Four basic strategies are dominant when MNEs look to international markets for growth opportunities, cost reduction, and risk diversification within the context of satisfying the competing demand of global integration and local responsiveness; the choice must also depend on the links between the different businesses and products a firm may have, since many international firms are multi-business and multi-product. Each of these strategies differ fundamentally regarding where managers put value activities and how they try to run them.

International Strategy

Companies adopt this strategy whet hay aim to leverage their core competencies by expanding opportunistically into foreign markets. The firm transfers skills, new products, ideas, processes and advantages, which are usually developed domestically to foreign markets where there is the potential to secure differential advantage. The firm’s product development tends to be centralized; tight control and coordination come from the corporate headquarter. This mode relies on local subsidiaries in each country to administer business as instructed by headquarters. Some subsidiaries may have the freedom to adapt products to local conditions as well as to set up some light assembly operations or promotion programs. The ultimate control however rests with the managers at the corporate headquarters who believe that they know the basis and potential extension of the company’s core competence. Famous international strategy firms include McDonald’s, Google, BP, Wal-Mart and ING Group.

International strategy makes sense if the firm has a core competence that local competitors in other markets lack and if industry conditions do not push the firm to improve its cost controls or local responsiveness. In such condition the international strategy creates moderate operational costs and high profits. The central role of the corporate headquarters can be a hindrance to identifying and responding to local conditions. The HQ’s ethnocentric orientation, a one way view from home office to the rest of the world can lead to missed market opportunities and the believe that international operations is second to home market.

Multi-domestic Strategy

Also know as locally responsive companies follow a model that allows each of its foreign country operations to act fairly independent. A firm using a multidomestic strategy sacrifices efficiency in favor of emphasizing responsiveness to local requirements within each of its markets. This give the respective subsidiaries in the geographic locations and local markets to exercise authority to design, make, and market products that directly respond to the local customers’ preference and taste. Johnson & Johnson is an example of a successful multi-domestic firm that differentiates it value chain activities to meet local market s and adapts policies to conform to host-government regulations. Managers in these firms tend to hold a polycentric view, one that believes that people close to the market (philosophically, culturally and physically) should run the business. This implies that not only local production, sales and marketing, but also local product development and R&D centers designed to support market-specific activities. This structure naturally gives rise to a high cost base, although this can be compensated for by adding value to local product through targeted differentiation and marketing, increased innovation, and higher growth potential. E.g. Coca cola Company

A major problems faced by multi-domestic firms is control. With various divisions following their own objectives, it can mean the creation of decentralized federations through which it is hard to transfer skills and information. Others include the duplication of management, design, production and marketing activities due to each subsidiary building its own value chain hence this model cannot be adopted in industries that have intense cost pressures.

Global Strategy

Companies adopting this strategy choose to maximize on integration. This spurs the company to make and market a standardized product, such as razor blades and services like package delivery for a specific global segment. These companies thing in terms of creative products for the global market place and manufacturing them on a global scale in a few highly efficient plants and marketing them through a few focused distribution channels. These companies see the world as one market with no difference between national tastes and preferences, and consumers will be satisfied with the opportunity to buy comparatively higher-quality products for a lower price. MNCs that adopt this strategy seek to become low cost players in the industry and failing to do this will lead to losing their position to firms that are able to do so. Achieving this objective requires building global scale production facilities in low cost locations that create a platform for efficient operations, such as a Sneaker factory in Vietnam, an auto-part maker in China or a service call centre in India. Managers seek to convert gain in efficiency into cost reduction.

This strategy is more beneficial for industries where efficient is emphasized and little or no demand is required in relations to local responsiveness. This is becoming the norms of many industries since an internationally recognized global standard is endorsed, such as electronic payment protocol, USB cables, Industrial goods etc. Companies like Nokia, Texas Instrument and American Express all purse global strategy. This strategy can make it possible that a onetime transaction can exploit a worldwide distribution network, standardized financial controls and universal messages. The down side is that many consumer good and healthcare markets where local responsiveness is high limits companies that adopt the global strategy.

Transnational Strategy

This strategy is believed to be the most direct response to the growing globalization of business. The strategy holds that today’s environment of interconnected consumers, industries and markets require that MNCs need to find ways to configure a value chain that exploits location economies, coordinate value activities to leverage core competencies effectively, and ensure that the value chain deals directly with pressures for local responsiveness.

Companies adopting this strategy differentiate capabilities and contributions from country to country, finding was to learn systematically from various environments and then ultimately integrating and diffusing this knowledge throughout its global operations. The transnational concept of strategy endorses an integrated framework of technology, financial resources, creative ideas, and people that move it beyond the ideas of the international, multi-domestic and global strategy models. Though transnational strategy was firstly engaged by Japanese firms in the early 1980s, today it is evident (or at least elements of it) across wide range of producers such as GE, Nestle, Unilever, Caterpillar and Ford. Some of the limitations of this strategy include the fact that it is difficult to adopt, posing a serious challenge (especially in coordinating value chain activities) and are prone to short falls. For every success like GE, there are Philipses, Matsushitas and Acer that struggles for apply the same strategy. This strategy is best suited for firms that are faced with the pressure for cost reductions, local responsiveness and where there are opportunities to leverage core competencies extensively through a global network. Competitive conditions are forcing more companies to reset their value chain and reengage transnational strategy.