International strategy enables your business to reach customers in different countries. Globalization keeps increasing, and more businesses are moving online. Today, companies of any size can transact across borders with ease and speed. However, the type of international business you work at can help you determine what your strategy should be. In this guide, you’ll learn how to differentiate between various categories of international businesses. Then, you can develop a successful international strategy to help drive your company’s growth.
Four Types of International Strategy
Historically, businesses that sold in more than one country were divided up into four main types: International, Global, Transnational, and Multidomestic. These categories first appeared on the Bartlett & Ghoshal Matrix (1989). They based their international strategy framework on the degree of integration across countries (global integration) and the level to which a company fine-tuned their operations and offerings (local responsiveness). Let’s take a look at what these categories mean, using this model.
Per the Bartlett & Ghoshal model, an international business is considered to have a low degree of integration across countries, and a low level of customization for local market needs. This type of international strategy is used most often for companies that export products to other parts of the world, but produce their product in just one country. You might fall into this category if you manufacture a product that requires minimal if any adaptations for the local market, not even to packaging, but all your sales are handled locally.
A global company, on the other hand, has more of a hub-and-spoke model. They are highly centralized and dependent on their HQ location, so their degree of global integration is high. Local offices don’t have much autonomy, and their ability to adapt their product offering and operations is low. This international strategy offers a consistent product across the world, but seek to maximize operational efficiencies. The local offices implement decisions that come out of HQ. Local offices cannot flex and adapt much for their local customers.
A multi-domestic company is the opposite of a global one, in terms of their international strategy. The multi-domestic company tailors and customizes their product and services to whatever degree is needed to appeal to local market needs. The HQ office has a hands-off approach. The HQ country staff put very little pressure on local offices to just follow the lead of HQ. Instead, local offices have a very high degree of autonomy and independence. The default expectation in this category of company isn’t that local will bow to “corporate” of HQ. Each regional office functions separately and has a strong amount of local control.
The company that maximizes both for the ability to execute locally while optimizing to gain global leverage is considered a transnational company. If this international strategy sounds like the best of both worlds, it really is! It’s the gold standard, and what most companies ultimately seek to achieve. The idea with a transnational company is that you can drive scalability and leverage upstream, but create flexibility downstream in marketing and sales. For this model to work, local offices must be highly interconnected, with an excellent ability to communicate across regions and functions.
Comparing the Four International Strategy Options
The table below helps visualize what the trade-offs are of each type, per the model. Instead of referring to “global integration” and “local responsiveness,” I’m using slightly updated terms here. What I believe most modern businesses care about is achieving global leverage as they scale, while empowering local teams to be flexible.
|Local Flexibility||Global Leverage|
Perhaps a better way to visualize this topic is to think in terms of what relationships need to exist in a modern business in order to enable the optimal scenario, in which a business can achieve both local flexibility and global leverage. Here is a visual that depicts the relationships that need to exist in each of the four types of companies.
The visual of the four different models for international strategy is helpful because it allows us to understand the relationships between local offices and company headquarters. Some might refer to this as “power dynamics” instead. I don’t love that view, because it presumes that there are actors who are intentionally seeking a specific concentration of power. I actually think it’s more about facilitating communication, to enable equitable flows of information. But really, what it means is, how frequently are the different teams talking and working with each other, both across regions, and across functions?
It’s very hard to ever achieve solid communications across regions without a strong international operations function. And to have that, you need people whose sole job it is to enable those relationships to be created and for them to strengthen over time. Your international ops people are the “global glue” that hold functions and regions together. Without such a role, it’s unlikely you’ll ever be able to achieve the tight-knit communication processes and structures you really need to enable an international strategy like the one depicted as “transnational” above.
Whatever you do, don’t fool yourself into thinking you can delegate “all functions” to simply “be international” from the start. They have other work to do. If you want to improve international connections, find a way to measure the progress, and make it a person’s job to achieve improvements against this goal.
Transnational: The Best International Strategy for Global Tech Firms
The world’s best global technology companies use the transnational model to inform their international strategy. The transnational option optimizes for both scalability at the global level as well as local autonomy and flexibility. Localization is usually required by software companies to ensure companies can achieve product-market fit as they cross the chasm in each local market. Particularly for companies that build websites and web apps, it’s important to pay attention to web app localization best practices. Only then can they achieve the best global leverage while ensuring localizability and global extensibility through internationalization.
However, it takes time to become a transnational company. Developing a global mindset and enabling localization doesn’t happen overnight. For most companies, it’s a long and arduous process. It requires people leading the charge, pushing for international, and advocating for globalization across every function.
International Strategy Lessons from Unilever
One of the companies often cited as a transnational success story is Unilever. Here are some lessons shared by their former CEO in an article published in Harvard Business Review.
1. The road leading to transnational will take many turns.
All companies who have embarked on this path know that it takes time to implement a transnational strategy. As Floris A. Maljers writes in HBR, “While Unilever has certainly evolved into what is now called a transnational in academic and business policy circles, our actual progress was not made by the application of theory but through a much messier evolution of trial and error.”
I think this is a very important takeaway. People can analyze org charts and come up with org designs as much as they want. But there is no replacement for doing the work, figuring out the gaps, and adapting as time goes on. If there is one piece of advice I can offer on this topic from many years of working on international strategy and operations, it’s that you can plan all you want, but sometimes the organizational learning must be done the hard way.
2. Creating links between different areas of the business is key.
Maljers writes in the HBR piece about the importance of “linking decentralized units.” The importance of inter-linked regions and functions is also obvious from the visual with the arrows shown above. It takes a larger number of relationships, and more communication pathways, to get the work done in a truly transnational business.
He explains that one major way to do that is through a common corporate culture, and ensuring work is carried out a similar way no matter where it happens in the world: “At Unilever, we have realized over time that the transnational way of working helps to maintain common standards of behavior in our far-flung units.” Culture is a hugely powerful tool for enabling transnational business success.
3. Prioritize flexibility over hierarchy to enable transnational strategy to become a reality.
My favorite quote from Unilever’s CEO makes clear why hierarchy must give way to flexibility in any successful transnational business: “I like to use an analogy with a dance called the quadrille. This is an old-fashioned dance, in which four people change places regularly. This is also how a good matrix should work, with sometimes the regional partner, sometimes the product partner, sometimes the functional partner, and sometimes the labor-relations partner taking the lead. Flexibility rather than hierarchy should always be a transnational’s motto—today and in the future.”
I have seen this play out in my own work with international strategy and operations. The most successful global teams are highly cross-functional and work together very actively with participation from all levels of management and individual contributors. They are less hierarchical and more collaborative. It’s very much like a dance, in which people trade off partners and have to work with each other in a rotating fashion to ensure everyone takes a turn and gets the chance to work together. Viewing it like a dance is a great analogy, because it’s fun to do, but you also can’t just sit there and enjoy the music. It requires active participation from all teams, all levels — everyone in the company.
Additional Resources on International Strategy
Here are some other articles that may help you develop an international strategy at your company:
- What are the reasons why companies expand into international markets?
- What are the factors to consider before expanding internationally?
- What is the best model to use for going global?
- How can I build an international market entry framework?
- How can I build a local market entry playbook?
- How can country level data help our local market entry strategy?
- What are the most commonly overlooked entry strategies for international markets?
- What should we do after sizing local market opportunity?
- What is the MAP method of developing international expansion strategies?
- How can I help my company create a global mindset?
- Why does product-market fit matter at the country level?
- Why does crossing the chasm matter for an international business?
- How can an international steering group take our business beyond borders?
- How is the new normal changing international business trends?
- Why do multinational companies often struggle to grow?
- How can we boost local sales velocity?
- What strategies can I use for European expansion?