As globalisation touches economies around the world, more companies now are connecting with the global market. Expansion into the foreign financial market has become easier, thanks to improved communication, enhanced capital mobility and slashed tariffs. However, international business expansion involves many factors like dealing with foreign stakeholders, facing stiff competition, foreign employees and labour laws as well as government jurisdiction. Thus, successful business managers embrace a well-planned business strategy that caters to their needs as well as abilities.
Here are the four most popular global business strategies.
An international strategy refers to exporting or importing goods and services to and fro from foreign markets. You can either export to a particular foreign country or import their goods to your domestic country. This is the most basic import-export strategy that businesses have been following for decades. Companies that focus on international strategy are based on their domestic country from where they manage their overseas functions.
Professionals who have gained knowledge and experience in strategic business management can very well adapt to this strategy. Usually followed by small local businesses who are seeking to export resources to foreign markets, the strategy has its own challenges too such as setting up sales offices abroad, managing global logistics and ensuring compliance with foreign trade regulations. Still, this strategy has minimum overheads and has quite popular among businesses seeking business expansion beyond geographical boundaries. India has been exporting its textile products and importing fuels – this is a classic example of the international strategy.
Companies that are seeking to boost their revenue and upscaling their international reach follow the global strategy wherein they aim to expand the customer base and sell in more foreign markets. In an attempt to reduce costs, products or services are homogenised, and the horizon of international outreach is broadened by establishing operations worldwide. They might have to make small-scale changes in their original product according to regional needs in other countries. So, while the core items and the global message stays intact, there may be essential changes in language or food items in a foreign menu. Operating from a domestic office, the company might address a broad international audience from multiple foreign set-up establishments too. The companies with global strategy are highly centralized and subsidiaries follow only the parent company’s footsteps. That’s why it is also known as a hub and spoke model of business. A fine example of a global business strategy would be the pharmaceutical companies.
While international and global strategies may sound similar, there is a very significant difference. Companies adopting international strategy keep their domestic policy intact and try to adapt it to the international markets. In the global strategy, the companies treat each foreign market differently and try to adopt the domestic culture.
Businesses that adopt the multi-domestic global business strategy invest in establishing their own presence in a foreign market. So, instead of marketing foreign products to those customers, companies alter and then offer to engage with a foreign culture, customs and daily requirements. This is a common strategy adopted by food and beverage companies. While the headquarters are in the original country, many subsidiary offices are set up in foreign lands which are well equipped to deal with region-specific requirements. There is little pressure for integrating worldwide operations as subsidiaries operate as autonomous bodies from the headquarters.
Take, for instance, McDonald’s, Nestle and Pizza Hut. Their offerings are customized to each country’s taste preferences.
One of the most challenging strategies, the transnational global strategy can actually be seen as a mix of global and multi-domestic strategies. The headquarters remain in the country of origin, but the strategy allows the establishment of similar full-scale operations in foreign countries too. An effective leader who is well trained and experienced in strategic business management can lead the company through a strong transnational strategy. Individual facilities in various markets are equipped with decision making, sales and manufacturing functions with the aim that they can respond well to local consumer needs. The biggest challenge that is faced by companies following their strategy is the identification of the best management policy that can boost the economy of scale positively. A significant investment is also required in order to establish multiple entities. Besides, overcoming foreign legal matters, recruiting foreign nationals, office establishment are all under the cost reduction umbrella that management needs to address.
Unilever is one of the best known transnational company as it strives to achieve global efficiency while trying to adopt local responsiveness.
The challenges of business globalization can be well handled by persons who have a deep understanding of the core business and are efficient in selecting the right strategy for the right business. Globalization trends tend to impact business in every part of the world. Gaining opportunity with expansion and following the correct strategy with efficient management and analytical skills works wonders. If you want to develop a global perspective, you can consider gaining insights from business strategy courses. You would be learning in-depth about each kind of global strategy.