- 12 Marks
Question
Explain the following internationalization strategies and identify TWO risks associated with each of the strategies:
i) International strategy
ii) Global strategy
iii) Multidomestic/Multinational strategy
iv) Transnational strategy
Answer
i) International Strategy:
An international strategy involves exporting products or services from the home country to international markets with minimal local customization. The focus is on maintaining a strong home base while leveraging core competencies globally.
Risks:
- Limited Responsiveness: There is a risk of not meeting the specific needs of local markets due to the lack of customization, which can lead to a loss of market share.
- Logistics and Distribution Challenges: Managing logistics and distribution from a central home base can be complex and costly, leading to potential delays and increased expenses.
ii) Global Strategy:
A global strategy involves treating the world as a single market, standardizing products and services across all markets to achieve economies of scale and cost advantages.
Risks:
- Cultural Insensitivity: The standardized approach may fail to address cultural differences in various markets, leading to a lack of acceptance of the product or service.
- High Coordination Costs: Implementing a global strategy requires significant coordination across different countries, which can be expensive and difficult to manage.
iii) Multidomestic/Multinational Strategy:
A multidomestic strategy focuses on adapting products and services to fit the unique needs of each local market. The strategy emphasizes local responsiveness over global efficiency.
Risks:
- Higher Costs: Customizing products and services for each market can be costly, reducing the potential for economies of scale.
- Complex Management: Managing a diverse portfolio of customized offerings across different markets can be complex, leading to potential inefficiencies and management challenges.
iv) Transnational Strategy:
A transnational strategy seeks to combine the benefits of global integration and local responsiveness. Companies adopting this strategy aim to achieve both global efficiency and local adaptation.
Risks:
- Balancing Act: The need to balance global standardization with local adaptation can be challenging, leading to potential conflicts and compromises that may weaken the overall strategy.
- Resource Intensive: Implementing a transnational strategy requires significant resources and investment, which can strain the organization and lead to operational difficulties.
- Topic: Strategic management in the globalized workplace
- Series: MAY 2017
- Uploader: Theophilus