Question

please refer back to the minicase on pages 374 and 375.

1. why have consumer product companies headquartered in Europe historically used the multidomestic strategy? in your view, Is this an effective choice of international strategy for these firms? why or why not?

Answer 1

A multi-domestic strategy is a type of international strategy where the strategic and operational decisions of the firms are decentralized to the individual business units in each country. The product offerings and marketing are customized according to the domestic needs of the country in which the SBU operates.

It is based on the premise that customer needs, preferences, and beliefs vary ion each domestic region. Also, external factors like competition vary in each region. So it becomes necessary to customize decision according to the geography. The multi-domestic strategy offers high local responsiveness. It is followed when the need for global integration is low and the need for local responsiveness is high

Europe is a continent appropriate where the difference between the customers and the markets in which the firm functions are significant. It becomes necessary for firms like Unilever operating in Europe to offer products tailored to the varying needs of different regional consumers. Hence a multi-domestic strategy with decentralized structure is more appropriate. The strategy decreases the level of performance ambiguity i.e. we can easily find the cause of poor performance in a region and the need for coordination.

Though the strategy is less efficient, this strategy is effective because it becomes necessary in FMCG industry to tailor products according to consumer needs..eg In India, Patanjali (FMCG company) introduced herbal based FMCG products that took a toll on other FMCG companies’ sales. So, Unilever had to come up with a new line called,’Ayush,’ to regain its share. Thus Unilever can offer new products according to the domestic market and competition.