Singapore-based Netflix Pte. Ltd.
The British multinational consumer goods company produces foods, cleaning agents, beauty products and personal care items, and sells them in 190 countries. Unilever's largest brands include: Dove, Sunsilk, Knorr, Ben & Jerry's, and Hellman's. And its product offerings and marketing campaigns are tailored to meet local demands. For example, Dove launched a 'My Beauty, My Say' campaign in China to challenge Chinese beauty stereotypes.
Multidomestic Strategies Require Localization
As you can see, localization is a vital part of any multidomestic strategy. Developing products, services, and brand messaging that are highly responsive to the local market is key for success. However, this requires significant research, planning, and a deep insight into the needs and preferences of local customers. That's because you are essentially recreating your products and brand strategy to appeal to new buyers.
Fortunately, a translation and localization provider such as MotionPoint can help you develop a localization strategy that will enable you to expand into any market. Thanks to our advanced technology, you can quickly and affordably:
- Localize, launch, and manage multilingual websites to reach new customers.
- Create multilingual content by connecting your offline documents, videos and omnichannel assets to our network of professional translators.
- Localize software applications, mobile apps, online portals, and product experiences to adapt the user experience (UX) and user interface (UI) for the target market.
By leaving the localization to MointPoint, you’ll free up time and resources to focus on other aspects of multidomestic strategy. Connect with our localization experts today to learn more about how we can help you prepare to launch in new markets.Last updated on September 02, 2022