Definition Definition

Multinational Strategy

Definition (1):

A multinational strategy means standardizing products and services around the world to gain efficiency. This marks the start of the multinational stage. At this stage, a price-sensitive perspective is popular and cultural differences are less emphasized.

Definition (2):

Under a multinational strategy, the subsidiaries of a company have the benefit of strong or powerful local autonomy for making business decisions.

Mainly, multinational firms use two types of multinational strategy for capturing markets in other countries. These are:

  • Vertical Expansion: Vertical expansion takes place when multinational firms expand processes for production to other countries. It allows them for taking advantage of factors like low costs of raw materials and labor, lower requirements for capital investment, and flexible local laws and regulations. Multinational firms can also expand by developing sales units in other countries rather than marketing products through local agencies. It allows the firms to ensure their products’ reach to their buyers and the control of prices by the firm.
  • Horizontal Expansion: Sometimes, multinational firms develop production units in the host countries for the only motive of serving the local market. They produce products in other countries for distribution in those countries. It helps firms save on costs of transportation and protects their activities from uncertainties causing by currency value fluctuations. Multinational firms can present the goods and services exactly as they are served in their home countries when offering them in the host countries. Such as branded and packaged beverages and foods. Firms can also set up outlets and showrooms to imitate international norms. Other firms adapt their products to match local tastes, demand, and customer needs.
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