International Business Strategy

International Business Strategy

International business strategy refers to plans that guide commercial transactions taking place between entities in different countries. Typically, international business strategy refers to the plans and actions of private companies rather than governments; as such, the goal is increased profit. International business is different from domestic business because the environment changes when a firm crosses international borders.

Most companies of any appreciable size deal with at least one international partner at some point in their supply chain, and in most well-established fields competition is international. Because methods of doing business vary appreciably in different countries, an understanding of cultural and linguistic barriers, political and legal systems, and the many complexities’ of international trade is essential to commercial success. International business grew over the last half of the twentieth century partly because of liberalization of both trade and investment, and partly because doing business internationally had become easier. International firms may choose to do business in a variety of ways. Some of the most common include exports, licenses, contracts and turnkey operations, franchises, joint ventures, wholly owned subsidiaries, and strategic alliances.

Types:

Multidomestic Strategy: A firm using a multi-domestic strategy sacrifices efficiency in favor of emphasizing responsiveness to local requirements within each of its markets. A great example of a multi-domestic company is Nestlé. Nestlé uses a unique marketing and sales approach for each of the markets in which it operates.

Global Strategy: A firm using a global strategy sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing efficiency. Their main role is to implement the parent company’s decisions and to act as pipelines of products and strategies. Pharmaceutical companies such as Pfizer can be considered global companies.

Transnational Strategy: A firm using a transnational strategy seeks a middle ground between a multi-domestic strategy and a global strategy. A great example of a transnational company is Unilever.

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