Welp MagazineA multi-domestic strategy is a strategy by which companies try to achieve maximum local responsiveness by customizing both their product offering and marketing strategy to match different national conditions.
What is Multi Domestic Strategy?
Multi-domestic strategy is also used to create a unified organizational structure for the global structure. It makes use of decentralized decision-making.
It is based on the idea that by achieving maximum local responsiveness, companies can successfully compete in different countries.
Each of the multinational units oversees the manufacture and sales of part or all of the company’s product line.
MDS are found in the manufacturing and service industries, but usually in the manufacturing industry.
Service industries such as banking, airlines, and hotel chains rarely employ this strategy.
Why manufacture in one country and sell in another?
Key decisions in this model are made centrally. This helps the company achieve economies of scale and avoid the pitfalls of operating. In addition, the company does not need to pay high local salaries, since all employees are likely to have the same level of skill.
It also allows the company to reuse the same process on all of its units, thus reducing the cost of making the same product.
MDS is also an effective way to reduce the cost of inventories and logistics.
Such cost reduction allows the company to lower its prices, which enhances its competitiveness in the world market place.
Some experts claim that products can only be successful in international markets if they are standardized and produced in one location.
Advantages of the Multi-Domestic Strategy
Uniform quality and credibility
By utilizing the same manufacturing processes, exportation becomes easier, especially if the supply chain is well developed and standardized.
Uniformity is achieved by the close communication between different production units, which allows for quality standardization.
This helps the company present a credible image to its foreign customers.
However, the problem of quality is often faced by companies that produce a homogenous range of goods with similar processes.
This problem is known as the “common problem” and it refers to the effect that uniform goods have on customers’ perception of the product’s quality and service.
This image can be used to achieve economies of scale and reduce costs. This image can be used to achieve economies of scale and reduce costs.
It is also a way to establish a reputation as being a consistent and credible manufacturer. This is especially beneficial to companies that manufacture or offer the same products.
Improved price competitiveness
Items manufactured in one country and sold in another can be sold at a lower price, since there is no duty or import tax.
For instance, the difference in price between the USA and Canada is 8%. In other words, most retailers price their products at 8% less in Canada, making it a more price-competitive market.
There is commonly a price difference between products of the same company that are sold in various countries.
This is because different countries may have different laws and regulations.
When a company meets its global or domestic customers’ demands, it is able to establish itself as a trusted partner and brand.
Once the company establishes a loyal customer base, the customer can be assured of the product’s superior quality.
Customers would be willing to buy the same model even if it was cheaper and imported. There would be no stigma attached to the product, and this would help the company reduce its costs, achieve economies of scale, and use its global resources. Customers would be willing to buy the same model even if it was cheaper and imported. There would be no stigma attached to the product, and this would help the company reduce its costs, achieve economies of scale, and use its global resources.
Flexibility and readiness
An MDS is the result of carefully weighing the benefits of international operations and the barriers to its implementation.
For instance, the company may choose to target the most profitable and fastest growing markets, and use its global resources to match the local market.
It also allows the company to establish a management structure that allows for quick, effective, and prompt implementation.
This means that the company can respond quickly to changing market conditions.
However, the downside to the benefits of international operations is that the company needs to take on risks and responsibilities associated with the increased risks in the future.
International operations may also result in potential political, social, or economic risk.
With this risk, the company may be forced to move away from its MDS.
Disadvantages of the Multi-Domestic Strategy
Problems in communication
Problems may arise when a company is not able to transfer skills and knowledge between foreign customers and the workers in the production unit.
A company can only achieve this by establishing strong communication between the foreign customers and the workers in the production unit.
In addition, a company must establish its own communication network and effective communication channels.
For instance, the members of the production unit must be able to directly contact the foreign customer through the telephone or email.
In a nutshell, a company must make its production unit fully equipped and ready to handle any communications.
It must also train its employees to be able to meet the needs of the customers.
Difficulty in Customizing Marketing Mix
A company may experience difficulties adapting its marketing mix to different local markets.
In order to create and adapt its marketing mix to different countries, the company must carefully choose the most appropriate marketing mix components to the conditions and problems that are faced by the market.
The company must use its global resources and analyze the international market in order to determine whether or not the country was lucrative.
It must then proceed to the adaptation of its marketing mix to the specific needs and conditions of the target country.
A well-designed MDS allows the company to profit from international operations and minimize the risks of exportation.
However, the company should be aware of the two above-mentioned issues, so that it can be able to effectively handle any problems that will arise.
The company must carefully assess its position and ensure that it has a firm foundation on which it may build the marketing mix.
The company must carefully assess its position and ensure that it has a firm foundation on which it may build the marketing mix.
Conclusion
With the Multi-domestic strategy, companies can achieve a better international presence, but this strategy is more complex than just selling in a foreign country.
The company must carefully address the internal issues, while also ensuring that it is able to effectively communicate with its foreign customers.
If a company does not enjoy a good reputation, then there will be no impact on foreign customers.
The goal of the MDS is to establish the company as a trusted partner and brand.
With such a strategy, a company will be able to satisfy the needs of overseas customers.
In other words, the company will be able to expand abroad without worrying about the quality and price of its products.
A company can adopt an MDS when it thinks that it is ready to face the problems that will arise with global business.
In addition, the management should be willing to assume some of the risks and responsibilities that are normally present in international business.
To sum up, MDS provides the company with economic benefits in the form of increased competitiveness in the domestic and global market.
Such a strategy also helps the company reduce its production cost, since the production processes are standardized.
The company should carefully assess its position, as well as its capability to face potential problems that will arise.
It should also choose a target market that will allow it to achieve its goals.
After choosing the target market, the company has to focus its resources.
Once the target market is identified, it must be able to execute marketing mix, and ensure proper execution of its MDS.
With the Multinational strategy, companies can maximize their gains.
The possible risks need to be seriously considered.
As a result, the company must re-examine its MDS and determine any potential problems that might hinder the business.
When the company has finally adopted the MDS, it must carefully monitor the performance of the country or countries.
The company must pay attention to the issues and problems that will arise in the specific market.
It must be ready to address the problems and issues that will arise.
To sum up, a company can benefit from the MDS, but it should be aware of the two associated problems and issues that will arise when it adopts such a strategy.
If a company is able to effectively handle such issues, it is on its way to global success.
