So many companies get caught up in expanding their business the “right” way.
But here’s the secret: There is no right way.
In fact, there are four different common strategies businesses use to expand internationally:
Consider each of these strategies on a spectrum between two elements: local responsiveness and global integration.
Local responsiveness refers to how companies serve a specific market’s needs — essentially, how much do they change from market to market? This isn’t just about translating the website or mobile app into a different language, but about the entire customer experience, from payment processes to imagery and product choices or specifications.
Global integration, on the other hand, refers to the standardization companies achieve as they scale. Brands that prioritize global integration have little to no differences between various countries.
It’s up to you how you want to balance these two elements, as determined by your business strategy:
A successful international strategy focuses on a single point of operation while exporting products and services around the world. As such, it ranks low on both global integration and local responsiveness.
An international strategy is often the first strategy companies use when they expand to secondary markets, and that’s because it’s the most accessible of the four. It’s essentially an extension of your domestic strategy, operating with a central or head office in your home market and exporting your products to target markets.
The major advantage of this approach is that it’s a quick way to test out the global appeal of your product without making significant investments in infrastructure or staffing in other markets.
Choosing this strategy allows you to:
If you’re unsure how your products will respond to different markets or just want to test it out, following the export model is a safe option. However, an international strategy does have its drawbacks, which is why many companies use an international strategy to start with before moving to one of the other three strategies. We’ll explain more below.
With an export-driven strategy, you’re stuck paying higher taxes and tariffs every time you export, and it can be challenging to coordinate supply chains and customer service with only offices in your home market. And just because you’re dipping your toe into a global market, you are not off the hook for translation. Your customers still need to be able to understand what you offer and how to pay for it regardless of the level of global integration you’re pursuing.
Regardless of these challenges, an international strategy is by far the most popular for businesses, especially as they take their first steps toward globalization and international expansion to different countries.
The other most popular type of business that employs this strategy is regional or luxury brands where the location of origin matters. Think about some of the most iconic food and drink in the world — champagne from France or caviar from Russia:
A multi-domestic strategy ranks high on local responsiveness and low on global integration, making it the “local-first” approach of the four strategies. Companies that employ a multi-domestic strategy change their product, messaging, go-to-market, and customer support (among other things) based on each market they enter.
The greatest advantage to this is a highly specialized, localized product that directly matches customer tastes and preferences, with employees on the ground in that market that understand the cultural nuances. Choosing this strategy allows you to:
Essentially, multidomestic companies operate with one overarching parent company and a selection of separate companies within each country (sometimes called Greenfield Investments).
This model doesn’t come without challenges, however, as the success of each “domestic” unit requires a deep understanding of that market and resources to spin up completely separate operations in that market. You may have duplicate efforts and siloes across each company, and fundamentally changing your offerings every time you enter a new market can take a lot of up-front time and resources. And with a multi-domestic approach, a strong localization program is the most crucial element (we can help with that!)
Done right, multi-domestic companies can be very successful. In fact, some of the most successful food, wellness, retail, and beverage companies in the world operate this way:
On the flip side of the global integration/local responsiveness spectrum is operating with a global strategy. This approach focuses on standardization as much as possible, including colors, messaging, products, and operations, so they can build repeatable, scalable processes no matter which foreign market they operate in. That means having one brand, one suite of products, and one message from a central headquarters.
The advantage of this is that pursuing this strategy gives you an instantly recognizable global brand with a step-by-step path toward global market penetration. Choosing this strategy allows you to:
However, the greatest challenge with global strategy is knowing how much standardization to pursue. Even top global brands still invest in some level of localization and adaptation to local markets — just not so much that it infringes on their scale and efficiency. You should expect to invest in a solid localization process so that your customers can interact with your website, mobile app, packaging, and more in their home language.
Because this model requires a strong global presence to start with, it’s often the end-game for international businesses, moving through the other models before achieving a truly global brand. As a company, you’re taking a gamble that your product has so much universal appeal that it will create demand regardless of market tastes and preferences — which is also why so few companies truly achieve this status:
While a global strategy may seem like the end-game, for many brands, the best choice is a transnational strategy, which splits the difference in terms of local responsiveness and global integration.
Transnational businesses operate with a central or head office in one country (the global integration part) and also employ local subsidiaries in international markets (the local responsiveness part). That way, they get the best of both worlds: one overarching brand that provides a cohesive structure and efficient center of operations while optimizing for local market preferences and tastes as needed. Choosing this strategy allows you to:
Of the four models, transnational has the most variation. Some businesses give more autonomy to their local branches than others. Balancing corporate decisions vs. local decisions remains one of the biggest challenges for global companies, which cascades across all aspects of the business, from staffing to marketing decisions. Some choose to localize on an in-depth level, changing products and operations (like a multidomestic model), while others standardize more rather than less (like a globalization model).
Keeping local customers in mind, rather than just selling to foreign markets, is what makes transnational strategies so successful, like these companies:
Even companies operating with models that favor global standardization over local responsiveness have to invest in localization and translation to be successful. That’s because regardless of the level of local responsiveness, your customers in foreign markets expect to interact with you in their language. In fact, when deciding where to buy, 56% of e-commerce customers say having a website in their language is more vital than price.
Smartling offers a world-class translation software solution built for you however you plan to scale your business. No matter how many markets you choose to enter or local subsidiaries you build and acquire, you can professionally translate and localize all of your content across devices and platforms without sending a single email, touching any button, or managing strings in spreadsheets.
See what Smartling can do for you. https://www.smartling.com/software/