Transnational Strategy Definition
A transnational strategy is a type of international business strategy that combines the benefits of global scale efficiencies with local responsiveness. Essentially, companies that follow a transnational strategy are trying to have it both ways – they want to achieve economies of scale by producing a standard product for the global market, but they also want to be able to tailor that product to local tastes and preferences as necessary.
Implementing a transnational strategy can be quite challenging, as it requires a strong, centralized global management structure to exploit economies of scale and decentralized local management that can respond effectively to local conditions. Despite these challenges, many multinational corporations successfully use a transnational strategy to compete in the global marketplace.
Key features of a transnational strategy include:
- Balanced Approach: Striking the right balance between centralized (global) and decentralized (local) operations.
- Shared Knowledge: Knowledge and innovation are shared and contribute to a global pool that benefits all parts of the organization.
- Flexibility: Companies have the flexibility to adapt their products and services to local markets while maintaining a strong global brand.
- Efficiency: Pursuing economies of scale and scope, learning effects, and location economies to save costs where possible.
Notable examples of companies that utilize transnational strategies include Procter & Gamble, Unilever, and Coca-Cola. These companies produce and sell products globally but adapt their offerings to fit local market preferences.
How to make a transnational strategy
Implementing a transnational strategy is complex and requires careful planning and execution. Here’s a general step-by-step guide to creating and implementing a transnational strategy:
1. Understand your Market: The first step is thoroughly understanding your global market. This includes identifying potential markets, understanding cultural nuances, legal requirements, consumer behavior, competition, economic conditions, etc. Use market research and intelligence to understand the global landscape comprehensively.
2. Develop your Global Vision: Create a vision that guides your global expansion. This vision should align with your business’s core values and principles and should be inspiring and attractive to global stakeholders.
3. Create a Flexible Business Model: Since a transnational strategy requires global efficiency and local responsiveness, your business model must be flexible. This means designing products or services that can be easily modified to meet local demands or implementing processes that can be scaled or adapted to work in different markets.
4. Establish a Global-Local Structure: Set up a corporate structure allowing centralized global decision-making and decentralized local management. Typically, this involves creating regional or country-level units with local management that report to a central global headquarters.
5. Develop a Global Brand with Local Adaptation: Develop a strong global brand consistent across markets but tailored to local tastes and preferences. This might involve using a consistent brand name and logo but varying your product offerings or marketing messages in different markets.
6. Share Knowledge and Resources Across Borders: Encourage and facilitate sharing of knowledge and resources across your organization. This could involve creating shared databases or collaboration platforms or implementing cross-border collaboration and learning processes.
7. Implement and Monitor: Once the strategy is developed, it’s time to implement it. This should be done phased and controlled, with regular monitoring and adjustments as necessary.
8. Iterate and Improve: Continuous improvement is key in a transnational strategy. Keep an eye on global and local trends, learn from your successes and failures, and regularly review and revise your strategy as necessary.
Example of transnational strategy
Let’s take the case of Unilever, the British-Dutch multinational consumer goods company, as an example of a transnational strategy.
Unilever operates in more than 190 countries around the globe, producing a wide range of consumer goods, including food and beverage items, cleaning agents, and personal care products. It has over 400 brands, with a portfolio that includes well-known names like Dove, Lipton, Knorr, and Axe.
Unilever’s transnational strategy can be seen in its balancing global scale efficiencies with local responsiveness. On the one hand, Unilever achieves economies of scale through centralized global operations. It formulates global strategies for product development, manufacturing, and logistics, allowing it to leverage its size to reduce costs and increase efficiency.
On the other hand, Unilever also displays a high degree of local responsiveness. It adapts its products and marketing strategies to meet local tastes, preferences, and cultural norms. For example, it may offer different product variants in different countries, use local product ingredients, or tailor its advertising messages to resonate with local consumers. In India, for example, Unilever sells a product called Brooke Bond Red Label Tea, which is specifically catered to the tastes of Indian consumers.
Unilever also shares knowledge and resources across its global operations. For example, a successful product innovation in one country may be rolled out to other markets. In this way, Unilever can combine the benefits of global scale with the benefits of local responsiveness, making it a prime example of a transnational strategy.
International Business, Marketing Strategy & Strategic Management
Benefits of transnational strategy
Transnational strategies offer several potential benefits for businesses operating across multiple countries. Here are some of the key advantages:
1. Economies of Scale: Companies can achieve economies of scale by standardizing certain elements of their operations. This could involve producing larger product quantities or leveraging shared services across markets, lowering per-unit costs.
2. Local Responsiveness: By being attuned to local market conditions and customer preferences, companies can tailor their products, services, and marketing strategies to meet local needs. This can lead to increased customer satisfaction and market share in individual markets.
3. Increased Market Share: A transnational strategy allows businesses to access multiple markets worldwide, potentially leading to a larger customer base and increased market share.
4. Risk Diversification: Companies can spread their risks by operating in multiple markets. If one market experiences a downturn, other markets may still perform well.
5. Innovation and Learning: Companies can benefit from shared learning and innovation across different markets. Ideas or successful strategies from one market can be transferred to others.
6. Enhanced Competitiveness: A transnational strategy can enhance a company’s competitiveness by leveraging its global presence and local market knowledge.
While these are potential benefits, it’s important to note that a transnational strategy also involves challenges and complexities. These include managing the organizational complexities of operating in multiple markets, dealing with differing regulatory environments, and balancing global efficiency and local responsiveness.
