Approaches for competing internationally
The three main approaches for competing internationally are global strategy, transnational strategy and multidomestic strategy. Multidomestic strategy requires business managers to think and act locally. The strategy focuses on offering different products in the market. Further, the competitive approaches used by firms vary from one country to another. The strategy has a number of advantages.
First, it can enable firms to precisely meet the specific needs of each market. Secondly, it enables companies to quickly meet the changes in local demand of a given region. Thirdly, the strategy enables companies to respond amicably to the moves of local rival companies.
Finally, the strategy allows companies to respond swiftly to local threats and opportunities. On the other hand, the approach deters the ability to transfer resources and capabilities across various markets. Secondly, the strategy is not conducive in the worldwide competitive market. Finally, the strategy may result in an increase in the production and distribution costs.
The second approach, global strategy, encourages business to think and act globally. The strategy employs same basic competitive approach in all regions where a firm operates. The strategy has a number of advantages. First, it enables companies to lower their cost due to large economies of scale. Secondly, the strategy results in improved efficiency and innovation due to the ability to move resources and capabilities across regions.
Finally, the strategy enables companies to enjoy the benefits of global brand and reputation. On the other hand, the approach has a number of disadvantages. First, it may not be able to address the local needs accurately. Secondly, the strategy may not enable a company to respond swiftly to changes in the local market conditions. Finally, the approach is likely to result in higher costs of tariffs, integration, transportation, and coordination.
The third approach, transnational strategy, incorporates the elements of global and multidomestic strategies. The strategy has a number of advantages. First, it enables companies to benefit from the ability to respond to changes in local and global markets.
Secondly, the strategy results in improved efficiency due to the ability to move resources and capabilities across regions. On the other hand, the approach is complex, time consuming and expensive to implement. Also, companies may find it hard to merge conflicting goals.
How to build a competitive advantage
A number of approaches can be used to build a competitive advantage. The first approach is to use international location to minimize cost of operation and to produce differentiated products. Secondly, firms can build competitive advantage by distributing resources, proficiencies and abilities across various markets. This improves efficiency.
Finally, a company can build competitive advantage from the benefits of cross border synchronization. Thus, an organization should ensure that the cross border activities are well coordinated to enable the company reap benefits.
Example of a company
Aramex Inc. is a company within logistics and the service industry. It deals with provision of consumer related solutions such as supply chain management and express logistics. From the perspective of Multi-domestic strategy, Aramex Inc. entered into partnership with Zubair Corporation (Z-Corp) in Oman for purposes of offering integrated services within the region.
Aramex Inc. also uses Berco Express (Pty) Ltd. to offer logistics and transportation services within Africa region. The company uses global strategy in cases where it experiences strong pressure in cost reduction and less pressure in the process of venturing into local markets. In this case, the company centralized major functions.
The strategy emphasizes on monitoring, integration and coordination of activities within local markets. The company utilizes the transnational strategy in cases where it requires expertise for the purposes of overcoming the pressures from cost effectiveness as well as local market adaptation.