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In: Economics

Q 3 Describe the four basic strategies firms use to compete in the international markets. Which...

Q 3 Describe the four basic strategies firms use to compete in the international markets. Which strategy is best?

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Expert Solution

The four basic strategies that the firms use to compete in the international market are:

1. Multi-domestic or localisation Strategy: In this, a firm sacrifices efficiency in order to emphasize on local requirements within each of its markets. They aim towards achieving maximum global responsiveness. They customize and adjust their product offerings according to the various national environments.

2. International or multinational Strategy : The companies create value in the home country by transferring valuable skills and products from foreign markets to where local competitors lack those products and skills. They often transfer differentiated product offerings to new markets.

3. Global Strategy: This strategy can also be termed as low cost strategy. Here, the companies focus on increasing profitability by reaping the benefits of cost cuttings that come from location economies and experience-curve effects. They emphasize on efficiency in order to reduce costs. It is a complete opposite of the multi-domestic strategy.

4. Transitional Strategy: This is a middle ground between multi-domestic strategy and a global strategy. The firms try to balance the desire for efficiency with the need to adjust to local requirements within the domestic markets.

The best strategy from the above mentioned is the transitional strategy, as it combines the advantages of both multi-domestic and international strategy.


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