Four Types of International Business Strategies

Globalization continues to influence world economies, as reduced tariffs, enhanced communications, and
increased capital mobility have allowed companies to connect to global financial markets and expand
their businesses internationally. However, successful expansion into new foreign markets demands that
companies adopt international business strategies that best fit their needs and capabilities. International
business involves dealing with foreign stakeholders, employees, consumers, and governments, and
therefore, business managers need to consider many factors when conducting business in global
markets, such as competition, supply chain management and pricing strategy. In order to successfully
expand their consumer base and increase profitability through internationalization, companies need to
spend the necessary time and resources to understand global market opportunities and choose the
proper international business strategies.
Four Types of International Business

Strategies
International
Using an international strategy means focusing on exporting products and services to foreign markets, or
conversely, importing goods and resources from other countries for domestic use. Companies that
employ such strategy are often headquartered exclusively in their country of origin, allowing them to
circumvent the need to invest in staff and facilities overseas. Businesses that follow these strategies often
include small local manufacturers that export key resources to larger companies in neighboring countries.
However, this model is not without significant business challenges, like legally establishing local sales and
administrative offices in major cities internationally; managing global logistics involving the import, export,
and manufacture of products; and ensuring compliance with foreign manufacturing and trade regulations.
Despite its relative challenges, the international strategy may be the most common, because on average,
it requires the least amount of overhead. Companies striving to expand internationally may try a
combination of strategies to see which works the best for them in terms of logistics and profits. For
example, a company may start off using the international strategy—exporting its products overseas as a
way to test the international market—and gauge how successfully its products sell. Subsequently, the
company may need to adjust its strategy and create a multi-domestic platform through which it can
manufacture and sell its goods more efficiently.
Multi-domestic
In order for a business to adopt a multi-domestic business strategy, it must invest in establishing its
presence in a foreign market and tailor its products or services to the local customer base. As opposed to
marketing foreign products to customers who may not initially recognize or understand them, companies
modify their offerings and reposition their marketing strategies to engage with foreign customs, cultural
traits, and traditions. Multi-domestic businesses often keep
their company headquarters in their country of origin, but they usually establish overseas headquarters,
called subsidiaries, which are better equipped to offer foreign consumers region-specific versions of their
products and services. These companies also frequently lease buildings abroad to serve as sales offices,
manufacturing facilities or storage for housing service operations.
Multi-domestic strategies are largely adopted by food and beverage companies. For example, the Kraft
Heinz Company makes a specialized version of its ketchup for customers in India—featuring a different
blend of spices—to help match the nation’s culinary preferences. However, these adjustments are often
expensive and can incur a certain level of financial risk when launching unproven products in a new
market. As such, companies usually only utilize this expansion strategy in a limited number of countries.
Global
In an effort to expand their customer base and sell products in more foreign markets, companies following
a global strategy leverage economies of scale as much as possible to boost their reach and revenue.
Global companies attempt to homogenize their products and services in order to minimize costs and
reach as broad an international audience as possible. These companies tend to maintain a central office
or headquarters, usually in their country of origin, while also establishing dozens of operations in
countries all over the world.
Even when keeping essential aspects of their goods and services intact, companies adhering to the
global strategy typically have to make some practical small-scale adjustments in order to break into
international markets. For example, software companies need to adjust the language used in their
products, while fast-food companies may add, remove or change the name of certain menu items in order
to better suit local markets while keeping their core items and global message intact.
Transnational
The transnational business strategy is one of the most intricate methods that businesses can employ
when expanding internationally, and can be seen as a combination of the global and multi-domestic
strategies. While this strategy keeps a business’s headquarters and core technologies in its country of
origin, it also allows a company to establish full-scale operations in foreign markets. The decision-making,
production, and sales responsibilities are evenly distributed to individual facilities in these different
markets, allowing companies to have separate marketing, research and development departments aimed
at responding to the needs of the local consumers.
A company that employs this strategy has the challenge of identifying the best management tactics for
achieving positive economies of scale and increased efficiency. Having many inter-organizational entities
collaborating in dozens of foreign markets requires a significant startup investment. Costs are driven by
foreign legal and regulatory concerns, hiring new employees and buying or renting offices and production
spaces. Therefore, this strategy is more complex than others because pressures to reduce costs are
combined with establishing
value-added activities to optimize adjustments that are necessary to gain leverage and be competitive in
each local market. Given these challenges, larger corporations—such as General Electric and Toyota—
typically employ a transnational strategy as they are able to invest in research and development in foreign
markets, as well as establish production, manufacturing, sales and marketing divisions in these regions.

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Globalization continues to influence world economies, as reduced tariffs, enhanced communications, and

Four Types of International Business

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