With the exponential increment in the extent of globalization, even small-scale organizations have been highly successful in overcoming barriers of physical boundaries and performing business in the international domain. Firms operate internationally are primarily known by numerous terms such as international firms, transitional companies, global businesses, multinationals, etc. However, not all the terms define a similar concept and it becomes highly important to understand the difference between each of them. Bartlett & Ghosal Matrix is a widely used framework for the purpose of distinguishing multiple forms related to internationally operating business organizations. According to the framework, international businesses could be classified based upon two different criteria namely local responsiveness and global integration. A different business which is globally integrated to a great degree of extent has a prime objective of reducing costs by the creation of economic scale with the help of standardized product being offered worldwide. Moreover, businesses which are locally responsive on a local level have an extra objective of modifying and customizing the products and services according to the demand of local customers. These two factors accumulate together to form four different types of strategies that can be primarily used by internationally operating businesses namely Multidomestic, Global, International and Transitional.
Multidomestic Strategy has a high degree of responsiveness but the low extent of integration. Various companies which pursue multi-domestic strategy have a prime objective of meeting the exact needs and requirements of local markets on a worldwide platform by extensively customizing various products and services. Moreover, these have a strong possession of considerably non-centralized structure in which the worldwide subsidiaries are operating in relative autonomous manner and completely non-dependent from the headquarter. One of the best and appropriate examples of Multidomestic Organization is Nestle which uses a highly different sales and marketing strategy for various markets it operates in. In addition, Nestle provides products according to the needs, requirements, and taste of various people at particular region.
Global companies are the vice versa and inverse of multidomestic companies as they offer a standardized product throughout the world. Such companies have a prime goal of maximizing the efficiencies which will help in reducing the overall costs to a great degree of extent. Such companies have a highly centralized structure and different subsidiaries are highly dependent upon the headquarters. The prime role of such subsidiaries is to appropriately implement the decision of parent company and to simultaneously behave and act as platforms for different strategies and products. Global strategy is also known by another unique named i.e. hub-and-spoke model. Pfizer is one of the most successful global pharmaceutical company as it has a high degree of integration and low responsiveness.
The transitional company inherits traits from both global and multi-domestic companies. The prime objective is to maximize the extent of local responsiveness and simultaneously gaining benefits with the help of global integration. Achieving such state might seem complex at first but it is highly doable when the whole value chain is taken into strict consideration. In context of organizational design, a transitional company could be categorized with the help of an independent and integrated network of different subsidiaries around the world. Such subsidiaries have extensive strategic roles and primarily act as centers of excellence. The company is primarily able to achieve various strategic objectives due to the presence of efficient knowledge and expertise between different subsidiaries. Unilever is one of the great examples of transitional strategy.
Organizations which follow International Strategy have low integration and low responsiveness. International strategy was not primarily included by Bartlett and Ghosal along with various topologies. However, numerous authors around the world have place the strategy in the lower & left corner of the overall matrix which depicts low integration and low responsiveness. Thus, an international company has a minute need for local adaptation and integration. Moreover, this strategy is also referred to as exporting strategy. In such companies, the products are produced in the home country of company and exported to customers around the world. In such a scenario, the functioning subsidiaries operate through local channels via which the products are sold to end-consumers. Large wine producers from Italy and France are one of the great examples of international companies.
Thus, there are wide range of aspects in which different organizations would be able to perform their business operations in international domain. When a specific organization possesses numerous types of economic operations in at least two different nations, such companies are commonly referred to as Multinational Companies or Multinational Enterprises. For International Business Owners and Managers, it becomes highly essential to have a clear and concise understanding of different type of strategies that could be extensively used. By being highly aware of different strategies, International Business Managers could opt for the most optimal strategy that best suits the business needs and objectives.