Question

Large firms operating globally develop organizational strategies based on the type of industries and businesses in which they compete. Explain the four basic international business organization strategies discussed in the course and the Hill text. Then identify which of the four strategies Volkswagen has used over time and the one it is now trying to implement. After identifying the strategies it has used and is now trying to implement please describe and explain how and why it is pursuing the strategy it has currently selected in order to penetrate certain markets and meet global competition in its industry. You should comment on the success and/or failure of its approach and implementation and how it may have modified its organization, supply chain or marketing over time given changes in its markets, its suppliers and its industry’s competitive structure.

Answer 1

The four basic international business strategies are:-

1) Multidomestic Strategy - Main aim is maximum local responsiveness. Customize the product offering, market strategy including production and R&D according to national conditions.

2) Global strategy - Focus is on achieving a low cost strategy by reaping cost reductions that come from experience curve effects and location economies. Production, marketing, and R&D concentrated in few favorable functions & market standardized product to keep costs low.

3) International Strategy - Create value by transferring valuable core competencies to foreign markets that indigenous competitors lack. Centralize product development functions at home & establish manufacturing and marketing functions in local country but head office exercises tight controlover it.

4) Transnational Strategy - To meet competition, firms aim to reduce costs, transfer core competencies while paying attention to pressures for local responsiveness.

Avon products has adopted a multidomestic strategy by moving towards direct selling and away from retailing to suit the exact needs of its customers by offering customised products, R&D in the local countries which best suits them. This strategy has been a success for the company. Avon uses both door-to-door sales people ("Avon ladies," primarily and a growing number of men) and brochures to advertise its products. Avon agents are able to maximize sales to existing customers and continually gain new ones with creative marketing. In addition to selling, Avon offers representatives the ability to be involved in the Leadership program, Avon’s network marketing opportunity, where Representatives recruit, mentor and train others to succeed.