A multi-domestic strategy facilitates independent competition of the individual subsidiaries of a multinational firm within different domestic markets. The multi-domestic strategy definition involves the differentiation of its product offerings in order to adjust to local markets and pursues maximizing national responsiveness.
Explanation:
The multinational headquarters regulate financial controls, as well as marketing policy. It might also centralize some R&D (research and development) and component production. Every subsidiary company serves as a strategic business unit that is required to contribute earnings and growth in proportion to the market potential.
Furthermore, decisions prone to be decentralized to enable a firm to adapt its products to respond rapidly to changes in demand. This allows a firm to develop its market and offer different prices in different markets. Such a strategy requires firms to concentrate on language, culture, customer income, preferences, and taste. Product innovations generally relocate from the local unit back to the central headquarters.
The strategy implies a competition within each country and optimizes local response capacity. It is based upon the concept that markets differ and, hence, are fragmented by a state line. As such, customer’s needs and desires, industry conditions, political and legal organization, and social norms vary in each country.
With the aid of a multi-domestic strategy, the company can modify its products to address the particular preferences and needs of local consumers. Therefore, the company can compete more efficiently within every national market and advance its local market segment.
The multi-domestic strategy disadvantage, however, is that the firm deals with more issues and obscurity because of the targeted rules in different countries. In addition, due to the firm’s focus on different strategies in different locations, it cannot benefit from economies of extent that could be useful in decreasing the overall expenses for the firm. European multinational enterprises commonly apply this strategy because of the diversity of cultures and markets discovered in this region.
Amongst the multi-domestic strategy examples, Yum! Brands has a strong motivation to compete globally with its restaurant visions, such as KFC, Pizza Hut, Taco Bell, A&W Restaurants, and Long John Silver’s. Yum! implements a multi-domestic tactics by working to localize as much as possible. Apart from the US model, this company gradually adjusts to local tastes and successfully negotiates during the cultural and political climates variability.
For instance, KFC sells crispy tempura strips in Japan, gravy and potatoes in northern England, and provides fresh rice with soy or sweet chili sauce in Thailand. Thus, it is a complicated task to market by being solely an American brand without a local appeal.
With that said, a multi-domestic strategy is implemented by giving decentralized policy-making control to local operational units in every country to enable creating products and services designed for their local markets. This strategy occurs when multinational firms enable individual subsidiaries to compete independently in domestic markets.
Moreover, it occurs when there are significant variations between market pull and few benefits from globally integrating. As a result, a portfolio of nearly independent multi-domestic strategy companies operating themselves and producing for their own markets will be developed.
The implementation of the multi-domestic strategy might be a costly strategic step, however, the effort can be recouped massively. For this reason, any business enterprise should consider the power of a multi-domestic marketing strategy as it might contribute to becoming established and build a loyal client base in several different geographical areas.