A multidomestic strategy is a type of international business strategy in which a company decentralizes its operations and allows each country or region in which it operates to tailor its products or services to local market needs and preferences.
In this approach, subsidiaries in different countries or regions operate independently and are given significant autonomy to make decisions most suitable for the local market.
A multidomestic strategy aims to increase the company’s responsiveness to local market conditions and gain a competitive advantage by tailoring products or services to local preferences. This approach is instrumental when significant cultural, economic, and regulatory differences exist between countries or regions.
Multidomestic companies typically have strong local brands and marketing campaigns tailored to specific regions. They also tend to have extensive distribution networks to meet each market’s unique needs.
Multidomestic strategy examples
- McDonald’s: McDonald’s has a strong global brand, but the company adapts its menu to local tastes in different regions. For example, in India, McDonald’s offers vegetarian options such as the McAloo Tikki burger and the McVeggie burger, which are unavailable in other countries.
- Unilever: Unilever is a consumer goods company in over 190 countries. The company’s products are adapted to local tastes and preferences in each market. For example, Unilever’s Lipton tea brand is marketed differently in different countries. Lipton sells green tea in Japan, while in the United States, it sells black tea.
- Nestle: Nestle is another consumer goods company that uses a multidomestic strategy. The company has a portfolio of over 2,000 brands, including KitKat, Nescafe, and Gerber. Nestle adapts its products to local tastes and preferences in each market. For example, Nescafe sells instant coffee in some countries and ready-to-drink coffee in others.
- Coca-Cola: Coca-Cola is a global beverage company in over 200 countries. The company adapts its marketing campaigns and products to local tastes in each market. For example, Coca-Cola sells a drink called “Georgia Coffee,” popular among office workers in Japan. In contrast, in the United States, the company sells a variety of soda flavors.
- Procter & Gamble: Procter & Gamble is a consumer goods company in over 180 countries. The company adapts its products to local tastes and preferences in each market. For example, Pampers diapers are marketed differently in different countries. In some countries, Pampers sells diapers with cartoon characters, while in others, the diapers are marketed as more absorbent.
Advantages and disadvantages of multidomestic strategy
Advantages of multidomestic strategy:
- Responsiveness to local markets: Multidomestic strategy allows companies to adapt to local market needs and preferences, making them more responsive to changing customer demands. This approach can help companies gain a competitive advantage by tailoring their products or services to local markets.
- Local brand recognition: By tailoring products and services to local markets, companies can build strong local brands that resonate with customers. This can help companies establish a competitive advantage in different regions.
- A better understanding of local culture and regulations: Multidomestic companies have a better understanding of local cultures and regulations, which can help them avoid cultural missteps and comply with local laws.
Disadvantages of multidomestic strategy:
- Higher costs: Multidomestic strategy can be expensive because it requires companies to develop and manufacture products tailored to different markets. This can lead to higher costs for research and development, production, and marketing.
- Difficulty in maintaining consistent quality: Maintaining consistent quality and brand standards across different regions can be challenging. This can be particularly difficult for companies that operate in countries with varying regulations and product standards.
- Duplication of effort: In a multidomestic strategy, subsidiaries in different countries may duplicate efforts by conducting similar research and development or marketing campaigns. This can result in inefficiencies and higher costs.
- Lack of global integration: Multidomestic strategy can lead to a lack of global integration and coordination, making it difficult for companies to leverage economies of scale and scope. This can limit a company’s ability to compete globally.
How to build a multidomestic strategy
Building a multidomestic strategy involves several key steps:
- Analyze the market: Companies need to conduct market research to understand the local market needs, preferences, and regulatory requirements of each region they plan to operate. This will help them tailor their products or services to local market conditions.
- Define the scope of autonomy: Companies need to determine how much autonomy to give each subsidiary in different regions. The level of autonomy should be balanced with the need for global coordination and consistency.
- Develop local products and services: Based on market research, companies need to develop products or services that meet the needs and preferences of local customers. This may involve customizing products, branding, packaging, and pricing.
- Establish local partnerships: Companies can build local partnerships with suppliers, distributors, and other stakeholders to improve their understanding of local markets and gain access to local resources.
- Create a decentralized organizational structure: Multidomestic companies need to create a decentralized organizational structure that allows each subsidiary to operate independently and make decisions based on local market conditions.
- Invest in local talent: Companies must invest in local talent to ensure they have the skills and knowledge to operate successfully in each market. This may involve hiring local managers and employees, providing training and development programs, and promoting cross-cultural understanding.
- Monitor performance: Companies need to monitor the performance of each subsidiary to ensure that they are meeting local market needs and achieving the company’s overall objectives. This may involve setting performance metrics and benchmarks, conducting regular reviews, and adjusting as needed.
Overall, building a successful multidomestic strategy requires a deep understanding of local market conditions and a commitment to tailoring products and services to meet the needs and preferences of customers in each region.
International Business, Marketing Strategy & Strategic Management
Case study of a successful multidomestic strategy
One example of a successful multidomestic strategy is the multinational fast-food chain McDonald’s. McDonald’s operates in over 100 countries worldwide, with diverse cultures, tastes, and preferences.
McDonald’s has successfully implemented a multidomestic strategy by adapting its menu to meet customers’ specific needs and preferences in each country. For example, in India, McDonald’s offers a range of vegetarian options to cater to the country’s large vegetarian population. In Japan, McDonald’s offers rice burgers; in Brazil, the chain offers local favorites such as the Pão de Queijo burger.
In addition to adapting its menu, McDonald’s has also customized its marketing and advertising campaigns to appeal to local customers. For example, McDonald’s launched a social media campaign in China featuring popular Chinese celebrities to promote its brand.
Another key aspect of McDonald’s multidomestic strategy is its franchise model. McDonald’s franchises its business to local partners, who better understand the local market and can adapt its products and services accordingly. This allows the company to enter new markets more quickly while reducing its risk and costs.
Overall, McDonald’s successful implementation of a multidomestic strategy has allowed the company to expand globally while maintaining a solid local presence in each market. By adapting its products and services to meet customers’ unique needs and preferences in each country, McDonald’s has built a loyal customer base worldwide.
