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Strategies for Competing Internationally

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Strategies for Competing Internationally

As a consequence of the two opposing pressures, reduction of costs and local adaptation, companies have four basic strategies for competing internationally:

1. home replication 2. multidomestic 3. global 4. transnational

The strategy that would be most appropriate for a company, overall and for various activities in the value chain, depends on the amount of pressure the company faces to adapt to local markets and achieve cost reductions. Each of these strategies has its own set of advantages and disadvantages:

1) A home replication strategy centralizes product development strategy in the home country, and after differentiated products are developed in this home market, they are transferred abroad to capture additional value. This strategic choice is sometimes called international strategy.

2) A global strategy tends to be used when a company faces strong pressures for reducing costs and limited pressure to adapt products for local markets. Strategy and decision making is typically centralized, and the company offers standardized products and services. Value chain activities are often located in only one or a few areas, to help achieve economies of scale. There is emphasis on close coordination and integration of activities across products and markets, and development of efficient logistics and distribution capabilities. Global strategies may confront challenges such as limited ability to adjust to changes in customer needs across national or regional markets, increased transportation and tariff costs from exporting products from centralized production sites, and the risks of locating activities in a centralized location.

3) A multidomestic strategy tends to be used when there is strong pressure to adapt products or services for local markets. Decision-making is more decentralized to allow the

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