Sometimes implementing an internationalization strategy may represent survival for your company. But there are different kinds of internationalization strategies, and you may choose between them depending on your product or service, the characteristics of your own company, the kind of industry where you are and your market.
As most of the strategies in a company, an internationalization strategy looks for an increase in the profitability of your company. We will simplify this as Profit equals to Perceived Value minus Costs. And let´s notice we are stating “Perceived Value” instead of “Income”, in order to relate this formula easier to the internationalization strategy.
The nature of the internationalization strategy comes from differences between countries: political, economic, fiscal, cultural differences, plus international trade factors, investment framework and the international monetary system. So, with all these differences, the perceived value of your product or service may vary between different countries.
The internationalization strategy of your company should be related a) to the perceived value of your product or service and b) to the costs related to it. In this way, an internationalization strategy allows your company to increase its profitability in a way it couldn´t if it were entirely domestic.
We may identify four general internationalization strategies: International, Multidomestic, Global and Transnational.
You may choose an international strategy if you are looking to create value by transferring valuable skills, products or services to foreign markets where competitors may lack those skills, products or services.
A multidomestic strategy may be suggested for your company if you need to achieve maximum local responsiveness; customizing your product or service and your marketing strategy to match different national conditions. This strategy may be suitable if you don´t have important pressures to decrease costs, and you have important pressures for local responsiveness.
A global strategy would be the ideal for your company if you have high pressures in reducing costs, by taking advantage of experience curve effects and location economies. In a global strategy you may not customize your product or service for the local markets, because customization raises costs.
A transnational strategy makes sense when a firm faces high pressures for cost reductions, high pressures for local responsiveness, and where there are significant opportunities for leveraging valuable skills within a multinational´s global network of operations. So, you may achieve simultaneously cost and differentiation advantages.
Each one of these four strategies has a specific analysis and methodology in order to implement it. You may approach to organizations that may help you understand the best strategy for you (www.sdchcc.org) or work together with a management consulting firm (https://lukev.mx/lukev/lukev-diagnosis-and-strategy/). In certain conditions, as reduced demand in your local market, or changes in the political and economic environment, implementing an internationalization strategy may represent survival for your company.
