When would a firm choose to operate on a transnational basis? Under what circumstances would a firm use a localization strategy? When would an international strategy be employed? Support your answers with examples.
Firms look to operate on a transnational basis primarily to penetrate into foreign markets and expand their business. After tasting success at home, several firms make investments to expand globally in order to attain market share and boost revenues. Transnational companies have coordinating and operation-controlling power in multiple countries, even if they do not own them. General Motors, Ford, and Wal-Mart are amongst the world’s largest transnational companies. Japan, North America, and Western Europe account for about three quarters of the world’s transnational companies. When operations go international, localization strategy takes center-stage for firms. Firms use a localization strategy when they counter differences in management styles and cultural practices. Localization strategy is used by firms to adapt and cater to the choices and expectations of foreign customers and quickly occupy new markets. McDonald for instance, which operates in 119 countries, is a good example of a company that maintains its global brand identity successfully by using a localization strategy to adapt to the tastes and temperaments of diverse cultures across the globe. In short, localization strategy helps a firm deliver a unique customer experience that exceeds geographical boundaries. An international strategy is employed by a firm to create value through core competency transfer to a foreign market in which native competitors are not equipped with those competencies. Typically, a firm comes up with an innovative product and introduces it into the foreign market. As the demand for the product increases, the firm begins to export the product. As foreign competitors start production, the firm starts production abroad. The firm then standardizes production and...
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