A transnational strategy can be defined as one where the focus is on creating markets and increasing market share by moving into new territories, rather than focusing on gaining market share in existing markets. The Transnational Strategy Group states that, “transnational strategies start not with what’s locally available but with opportunities identified globally.”
Transnational strategies are especially suited to companies that are trying to establish a global brand, or are looking for other ways to distribute products internationally. For example, Starbucks has used transnational strategies to expand beyond their original coffeehouse business model. They have expanded their menu offerings to include breakfast foods and teas also available at grocery stores across the world. They have also begun opening stores in airports around the world which lets them reach out to a wider audience.
Transnational strategies work well for companies
Transnational strategies work well for companies that have a product with a higher percent of market share in other countries compared to the United States. If a company’s product is popular in other markets, but not as popular domestically, they can use transnational strategies to develop their international presence and target those overseas customers who may already be familiar with the brand or its products.
Successful transnational strategies
Successful transnational strategies also take into account local cultures and customs which can heavily influence purchase behavior. In order for a company’s transnational strategy to be effective, they have to understand that what works at home might not work abroad. For example, some companies sells more frozen pizza in Greece than it does anywhere else because Greeks eat more frozen food than residents of any other country. Additionally, companies Knorr Soup brand dominates the soup market in Germany, but sells very few products in the United States. However, how Knorr foods are marketed to German consumers is different from how they are marketed to U.S. consumers because of differences between German and American cuisine and lifestyles.
A successful transnational strategy would take into account differences between markets. It would also consider a range of variables including consumer demographics, behavioral patterns and economic differences among countries which can influence purchase behavior and product demand. In order for a company to develop a successful transnational strategy they have to understand their target audience on a global scale well as within individual countries or regions.
Transnational strategies can be risky
Transnational strategies can be risky because they require companies to adapt their business model significantly in order to be successful. A company’s management team has to weigh the risks against the potential rewards before developing a transnational strategy.
A transnational strategy can help increase market share and revenue by expanding into new markets across national borders. This type of expansion is often used for companies that are trying to build global brands or expand distribution outside of domestic channels. According to the Transnational Business Group, “the key elements of a transnational strategy are choice of worldwide product range, worldwide structure of costs and profitability (i.e., making sure all units make an acceptable percentage on sales) with worldwide cost control mechanisms.”
Identifying global distribution possibilities
Transnational strategy entails identifying global distribution possibilities, targeting common buyers across borders and offering identical products. This approach involves having the same marketing plan for all subsidiaries worldwide; however, it does not require companies to offer an identical product line.
This is especially effective for companies with many subsidiaries because they can maximize their profits by consolidating production processes. Product lines that are identical throughout all subsidiaries allow each unit to purchase supplies or finished goods from any other subsidiary at the lowest possible price. Each subsidiary also benefits from maximizing sales through promotion of its own brand name, while using another subsidiary’s production equipment, organizational structure and systems.
Global economic recession
The global economic recession beginning in 2008 was detrimental to many companies that depended on sales across borders. There was a decrease in consumer spending, which was particularly felt in European countries where economies are more interdependent. Many companies had to opt for a singular strategy rather than pursuing transnational practices.
Many companies choose this strategy because it is less risky and therefore offers the potential for quicker growth. However, there are significant drawbacks to basing marketing strategies on using each subsidiary to establish its own brand identity. A common drawback of using a local approach is that by advertising directly to consumers within individual markets, there are often discrepancies between product offerings across different subsidiaries. This makes it difficult for consumers who shop at one subsidiary store to understand why certain products are available at other subsidiary stores but not their regional franchise.
Another challenge associated with this type of strategy is that often each subsidiary is trying to develop similar products and services. This can stifle innovation within individual markets. In addition, the success of a transnational strategy often depends on establishing connections between subsidiaries. This process is easier in developed countries with well-established economies because they tend to have a more stable infrastructure. However, it is more challenging in developing countries with less established infrastructures.”
A transnational strategy is when a company uses the same marketing approach for all subsidiaries in which they operate throughout the world. These approaches are not identical throughout all subsidiaries but rather consist of similar practices in order to maximize profits and take advantage of economies of scale. A transnational strategy does not require companies to offer an identical product line across all regions; however, it does require them to use similar branding, advertising campaigns and promotion techniques.
What is meant by a global strategy?
It is an international business structure where a company’s worldwide business operations are synchronized through collaboration and interdependence between its corporate headquarters, operational divisions, and subsidiaries or retail locations.
What is a multinational example?
Multinational corporations (MNCs), sometimes known as transnational corporations (TNCs), conduct business internationally. TNCs include companies like Apple, Mcdonald’s, and Unilever. TNCs often have headquarters and offices in industrialized countries.