A Multidomestic Strategy: The Key to Global Expansion

Understanding the Multidomestic Strategy for Global Business Expansion

From capital mobility to enhanced communication channels, globalization has significantly eased the process of entering foreign markets. However, global expansion for your business requires a strategic approach tailored to your goals and resources. The four main international strategies used to target new markets include: international, global, transnational, and multidomestic. In this third installment of our series, we explore multidomestic strategies and what makes them unique.

As is the case with the other three international business strategies, a multidomestic strategy requires a certain level of commitment around four major factors. These include local responsiveness, global integration, standardization, and customization. Below is a brief overview of each.

Local responsiveness refers to the degree to which a company localizes its products and services to meet the conditions and cultural nuances of a foreign market.

Global integration refers to a company’s local presence in the global market and the degree to which it can offer the same products and services in different countries.

Standardization refers to the ways in which a company develops a “one size fits all” model for the same products and services in different countries.

Customization refers to the process a company uses to adapt a standardized product offering, message, or procedure to better meet the demands of different countries.

What is a Multidomestic Strategy?

A multidomestic strategy is a business model that focuses on creating country-specific brands and tailoring marketing strategies, sales tactics, and product offerings to meet the unique demands of local markets. This strategy prioritizes local responsiveness over global integration, contrasting with other global strategies that emphasize consistency across markets. In a multidomestic approach, each country may have its own marketing plan, product variations, and even a localized customer support system.

This local-first strategy is ideal for companies entering markets with distinct cultural, political, and economic characteristics that necessitate significant adjustments in products, messaging, and customer interactions.

Key Components of a Multidomestic Strategy

Implementing a multidomestic strategy involves a careful balance of four crucial elements that dictate how businesses will enter and operate in foreign markets:

1. Local Responsiveness: The degree to which a company adapts its products and services to local preferences, customs, and market conditions.
2. Global Integration: A company’s ability to offer standardized products and services across multiple countries, maintaining consistency while addressing regional needs.
3. Standardization: The approach of offering the same product with minimal adjustments across global markets.
4. Customization: The process of tailoring a product, service, or marketing strategy to the cultural and economic characteristics of a particular market.

Ultimately, whether or not a multidomestic strategy is right for your business comes down to standardization vs. customization. How much you need to change your products for local preferences will affect which strategy is more likely to succeed.

Developing a Multidomestic Strategy

As we mentioned above, multidomestic strategies prioritize a high degree of local responsiveness over global integration. In practice, a multidomestic corporation is often a multinational company that acquires global brands to cater to those same local customers.

The parent company may operate using a transnational or global strategy, and launch smaller, regional brands to meet the needs of the target market. Depending on business structure, each brand may have its own operations, such as an entirely local team, or use a blend of local and company-wide resources.

High Local Responsiveness and Low Global Integration

To use a multidomestic strategy, you must know the target market’s demographics, culture, and preferences well before starting. This will help ensure your offerings meet the needs of local customers. As you develop a strategy, consider:

• Product or service variations, including potential new ones for the target market
• Brand and/or product names, and how they translate into the local language(s)
• Design and packaging, including colors, fonts, and imagery
• Price points for different markets, and whether the offering would be profitable there
• Payment processing options such as credit card brands, bank types, and payment apps
• Website localization and multilingual website options
• Marketing and advertising campaigns, and whether they can be adapted

Keep in mind that a higher degree of local responsiveness will result in lower global integration. This refers to a company's ability to use similar products, services, and business techniques in different markets. Low global integration makes scaling more difficult, but a high degree of local responsiveness offsets this by allowing you to develop a loyal customer base.

The Pros and Cons of a Multidomestic Strategy

As with any business strategy, a multidomestic strategy comes with both benefits and challenges. It’s important to weigh the pros and cons before deciding whether to pursue this approach:

Pros:

• Highly tailored products and services increase the likelihood of product-market fit and customer satisfaction.
• Local competitive advantage by leveraging local knowledge, resources, and networks.
• Scalability through localized subsidiaries, which can be expanded or downsized based on market performance.
• Easier to acquire companies or enter partnerships that already have an established local presence.

Cons:

• Higher initial costs due to the need for product and service adaptations, localization, and dedicated teams in each market.
• The need to invest in deep market knowledge for each target region to meet customer expectations.
• Decentralized decision-making and operations can lead to complexity in managing multiple teams and markets.
• Difficulty in scaling quickly due to the customization required for each market.

Successful Examples of Multidomestic Strategies

Now that you know more about multidomestic strategies, let’s take a look at five global companies that have successfully implemented them.

7-Eleven

The American multinational chain of convenience stores tailors its product selection, payment methods, and marketing across the 19 countries and territories where it operates. In the Philippines, for example, customers can purchase items using the GCash mobile wallet by scanning barcodes. And in Taiwan, the company introduced Open-Chan, a rainbow-haired
extraterrestrial dog who serves as a corporate mascot.

Heinz

The American multinational food processing company manufactures thousands of food products and markets them in over 200 countries. They adapt popular food items to match local tastes. For example, customers in India can buy standard Tomato Ketchup and Tomato Chili Sauce. They also have subsidiaries in different markets, such as "Wattie's" in New Zealand.

Nestle

The Swiss multinational food and drink brand owns more than 2,000 companies, including Gerber, Häagen-Dazs, Lean Cuisine, Perrier, and Toll House. They sell products in over 186 countries, and curate their offerings to match local preferences. For example, Nestle Japan launched a 'Heart-full Care Program' to offer products and nutrition-related consulting services to the elderly.

Netflix

The American subscription streaming service and production company has 220.7 million subscribers and is available in over 190 countries. The company not only localizes English language movies and television shows for international audiences, but produces content specifically for international markets. Netflix has three subsidiary studios: Netflix Studios in the US, Netflix Services Germany in Germany, and Netflix Pte. Ltd. in Singapore. 

Unilever

This British multinational company produces foods, cleaning agents, beauty products, and personal care items, for 190 countries. Unilever's key brands include Dove, Ben & Jerry's, and Hellman's. They localize products and marketing campaigns for different market segments, such as Dove’s ‘My Beauty, My Say’ campaign in China. 

Localization is Key to Multidomestic Strategy Success

A successful multidomestic strategy relies on robust web localization efforts. It's crucial to customize your product offerings and messaging to ensure that they resonate with your target markets. The key to a successful plan includes developing products, services, and brand messaging that are highly responsive to the local market. This requires significant research, planning, and insight.

Fortunately, a website localization services provider such as MotionPoint can help you develop a localization strategy that will enable you to expand into any market. Thanks to our advanced technology, you can quickly and affordably:

• Localize, launch, and manage multilingual websites to reach new customers.
• Create multilingual content by connecting your offline documents, videos and omnichannel assets to our network of professional translators.
• Adapt software, apps, portals, and products for the target market by localizing the user experience and interface.

By leaving the localization to MointPoint, you’ll free up time and resources to focus on other aspects of multidomestic strategy. Connect with our localization experts today to learn more about how we can help you prepare to launch in new markets.

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