Identify the four basic strategies that multinational corporations use and the situations in which they are used.

Question

What will be an ideal response?

Answer 1

Multinational corporations can be characterized as using one of four basic international strategies: an international strategy, a multi-domestic strategy, a global strategy, and a transnational strategy. The appropriateness of each strategy depends on pressures for cost reduction and local responsiveness in each country served. Firms that pursue an international strategy have valuable core competencies that host-country competitors do not possess and face minimal pressures for local responsiveness and cost reductions. International firms such as McDonald's, Wal-Mart and Microsoft have been successful using an international strategy. Organizations pursuing a multi-domestic strategy should do so when there is high pressure for local responsiveness and low pressure for cost reductions. A global strategy is a low-cost strategy. Firms that experience high cost pressures should use a global strategy in an attempt to benefit from scale economies in production, distribution, and marketing. By offering a standardized product worldwide, firms can leverage their experience and use aggressive pricing schemes. This strategy makes most sense where there are high cost pressures and low demand for localized product offerings. A transnational strategy should be pursued when there are high cost pressures and high demands for local responsiveness. However, a transnational strategy is very difficult to pursue effectively. Pressures for cost reduction and local responsiveness put contradictory demands on a company because localized product offerings increase cost. Organizations that can find appropriate synergies in global corporate functions are the ones that can leverage a transnational strategy effectively.