The relaxing of trade barriers in many countries previously off-limits to international business created tremendous growth opportunities for small and medium-size businesses in countless product and service categories. According to Zurich-based consulting firm, KOF Institute, the share of the planet's population that makes up the international market was at 95 percent in the first decade of the millennium, up from 15-20 percent just 30 years earlier. Show
Despite the opportunities, many SMB operators get confused about the unique terminology used to describe the various business strategies used in international business. For example, some people may interpret transnational as a synonym of similar terms used to describe global companies. In fact, transnational describes one of four business strategies used by companies in global markets. Transnational is a hybrid strategy that incorporates element of the other three, but is quite dissimilar from the international strategy. International and Transnational Business StrategiesThe four primary business strategies companies use to address the above mentioned issues are:
What is International Business?These are basically importers and exporters. International businesses do not make direct investments in the host countries where they operate. International businesses may customize products or services for local markets on a limited basis, but customization is generally not a priority. All financial, operating and managerial decisions are centrally located at the company's main office. A typical example of the international business model is the small manufacturer that exports to neighboring countries. What is a Multinational Business?Often called a multidomestic strategy, multinational businesses make direct investments in host countries where they operate. Similarly, decision-making authority is delegated to host-country business units. Each business unit customizes products or services to suit local-market preferences. What is a Global Business?Companies that use the global business strategy operate as if the entire globe was one huge domestic market. Global companies have strong centralized management control and standardized, uniform products or services in all countries where they operate. Like multinationals, global businesses make direct investments in host countries when appropriate. However, management makes all investment decisions, which are mainly to achieve economies of scale as opposed to responding to local-market preferences. What is a Transnational Business?The transnational strategy uses a central control structure similar to international and global business models. However, the transnational strategy is different from the international strategy mainly because the “control” is more about coordinating the activities of local-market operating units to achieve integrated and interdependent synergies among the operating units. Each operating unit specializes in what it does best to make its own contribution to the organization. For example, an operating unit in China might do the manufacturing. Another operating unit in India might be responsible for technical support. One overarching theme of transnationals is adaptability to local markets. As such, they tend to be quite aggressive about being flexible and nimble to respond to local-market conditions. They develop standardized products and services that can be readily customized for local markets. Some transnationals take this a step further with mass-customized products made in mini-factories strategically dispersed around the globe. International strategy and global strategy are often perceived as the same by several marketers. However, both are definitely not the same. An international strategy involves the tactics adopted in different countries specific to the markets of those countries whereas, a global strategy is a concept that involves putting together plans that are unique for the worldwide market. What is an International Strategy?It refers to the plans laid down by strategic managers to guide commercial transactions taking place between entities in different countries. In simple words, it is a way in which a firm decides acquiring and utilizing resources to achieve international goals and objectives. Also Read: Leadership Excellence In A VUCA World What is a Global Strategy?It is an organization’s strategic guide to globalization that connects it with the rest of the world. In other words, a global strategy refers to the plans an organization has developed to grow beyond its local or domestic borders. It specifically aims at increasing the sales of goods or services abroad.  Even though these two terms sometimes sound similar, both have different meanings. Let us study some key differences between the two terms that highlight their dissimilarity:-
While developing a global strategy, a company provides the exact product or service descriptions offered to the customers in all countries that it operates. On the other hand, while developing an International strategy, each market is served with specific and tailored products that are best suited to the customers in that particular market. Also Read: Executive Development Program In Transformational Leadership
Global strategies are quite effective when it comes to customers’ engagement, however, a company can connect with its customers in international strategies by setting up better communication channels. International strategies seem to create a greater amount of engagement than global marketing does since they are working with a tailored strategy for every country.
In a global strategy, the advertisements are typically aired on worldwide mediums; whereas in international strategies companies tend to air tailored advertisements specific to the local markets of that area.
In real-life situations, R&D and marketing research are thorough in both global as well as international strategies. There have been some instances where the companies do not go through their research properly and thus their products fail miserably in the global market. Also Read: Strategic Human Resources Leadership
An international strategy allows subsidiaries independence to plan and execute different competitive moves. In contrast, global strategy plans and executes competitive battles on a worldwide level and does not allow freedom to execute tailored competitive moves. Summing UpWhether you choose an international strategy or a global one, it is your decision. Ultimately to get a deeper knowledge you will need the guidance of an online course for international business. A certified international business course will help you make better strategic decisions that will determine the success of your organization. All major decision-makers and managers can help their organizations excel and achieve greater heights with a deeper understanding of international business management. A certified and accredited online course for international business aims to help managers develop and implement strategies in the international context. More Information: 10 Benefits of Leadership Courses Understanding A-Z of Strategic Leadership 3 Types of International Business Strategies Upcoming Trends of International Business Strategy How a Strong Leadership Can Lead a Business to Success? Strategic Management in International Business Negotiations Learn to Strategize International Business Activities with Executive Development Program Want to know how can this course help in your profile?What is the difference between transnational strategy and international strategy?An international strategy ranks highly on global integration but low on local responsiveness — ditto for global strategies. Multi-domestic strategies rank highly for local responsiveness but low for global integration. A transnational strategy gives you the best of both.
What is the difference between global strategy and international strategy?An international strategy involves the tactics adopted in different countries specific to the markets of those countries whereas, a global strategy is a concept that involves putting together plans that are unique for the worldwide market.
What is a transnational strategy?An international business structure where a company's global business activities are coordinated via cooperation and interdependence between its head office, operational divisions and internationally located subsidiaries or retail outlets.
What is an example of a transnational strategy?Transnational Strategy
For example, large fast-food chains such as McDonald's and Kentucky Fried Chicken (KFC) rely on the same brand names and the same core menu items around the world. These firms make some concessions to local tastes too. In France, for example, wine can be purchased at McDonald's.
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