The management psychology of a global strategy is often ethnocentric and the company will impose the structure of their home organisation and principles on all offices/outlets. Wal-Mart, the huge American company which accounts for 20% of US imports, is a typical example of this; in each of their stores, they put in place a management team trained to their way of thinking and their style of selling…(ADD) Whereas in a multi-domestic strategy, the management psychology is open to all view points and is very much geo-centred – they adopt local policies. Ikea does this, they are pleurilistic(???) centred and they adapt to the situation which differs with each branch.
The political risks of a global strategy are higher than that of a multi-domestic due to the likelihood of local business lobbying and government regulations and standards. Nike faced a big problem when the public found out that their products were made using child labour in third world countries and there was a huge outcry. There is a minimal political risk for a multi-domestic strategy as they integrate into the local community as Texas Instruments did when they set up several joint ventures with local businesses.(EXAMPLE?)
When a global strategy is used, product functions tend to be centralised and outsourced to the cheapest possible provider; this is why Dyson outsourced its call centre to India. Product functions and other functions with a multi-domestic strategy tend to be localised, each area is likely to have a local sales office. Carlsberg is an example of this with different offices in Denmark and England. (ADD?)
Recruitment for a global strategy is overseen by a central office hub of VIP managers and training officers, they will be sent out to run, train and manage new branches to ensure the correct protocol is being followed. Hewlett Packard does this; each time they open a new office it is opened by a fully trained management team who have been trained to the Hewlett Packard way of thinking. On the other hand, with a multi-domestic strategy local recruitment is given priority due to government policies wherever possible. An advantage of employing locals is that they are likely to have a good understanding of the local environment, beliefs and attitudes. PC World uses a multi-domestic strategy and they always put the onus on local recruitment.
A global strategy uses transferable marketing like symbols and logos that are recognisable worldwide such as the Windows symbol or the Nike tick. When marketing industrial or not very visible products the company will barely need to change the advertising at all therefore it is a lot cheaper. Multi-domestic strategies make use of localised marketing – sometimes local celebrities are used who would be unrecognisable elsewhere. The East Anglian company Ridgens used a localised marketing policy when they used a local footballer to promote their new range of paint. (?)
Global strategies can benefit from economies of scale as they can access more markets and customers and reach a broader target audience. An example of this in the car industry is Ford.(ADD) However, multi-domestic strategies have a limited target market and work as separate businesses therefore they don’t benefit from economies of scale. This is what occurs with Triumph, the bike manufacturer – their product range is too varied and their target audience limited so they will never benefit from economies of scale.(REWORD?)
Global strategies tend to have competition from other MNE (Multinational Enterprises) Examples of this type of competition are Pepsi and Coca Cola or McDonalds and Burger King. On the other hand, multi-domestic strategies compete against local competitors who are also local firms forming part of other multi-domestic strategies such as Pizza Hut and Dominoes.
Global strategies are more effective when the differences between countries or consumer needs are small, Levis sells its jeans worldwide with the same design. (ADD) A multi-domestic strategy works well when there are large differences between central office, home office and regional office and when it is operated in broadly different cultural areas. Vogue magazine is an example of this, it is sold in the US, the UK and France and is successful in all three because it uses a different format to appeal to the consumer wants of that particular country.
Although there are all these differences between global and multi-domestic strategies, there are some similarities too. Regardless of the strategy, certain rules have to be adhered to; they will have to meet requirements and standards of their central office no matter what country the output centre is in. If they are listed on different stock markets they need to report according to that stock markets particular standard.
Any company has to abide by ISO’s, no matter what organisation they are or where they are based. (?) In the US, for example, they have a six sigma rule which states that the maximum faults allowed per million is 3.4.
Any number of these characteristics can apply to a global strategy or a multi-domestic strategy. However, it must be remembered that not all of these characteristics will will necessarily apply to any one organisation. Neither of these strategies are necessarily the ‘best’, it is simply a case of the firm adopting the strategy which best suits its current situation. (There are a growing number of global players)
