Guide to creating and executing a global strategy06/27/22
Since 2003, Forbes has published the Global 2000, a list that ranks the largest public companies worldwide by the following four metrics: sales, profits, assets and market value. Studying this ranking and its associated company profiles, like which corporation is No. 1 this year, who’s new to the list, or which companies have dropped off, are a great way to start designing a successful multinational corporation.
The top 100 companies cover a wide range of sectors, including oil and gas, technology, banking and finance, automotive, telecommunications, pharmaceuticals, mining and food and beverage. The 2,000 companies in on the 2022 list come from 58 countries, but nearly three-fourths are based in just 10 countries. The U.S. and China remain the countries with the most listed companies, followed by Japan, South Korea, Canada and the United Kingdom.
All of these 2,000 companies global businesses with facilities, suppliers, employees and other assets in at least one country other than their home country. Large multinational companies (MNC) have several advantages over other companies, most of which come with just being big. Labor concerns, supply issues and regulatory problems are all easier to deal with if a company has bases in more than one country.
Affordable and reliable communication technology may be the most important factor that makes it easier for companies to operate in other countries is Consider Walmart with its 5,100 stores and 550,000 staffers in 23 countries outside the U.S. Walmart also sources its products from more than 100 different countries.
Face-to-face communication is as important for sensitive discussions or avoiding cultural faux pas in a multinational corporation as it is in a small local business. Ensuring employees and customers understand a corporation’s global strategy and their roles in its execution takes an extremely fine-tuned level of focus and understanding from the top down.
Short story about the long history of global business
Global business refers to international trade, whereas a global business is a company doing business across the world. The exchange of goods over great distances goes back a very long time.
Anthropologists have identified long-distance trading in Europe in the Stone Age. Maritime trade, or business across the seas, dates back before Greek civilization. These would not be defined as “global” trade, but they had the same goals – to reach beyond homelands and across the world to find new markets and resources.
The British East India Company, established in 1600, and the Dutch East India Company, begun in 1602, were the two earliest global companies. As government-chartered organizations, they were part-business, part-government. Their goals were two-fold; to accumulate capital, often by using natural resources and labor in the new locations, and establish colonial empires.
At the end of the 19th century, another type of global business emerged, and the multinational corporation (MNC) was born.
The first MNCs in the modern world were also searching for natural resources, locations where production was directly linked to the land. Many of today’s mining and agricultural companies date back more than 100 years and still rank among the world’s largest global companies.
In fact, Exxon Mobil Corp., No. 15 on Forbes 2000, was founded by John D. Rockefeller in 1882.
International strategies: Multiple structure options
International business organizations face choices regarding resource allocation, the balance of authority between the central office and business units and the degree to which products and services are customized to accommodate the tastes and preferences of local markets.
Every country is different, and so are the cultures, expectations and needs of the people who live there. What might work in one country could be a huge failure in another. Yet some companies are so large and their products and services so pervasive that they can succeed even if they make very few, if any, adjustments in a new country.
Usually, an MNC is a very large company possessing subsidiaries in several countries, and its organization, production and sales strategies are conceived on a global scale. Many companies choose entirely different methods and structures for their international expansion. Multinational corporations choose from these three basic strategies:
- International strategy: This is usually the first type of international expansion for a business, focusing on imports and exports and maintaining a head office or offices in their home country. This is a common model for companies selling food or wine, or other products with regional appeal. An example of this strategy is Moet & Chandon, which sells champagne around the world, growing every grape in France.
- Multi-domestic strategy: Rather than using one global brand, multidomestic strategy creates many smaller, country-specific brands tailored to local tastes, its customers and local environment. The Swiss-owned candy company Nestle owns more than 2,000 companies including Gerber, Purina, Perrier, Lean Cuisine and Toll House. Nestle sells in over 186 countries, where each carries a selection of brands designed to match the local market.
- Global strategy: A firm using this strategy may make some minor modifications to products and services in various markets. Still, the objective is to gain economies of scale by offering the same products or services in each market. Microsoft, for example, offers the same software programs around the world but adjusts the programs to match local languages. KFC, Coke and Apple sell the same products with consistent branding in overseas markets.
- Transnational strategy: When employing a transnational strategy, the goal is to combine elements of global and multi-domestic strategies, to balance the goal of efficiency and adjusting to meet the needs of local markets. Firms using a transnational approach make some concessions for local tastes. For example, you can buy wine in addition to fast food at McDonald’s in France.
Developing an international business strategy
It’s time to expand your business. You’ve already got some feelers in international waters but aren’t entirely sure how to set things up. Global markets offer opportunities for new markets, expanded brand recognition or potential partnerships.
Before a company gets too far into a new market, it is important to step back and answer some questions that will help determine what type of business strategy makes the most sense at this stage. Here are eight steps articulated by Global Expansion, an international employment firm:
- Research your market
Seek out multiple sources of information, trying to make local contacts. And don’t neglect researching the local regulatory environment.
- Decide on what you’re bringing to the market
Be clear about what you are selling and how your products fit into the local market.
- Set your goals
Set specific goals about market share, sales numbers, cost-efficiency and customer growth. Develop sales goals for multiple years.
- Make a note of any competition
Research local competition to further understand potential markets.
- Develop the finer points of your strategy
Think hard about who you’ll hire, how your business can navigate financial regulations and what an overseas market means for marketing.
- Evaluate your infrastructure
Audit your current business capabilities. Examine the team needed to carry out expansion.
- Create a system for distribution
Explore your options for franchising, licensing and regulatory requirements.
- Consider a partner or consultant
Explore putting a management team together on the ground to help expand your operation.
Executing your international business strategy
Recognize that your global business strategy will be a living document. Initial plans and goals that take shape through focused due diligence are subject to change once you set up shop across international boundaries. Remember to be flexible.
As you move into new markets, keep these goals and visions in mind:
- Partner with someone who understands the laws and regulations in your new market.
- Explore pros and cons internally and make sure you have stakeholder buy-in.
- Get to know your international customers; learn how you have a competitive advantage.
- Become familiar and comfortable with the new culture.
- Prepare a solid global marketing plan to support international growth and strategic goals.
Learning customs, culture, values
“International” is a term that is so broad and unspecific that it can be near meaningless in establishing a growth strategy.
Business strategist Lowell Aplebaum recommends that entrepreneurs take a specific approach to creating a global strategy. It’s important to take the time to break down the regions, countries or communities that are in closest alignment to the offered service or product. Aplebaum, CEO of Vista Cova, suggests taking the time to determine how you will be able to fill a unique need in the new locale. “From there, a global growth strategy can be stepped and piloted with intent,” Aplebaum says.
When expanding into international markets, it is important for entrepreneurs to understand the cultural differences in those markets and adapt their business plans accordingly. A business that is successful in the United States, for instance, might not be successful in Nairobi because the cultural norms in those countries are very different.
Cross-cultural environments require business leaders to understand diverse cultural, political and business customs. Perhaps the most important thing to keep in mind while your business moves into new markets is culture, what we at Thunderbird call a Global Mindset.
Whether you’re an international executive or a student, developing a Global Mindset will help you thrive in global enterprises and beyond. At Thunderbird, leadership development is a fundamental aspect of our curriculum, and we help students and executives become better leaders. Here are a few of our programs geared toward future and current leaders: