Multi domestic strategy | Explanation | Factors affecting

What is a Multi domestic strategy?

The multi domestic or multi-national market concept focuses on maximizing the company’s effectiveness and efficiency in exploiting economies of scale, experience and skill in marketing, production and logistics. A company adopting such an orientation assumes that foreign market opportunities are as important as home market opportunities. However, the company takes the view that the differences between its international markets are so acute that adaptation to meet market needs is necessary to retain competitive leverage in local markets. Thus the company essentially follows a differentiated marketing strategy with different marketing mixes in many of their world markets.

Multi domestic strategy for global presence

Whilst there has been considerable debate amongst writers during the 1980s about the advantages and disadvantages of multi-domestic strategy to obtain an internationally reasonable competitive benefit rather than the pursuance of an world-wide approach through standardization of actions, it is distinct that for many key firms there are a number of positive aspects to be obtained from universal standardization in their actions and that a well organized and managed multi-domestic strategy is an effective method for the majority of companies to develop a global presence.

Whilst there are many forces driving companies towards achieving a global strategy through standardizing as many marketing activities as possible, there are also very important prevailing arguments persuading companies that they are still more able to achieve an effective worldwide strategy through a multi-domestic approach. These forces are as follows.

Factors Affecting Multi-domestic strategies

Industry standards remain diverse

Diverse Industrial standards are one of the factor that affects multi domestic strategies. For many traditional industries such as those based upon engineering and particularly those that involve large investment in plant and equipment, the cost of harmonization of standards is high and the progress to harmonization is slow. The markets for these industries often involve a country’s infrastructure, transport and utilities and, consequently, depend on often protracted government spending decisions. Usually in making decision such as these governments will give consideration not simply to market factors, but also the impact on the economy, environment and the electorate’s expectations too.

Customers continue to demand locally differentiate products

The demand of customers for locally differentiate products affects multi domestic strategies. Cultural heritage and traditions still play a strong role in areas, such as food, drink and shopping. Whilst there are increasing moves to accept cross-border products, there is still resistance in many cultures.

Being an insider remains critically important

The perceived country of origin of goods still has a bearing on take up of products and so local manufacturing of goods is frequently necessary to overcome this skepticism. In business-to-business marketing, there is a definite bias in favor of products sourced from particular areas, such as Silicon Valley in the US and so IT/electronic firms often decide to set up local manufacture there.

Global organizations are difficult to manage

In finding ways to coordinate far flung operations, firms have to decentralize and replace home country loyalties with a system of corporate values and loyalties. For some companies this proves to be problematic and, in some cases, totally unacceptable.

Management myopia

Products and product categories are sometimes candidates for global marketing but managers fail to seize the opportunity. Porter (1985) argues that all global industries have developed from a strong home base. Companies must see the potential for changing the competitive nature of the industry in their favor by triggering a shift from multi-domestic to a global strategy. Because there are no guarantees that a business can succeed, the firm must be willing to risk the heavy investment that a global strategy requires. For some, the resources required and the risks involved are simply too great.

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