Chapter 8: International Strategy 247regions for the purpose of allowing each unit the opportunity to tailor products to the
local market.^35 With this strategy, the firm’s need for local responsiveness is high while its
need for global integration is low. Influencing these needs is the firm’s belief that con-
sumer needs and desires, industry conditions (e.g., the number and type of competitors),
political and legal structures, and social norms vary by country. Thus, a multidomestic
strategy focuses on competition within each country because market needs are thought
to be segmented by country boundaries. To meet the specific needs and preferences of
local customers, country or regional managers have the autonomy to customize the firm’s
products. Therefore, these strategies should maximize a firm’s competitive response to
the idiosyncratic requirements of each market.^36 The multidomestic strategy is most
appropriate for use when the differences between the markets a firm serves and the
customers in them are significant.
The use of multidomestic strategies usually expands the firm’s local market share
because the firm can pay attention to the local clientele’s needs. However, using a
multidomestic strategy results in less knowledge sharing for the corporation as a
whole because of the differences across markets, decentralization, and the different
international business-level strategies employed by local units.^37 Moreover, multido-
mestic strategies do not allow the development of economies of scale and thus can be
more costly.
Unilever is a large European consumer products company selling products in over
180 countries. The firm has more than 400 global brands that are grouped into three
business units—foods, home care, and personal care. Historically, Unilever has used
a highly decentralized approach for the purpose of managing its global brands. This
approach allows regional managers considerable autonomy to adapt the characteristics
of specific products to satisfy the unique needs of customers in different markets. More
recently however, Unilever has sought to increase the coordination between its indepen-
dent subsidiaries in order to establish an even stronger global brand presence. One way
coordination is achieved is by having the presidents of each of the five global regions
serve as members of the top management team.^38 As such, Unilever may be transitioning
from a multidomestic strategy to a transnational strategy.Global Strategy
A global strategy is an international strategy in which a firm’s home office determines
the strategies that business units are to use in each country or region.^39 This strategy indi-
cates that the firm has a high need for global integration and a low need for local respon-
siveness. These needs indicate that, compared to a multidomestic strategy, a global
strategy seeks greater levels of standardization of products across country markets. The
firm using a global strategy seeks to develop economies of scale as it produces the same,
or virtually the same, products for distribution to customers throughout the world who
are assumed to have similar needs. The global strategy offers greater opportunities to take
innovations developed at the corporate-level, or in one market, and apply them in other
markets.^40 Improvements in global accounting and financial reporting standards facilitate
use of this strategy.^41 A global strategy is most effective when the differences between
markets and the customers the firm is serving are insignificant.
Efficient operations are required to successfully implement a global strategy. Increasing
the efficiency of a firm’s international operations mandates resource sharing and greater
coordination and cooperation across market boundaries. Centralized decision making as
designed by headquarters details how resources are to be shared and coordinated across
markets. Research results suggest that the outcomes a firm achieves by using a global
strategy become more desirable when the strategy is used in areas in which regional
integration among countries is occurring.^42
A global strategy is an
international strategy in
which a firm’s home office
determines the strategies that
business units are to use in
each country or region.