What Are Two Strategies Commonly Used by Multinational Companies?

Friday - 01/11/2019 00:05
A multinational company operates out of several countries. The parent company typically is based in the home country, and it sets up units in other countries called host countries.
What Are Two Strategies Commonly Used by Multinational Companies?
A multinational structure might be appealing to small businesses because a large amount of capital is not necessary to start. A multinational company could be one that moves some of its operations or sets up subsidiaries in other countries, or it could hire or partner with people from other countries. Two strategies multinational companies use to capture markets in other countries are vertical and horizontal expansions.
Vertical Expansion - Manufacturing
Vertical expansion occurs when multinational companies expand production processes to other countries. This strategy allows them to take advantage of factors such as the low costs of labor and raw materials, lower capital investment requirements and less stringent local laws and regulations.
This means these companies can lower production costs and maximize profits. Some developing countries encourage multinational companies because of the innovative technology they bring to the host country and because they typically offer higher wages than the national average.
Vertical Expansion - Sales
Multinational companies also might expand by setting up sales units in host countries instead of marketing their products through local agencies. This allows the companies to ensure that their products reach their buyers and that they are in control of prices. Multinationals also may enter foreign markets when other brands offering the same products set up operations there.
Competition makes it necessary for these companies to follow suit with units of their own. Multinational companies can give their sales units a level of autonomy, which allows them to operate and adapt their sales efforts according to market conditions in the host country.
Horizontal Expansion - Production
Often, multinational companies set up production units in other countries for the sole purpose of catering to the local market. They manufacture products in the host country for distribution in the same country. This helps companies save on transportation costs and shields their operations from uncertainties arising from fluctuations in currency values.
They also use sequential marketing, a strategy that edges out the local competition by offering better and more state-of-the-art products. Another method they might use to eliminate competition is to merge with or acquire local companies.
Horizontal Expansion - Sales
When offering products in the host countries, multinational companies may present their goods and services just as they are offered in their home countries. Examples include branded and packaged food and beverages. They carry similar brand names and are similar in appearance. Companies also might set up showrooms and outlets to mimic international norms. Other companies adapt their products to suit local demand, tastes and customer requirements.

Total notes of this article: 0 in 0 rating

Click on stars to rate this article

  Reader Comments

Security Code   
  • Sales

    Sales Manager

    +(84)982 55 66 97


    Sales 01



    Sales 02



  • Technical

    Error handling









  • Online400
  • Search engine13
  • Guest387
  • Today119,413
  • This month1,175,301
  • Total35,046,630
You did not use the site, Click here to remain logged. Timeout: 60 second