Question

Briefly compare the implementation of global and multinational company’s strategy and objectives while going into international business

Answer 1

Global and multinational companies are distinctly different on the management and operational levels. The business models do overlap, however, in their marketing efforts. Both global and multinational companies have a presence in multiple countries. The primary differences lie in how it operates within the bounds of each individual country.

Global Company Strategy:-

A global company has a foothold in multiple countries but the offerings and processes are consistent in each country. For example, a major soda brand can set up shop in different countries, but the recipe does not change in the global model. The company uses the same ingredients and manufacturing processes, regardless of local culture. In a global model, the business does not adapt to local norms, but rather, it imposes its existing business model on the country.

The only exception in the global model is the marketing approach to drive sales in individual countries. The product is consistent but messaging must adapt to work within the cultural norms. Marketing is where the two models are difficult to distinguish.

Multinational Company Strategy:-

As a global company, a multinational company operates in multiple countries, and the company adapts marketing messaging to fit each culture group. Driving sales is always top of mind. The major difference in a multinational business model is the adaptation of product offerings and manufacturing processes. A multinational has more autonomy in each individual country, whereas a global model is still beholden to its central operating model.

Multinationals adapt operations and products to fit within individual markets. A multinational is different because it uses a decentralized approach to business. Each arm acts independently, while still serving the larger brand model.

Objectives

Objectives of Multinational Company

• To enhance free trade at the global level and attempt to bring all the countries together for the purpose of trading.

• To increase globalization by integrating the economies of different countries.

• To achieve world peace by building trade relations among different nations.

• To promote social and cultural exchange among the nations.

• To assist developing countries in their economic and industrial growth by inviting them to the international market thus eliminating the gap between the developed and the developing countries.

• To assure sustainable management of resources globally.

• To propel the export and import of goods globally and distribute the profit among all participating countries.

• To maintain free and fair trade.

Objectives of Globalisation Strategy:-

• Economies of scope: the cost savings developed by a group when it shares activities or transfers capabilities and competencies from one part of the group to another – for example, a biotechnology sales team sells more than one product from the total range.
• Economies of scale:the extra cost savings that occur when higher volume production allows unit costs to be reduced – for example, an Arcelor Mittal steel mill that delivers lower steel costs per unit as the size of the mill is increased.
• Global brand recognition: the benefit that derives from having a brand that is recognized throughout the world – for example, Disney..
• Global customer satisfaction: mulitnational customers who demand the same product, service and quality at various locations around the world – for example, customers of the Sheraton Hotel chain expect and receive the same level of service at all its hotels around the world.
• Lowest labour and other input costs: these arise by choosing and switching manufacturers with low(er) labour costs – for example, computer assembly from imported parts in Thailand and Malaysia where labour wages are lower than in countries making some sophisticated computer parts (such as high-end computer chips) in countries like the USA
• Recovery of research and development (R&D) costs and other development costs across the maximm number of countries – new models, new drugs and other forms of research often amounting to billions of US dollars. The more countries of the world where the goods can be sold means the greater number of countries that can contribute to such costs. For example, the Airbus Jumbo A380 launched in 2008 where development costs have exceeded US$ 10 billion.
• Emergence of new markets: means greater sales from essentially the same products.