Today, the transportation and communication technologies that have shaped globalization allow any company to sell its products internationally with relative ease.
It is not unusual to find brands from all over the world in a local market and, at the same time, it is common to recognize foreign brands that are part of our daily lives.
Thus, the possibility of exporting products abroad is an option always present in business planning.
However, it is important to consider that there are multiple ways to approach an internationalization process.
Therefore, the objective of this article is to analyze the different types of international business strategies available , explaining the key aspects of their operation in order to determine which one is the most suitable according to the resources and capabilities of each company.
Internationalization strategies
We understand international business strategies as the different ways in which a company approaches foreign markets.
There are four main types:
overall strategy
The first is the global strategy, which treats international markets as a single homogeneous market, where the products or services that the company offers are standardized for the entire set of international demand.
It is the simplest strategy and is easily applicable to low added value products or those that have global popularity.
This strategy is dominant in industries where price-based competition is high and differentiation opportunities are limited , forcing companies to reduce their costs to be competitive.
The core of this strategy is the mass production of a single product, with the aim of reducing the unit cost through what is known as economies of scale.
This allows production costs to be reduced beyond what would be possible if only producing for a domestic market.
However, due to the need to achieve economies of scale, this strategy is suitable only for large companies that have the resources to produce in large quantities.
SMEs and startups will not be able to compete in international markets in terms of price, so this strategy is not applicable to them.
Example of a transnational strategy. Amazon
A prominent example of success is Apple, which has managed to keep its branding and marketing strategies virtually uniform across all international markets.
Its standardized products and impactful advertising appeal to consumers around the world, without requiring significant adjustments to suit the particularities of each region.
Multi-domestic
The second is the multi-domestic strategy, which consists of adapting products or services to the specific needs of each foreign market, creating specialized business units for each country or region.
Contrary to the global strategy, the multidomestic strategy is more complex, as it requires a detailed analysis of the particularities of each market and the adaptation of the production process to meet those demands.
It is important to note that this strategy does not seek to differentiate the product to stand out, but to transform it to fit local needs , appealing directly to the demand of each country or region.
Ultimately, this strategy requires a large amount of resources to carry out an in-depth analysis of demand and modify production based on the results obtained.
Therefore, it is not recommended for SMEs or startups , but rather for large companies that identify clear business opportunities in specific markets.
Example of a multi-domestic strategy. McDonalds
McDonald's tailors its menu to the local tastes of each country, adjusting its products to reflect the cultural and gastronomic preferences of each region.
For example, it offers beer in Germany, wine in France, Mc Huevo in Uruguay and vegetarian burgers in India, demonstrating its flexibility to satisfy local consumers.
In addition, McDonald's chooses strategic locations with a high flow of customers, which explains the lower presence of establishments in less populated areas.
Transnational strategy
The third is the transnational strategy, which is somewhere between the global and multi-domestic strategies. This strategy seeks to expand in a standardized manner whenever possible, but also adapts to market specificities when necessary.
In practical terms, the transnational strategy involves the company moving into target markets, opening branches responsible for overseeing the internationalization process and determining the best strategy for each market.
The advantage of this strategy is that it allows maximizing results if executed correctly , taking advantage of economies of scale where demand does not require adaptation, and adjusting products when necessary to meet local needs.
Although at first glance it may seem more complicated than the previous two, the transnational strategy is feasible for SMEs and small-scale startups.
The business flexibility that characterizes these companies allows them to test different approaches in foreign markets until they find the optimal point of acceptance by consumers.
This ability to adapt can be a key advantage over large companies.
Example of a transnational strategy. KFC
Kentucky Fried Chicken's (KFC) transnational strategy stands out as one of the most successful in the fast food industry.
Its global expansion is based on a strategy that prioritizes alliances with local suppliers and experts in international markets.
These collaborations not only help reduce operational costs, but also strengthen relationships with local businesses, facilitating a deeper understanding of international consumers.
Although KFC is present in 145 countries and territories, it is rare to find two identical menus.
This is because the brand incorporates local ingredients into its recipes and adapts its offering to the food and cultural preferences of each region.
For example, in India, where approximately 42% of households are vegetarian, KFC offers a special menu with vegetarian options, such as the Veg Zinger.
international
The last strategy is the international strategy, in which the company focuses mainly on the domestic market, but is willing to sell internationally through export.
This strategy is indirect and focuses on taking advantage of international business opportunities , although it is not the company's main objective.
The international strategy resembles the global one in terms of marketing standardized products , but, unlike the latter, it does not seek to maximize production.
It is ideal for companies that are not fully committed to the internationalization process, but that see an opportunity to generate additional income through export.
It is a strategy applicable to any type of company.
If production exceeds demand in the domestic market, exporting makes it possible to take advantage of this excess and obtain additional benefits, while reducing the unit cost of production.
Conclusions
International business strategies can be classified according to the degree of commitment of the company to internationalization and the level of adaptation that the products or services need to succeed in foreign markets.
- The global strategy It involves the sale of standardized products in all markets, with the aim of minimizing unit costs through economies of scale.
- The multi-domestic strategy seeks to adapt to local demands by customizing products to meet the specific needs of each market.
- The transnational strategy It combines standardization and adaptation, depending on the characteristics of each market, which requires business flexibility.
- The international strategy It does not focus exclusively on internationalization, but allows taking advantage of opportunities in foreign markets through the export of surpluses.
Entering international markets is often costly and requires heavy investments to be competitive, whether in terms of price or differentiation.
For this reason, the most recommended strategies for SMEs and startups are the transnational strategy , which takes advantage of the flexibility of these companies, and the international strategy , which does not require a high degree of commitment or investment like the others.
RRYP Global , expert lawyers in international trade.
