International Strategy

Summary

This script discusses three international business strategies: multi-domestic, meganational, and transnational. Multi-domestic focuses on local customization, as seen with Danone's tailored products for different markets. Meganational aims for global integration and cost reduction, exemplified by car manufacturers sourcing globally. Transnational, like Starbucks, balances global consistency with local adaptations. Each strategy helps companies navigate cultural and geographic differences for profitable growth.

Takeaways

• 🌍 Strategy involves actions managers take to achieve company objectives and must be explicit for employees to focus their efforts.
• 🏢 International strategies help manage differences when operating across geographic and cultural borders, with three main types: multi-domestic, meganational, and transnational.
• 🛠️ A multi-domestic strategy customizes products, services, and operations to meet the specific needs of each country, allowing subsidiaries to operate independently.
• 🥛 Danone follows a multi-domestic strategy, creating products tailored to local markets like Russia, where it introduced specific yogurt brands.
• 🌐 A meganational strategy focuses on cost efficiency and global integration by creating standardized products for a global market with minimal local modifications.
• 🚗 Companies like Toyota and Ford utilize a meganational strategy, sourcing components globally and producing in highly efficient plants.
• ⚖️ A transnational strategy is a hybrid approach, aiming for both local responsiveness and global integration, requiring complex organizational structures.
• ☕ Starbucks uses a transnational strategy by maintaining a global brand while adapting products, such as offering a green tea latte in China.
• 🔄 In a transnational strategy, decision-making involves coordination between headquarters and local subsidiaries, combining top-down and bottom-up approaches.
• 📊 The choice between transnational, meganational, and multi-domestic strategies depends on company objectives and the need to standardize or adapt operations across borders.

Q & A

What is the primary purpose of strategy in a company?

The primary purpose of strategy is to guide the actions managers take in pursuit of company objectives and to help relate how it positions the company against industry competitors.

What are the three distinct international strategies mentioned in the script?

The three distinct international strategies mentioned are multi-domestic, meganational, and transnational.

How does a company pursuing a multi-domestic strategy operate?

A company pursuing a multi-domestic strategy customizes products, services, and operations to respond to local customers and employees in each country where it operates, acting like a group of locally focused subsidiaries.

What is the historical background of Groupe Danone mentioned in the script?

Groupe Danone started in Barcelona, Spain in 1919, introduced yogurt to Europe, expanded to the U.S. in 1942, and by 1970 expanded its products beyond yogurt with the purchase of Evian.

What is Groupe Danone's mission and how does it influence the company's approach to different markets?

Groupe Danone's mission is to bring health through food to as many people as possible. This mission guides the company's approach to create products that meet the tastes of each country it enters.

How did Groupe Danone adapt its strategy when entering the Russian market?

When entering the Russian market, Groupe Danone built a factory and introduced yogurt brands specifically designed for the Russian market, such as Danissimo, Activia, Rastishka, Actimel, and Danakor.

What is the core idea behind a meganational strategy?

A meganational strategy focuses on achieving cost reductions from economies of scale and global integration by creating products for a world market, manufacturing them on a global scale, and marketing them through key distribution channels.

How do companies like Toyota, Volkswagen, GM, and Ford exemplify a meganational strategy?

These companies exemplify a meganational strategy by sourcing auto components globally, assembling them in factories, and exporting the finished products worldwide with minimal modifications to meet local customer needs.

What is the main challenge for companies adopting a transnational strategy?

The main challenge for companies adopting a transnational strategy is balancing the need to be both locally responsive and globally integrated, often requiring complex organizational structures to facilitate local customization and global coordination.

How does Starbucks implement a transnational strategy?

Starbucks implements a transnational strategy by standardizing the ambiance of its stores globally while adapting its product offerings to local market tastes, such as offering a green tea latte with a red bean scone in China.

What factors should a company consider when choosing between a transnational, meganational, or multi-domestic strategy?

A company should consider its objectives and the perceived needs to standardize operations or adapt them across borders when deciding between these strategies.

Outlines

00:00

🌐 International Business Strategies

This paragraph discusses the importance of strategy in business and how it relates to industry competitors. It introduces three distinct international strategies: multi-domestic, meganational, and transnational. The multi-domestic strategy is about customizing products and operations to meet local needs, as exemplified by Groupe Danone's approach to entering different markets with tailored products. The meganational strategy focuses on cost reductions through global integration and economies of scale, with products created for a world market and manufactured in highly efficient plants. The transnational strategy is a hybrid that aims to be both global and local, requiring complex organizational structures to balance local adaptation with global integration.

05:01

🌟 Starbucks' Transnational Strategy

This paragraph focuses on Starbucks' implementation of a transnational strategy, aiming to create a global brand while adapting to local market tastes. Starbucks standardizes the store ambience across global markets but varies its product offerings to cater to local preferences. The decision to pursue a transnational strategy over meganational or multi-domestic strategies depends on a company's objectives and the need to standardize or adapt operations across borders. All three strategies are designed to manage differences that arise in international operations more effectively.

Keywords

💡Strategy

Strategy refers to the plan of action designed to achieve specific goals. In the context of the video, it is about how managers direct their company's efforts to meet objectives, particularly in relation to industry competitors. The video discusses how different strategies like multi-domestic, meganational, and transnational help companies operate effectively in global markets.

💡Multi-domestic Strategy

A multi-domestic strategy is one where a company customizes its products, services, and operations to suit local markets. The video uses Groupe Danone as an example, explaining how it enters each market with products designed to meet local tastes, such as introducing Danissimo and Activia for the Russian market, demonstrating the company's commitment to local responsiveness.

💡Meganational Strategy

A meganational strategy focuses on achieving cost reductions through economies of scale and global integration. The video describes how companies like Toyota and GM operate on this strategy, sourcing components globally, manufacturing in efficient plants, and marketing through key distribution channels with minimal modifications to meet local needs.

💡Transnational Strategy

Transnational strategy is a hybrid approach where a company aims to be both global and local. The video explains that companies like Starbucks use this strategy to create a consistent global brand while also adapting offerings to local tastes, such as offering a green tea latte with a red bean scone in China.

💡Global Integration

Global integration is the process of unifying business operations on a worldwide scale. The video mentions that a meganational strategy requires companies to exploit location economies to achieve this integration, such as producing aluminum in the U.S. due to low electricity costs.

💡Economies of Scale

Economies of scale refer to the cost advantages that a business obtains due to expansion. It is a key concept in the meganational strategy where companies like Toyota achieve cost reductions by producing on a large scale in a few highly efficient plants.

💡Localization

Localization is the process of adapting products or services to meet the needs of a particular region or culture. The video uses Danone's entry into the Russian market as an example of localization, where they introduced yogurt brands specifically designed for local tastes.

💡Subsidiaries

Subsidiaries are companies that are owned or controlled by another company. In the context of the video, subsidiaries are discussed in relation to how they operate under different strategies, such as acting independently under a multi-domestic strategy or being coordinated globally under a transnational strategy.

💡Market Customization

Market customization is the practice of tailoring products to meet the specific preferences of consumers in different markets. The video explains how Danone customizes its products to meet the tastes of each country it operates in, exemplifying market customization.

💡Global Brand

A global brand is a brand that operates in multiple countries and maintains a consistent image and identity worldwide. The video discusses how Starbucks aims to create a global brand, standardizing the ambience of its stores across markets while still adapting its product offerings locally.

💡Trade-offs

Trade-offs refer to the act of balancing competing objectives. In the context of the video, companies adopting a transnational strategy must make trade-offs between standardizing operations globally and adapting them to local markets, as illustrated by the need for complex organizational structures.

Highlights

Strategy consists of actions managers take in pursuit of company objectives.

Managers need to be explicit about the strategy they are following and how it relates to industry competitors.

International strategy helps manage the differences that arise when operating across multiple geographic and cultural borders.

Three distinct international strategies are multi-domestic, meganational, and transnational.

A multi-domestic strategy customizes products, services, and operations to respond to local customer and employee needs.

Groupe Danone follows a multi-domestic strategy, creating products that meet the tastes of each country.

Danone’s Russia strategy includes local brands such as Danissimo, Activia, and Actimel, and also educational programs for dairy farmers.

A meganational strategy focuses on cost reductions through economies of scale and global integration.

In a meganational strategy, products are created for a world market and manufactured in a few highly efficient plants.

Companies like Toyota, Volkswagen, and Ford follow a meganational strategy, producing and exporting products with minimal local modifications.

A transnational strategy is a hybrid that aims to be both globally integrated and locally responsive.

Transnational strategy requires complex organizational structures to balance adaptation and standardization.

Unlike meganational strategy, integration in a transnational strategy occurs through coordination and idea exchange between subsidiaries and headquarters.

Starbucks uses a transnational strategy, creating a global brand while adapting products to local market tastes.

Deciding between international strategies depends on company objectives and the need to either standardize or adapt operations across borders.

Transcripts

Strategy, in its most basic  form, consists of the actions 

managers take in pursuit of company objectives.

Managers need to be explicit about  the strategy they are following and 

how it relates to industry competitors.

This type of positioning helps employees  know how to focus their day-to-day efforts.

The purpose of following an international  strategy is to manage the differences that  

arise when operating across multiple geographic  and cultural borders. Global managers are likely  

to adopt one of three distinct international  strategies: multi-domestic, meganational,  

or transnational. These all help the company  achieve profitable growth in a global market.  

So how are these strategies different? A company  that pursues a multi-domestic strategy customizes  

products, services, and operations so it can  respond to customers and employees in each  

of the countries where it operates. In effect,  the company becomes a group of locally focused  

subsidiaries that act independently like domestic  companies deciding how the product is designed,  

made, distributed, and marketed in their local markets. Groupe Danone started in Barcelona, Spain in 1919.

The company introduced yogurt to Europe. Ten years later, in 1929,  

the company opened its first retail outlet in  Paris selling yogurt as a dessert.   

In 1942, the company expanded to the U.S. In 1970, the company expanded its products beyond yogurt with  

the purchase of Evian, a beverage and baby  formula company. Over the next 20 years the  

company purchased a number of food companies in  Europe and expanded to over 140 countries. 

The mission of the company is to bring help through  food to as many people as possible.

Today, this mission guides 100,000 Danoners motivated by the  belief that nutrition can and must contribute to  

bringing health to consumers of all ages, in  all countries, and of all cultures.

However, the company doesn't focus on selling the  same thing to each of the markets.

Rather the company believes in creating product that  meets the tastes of each country.

For instance, as the company entered Russia in 1992, it built a  factory and introduced yogurt brands specifically  

designed for the Russian market. These include  Danissimo, Activia and Rastishka, Actimel,  

and Danakor. The company also purchased Unimilk,  a Russian dairy company and is now the country's  

largest dairy producer. The company even hosts  educational programs for Russian dairy farmers.  

Danone takes a similar multi-domestic strategy in  each of its global markets to ensure that it is  

meeting the local needs of customers. Taking the opposite stance from the multi-domestic strategy,  

a meganational strategy focuses on reaping cost  reductions from economies of scale and other  

efficiencies of global integration. Managers at  headquarters create products for a world market,  

manufacture them on a global scale in a few highly  efficient plants, and market them through a few  

key distribution channels. This strategy requires  that companies exploit location economies.

The cost advantage of performing each stage in the  value chain at the lowest cost for that activity.  

For instance, aluminum production might occur in  the United States where electricity costs are low,  

manufacturing in Indonesia where labor costs  are low, and IT support in India where service  

labor costs are low. In this way, a meganational  strategy is really about seeing the world as one huge national market.  

Toyota, Volkswagen, GM,  and Ford all engage in a meganational strategy.  

These firms source auto components from locations  around the world, bring them together in global  

factories, and then export the finished products  all over the world. Few modifications are made to  

meet local customer needs, other than changing the  steering wheel from the left to the right side,  

depending on each country's local traffic  laws. Of course, many companies need to be  

both locally responsive and globally integrated.  The transnational strategy is a hybrid strategy by  

which a company aims to be simultaneously global and local. However, because it's often impossible  

to both adapt and standardize products at the  same time, companies adopting the transnational  

strategy must make trade-offs. For example, they  must implement organizational structures that are  

complex to encourage ideas to come from the local  operations and then to integrate them into global standards.

Like the multi-domestic approach, the  transnational strategy allows subsidiaries the  

discretion and autonomy to adapt and customize  locally. However, that discretion is bounded  

by global integration and coordination  from headquarters. Unlike the case in a  

meganational strategy that achieves integration  through decisions made mostly by headquarters,  

integration in a transnational organization  comes about when the different subsidiaries  

coordinating and exchanging information make more  informed decisions. Transnational strategies mix  

top-down from headquarters to subsidiaries  as in a meganational strategy and bottom-up  

from foreign subsidiary to headquarters as in a  multi-domestic strategy. This strategy fosters  

coordination from all over the organization in an  effort to take what is best in each global market  

and utilize this around the globe regardless of  where ideas originate.

Starbucks for instance aims to create a global brand but simultaneously adapt offerings to local market tastes.

For instance, while the company seeks to standardize the  ambience of the stores across global markets,  

the products offered in the stores changed based  on local preferences. In China, customers can get  

a green tea latte with a red bean scone. Deciding  whether your company should pursue a transnational  

strategy over a meganational or multi-domestic  strategy rests primarily on your objectives and  

on your perceived needs to standardize operations  or adapt them across borders.

Regardless, all three strategies will help you to more effectively  manage the differences that arise across borders.