Using the Global Integration – Local Responsiveness Framework
According to D. Siluh (2011) multi-domestic strategy can be defined as a strategy where companies try to achieve maximum local responsiveness by modifying both the product they offer and the marketing strategy they use to match different national conditions. Or product markets that initially serves local customers preferences and the functional requirements therein may differ from other markets. Some products such as food and beverages, clothing and lifestyle products are some of the appropriate examples of multi-domestic markets which may vary considerably across different countries where consumers prefer to have the local variants. Examples of multi Domestic Corporation are; Philips Company, Coca-Cola company, McDonald's and KFC. This concept primarily focuses on how to maximize effectiveness and efficiency in a company by exploiting economies of scale, experience and marketing skill, production and logistics. Any company taking this strategy assumes that foreign market opportunities are of the same importance as of the home market opportunities. For a company to succeed in adapting to meet market needs, it's important to maintain competitive leverage in local markets. So the company adopts and follows differentiated marketing strategy with different marketing mixes in different markets in the world.
Companies employing this marketing strategy will definitely need to understand the various local market cultures and emphasize their entry into those markets based on demographics of that area. For a domestic strategy to be successful, it is very vital of them to greatly invest in research of the various localities where the products are actively marketed. Multi domestic strategy is mainly used to create a wide range of tactics that are used to adapt and fit into markets that share a lot of similarities while customizing the marketing and advertising efforts to perfectly match with the local market.
There are three major strategic approaches of multinational enterprises. They include; (1) the global strategy. (2) The multinational (or multi-domestic) strategy and (3) the transnational strategy. In our case we will largely look on the multi-domestic strategy. A good example of a company that has followed the multi-domestic strategy is Philips Company. The company used this strategy to promote innovation from the local research and development process, building strong entrepreneurial spirit, tailoring products to individual countries and maintaining high quality through backward integration. However the Philips Company also faced some challenges when implementing the multi-domestic strategy which includes; high cost of tailored products, growing fear of product duplication by other companies across countries, the market was running slow and product innovations which was more research based than market driven.
How Philips Company used multi-domestic strategy to promote innovation from the local research and development process
Depending on the type of a company, its assets and capabilities are either centralized or decentralized. In our study Philips Company employed decentralized control, that is, local decision making. Innovation is what maintains company competitive and developing or growing. Using international marketing platform, Philips Company used exchanges across national boundaries to satisfy human needs and wants by applying various market functions incorporated and integrated across multiple country markets. The integration process involved product standardization, uniformity in packaging, homogeneity in brand architecture, identical branding of names, synchronized positioning of products and well organized sales campaigns across the markets of different countries. For it to be carried out successfully, they developed adequate acquaintance with trade barrier issues, market environments and possibilities of effective coordination with the corporate as well as the home country policies. Customer's decision making across countries largely depends on product beliefs, attitudes and social norms to the extent of quality attributes associated with the product and customer's attitudes towards foreign brands and Philips Company was keen in ensuring the same. Such differences makes the marketers to wait for product adaptation in the target segments before setting the volume sales operations.
How Philips Company used multi-domestic strategy to build strong entrepreneurial spirit
According to T. Helen (2013) Philips Company fostered work cultures that encouraged enthusiasm, vision and problem solving skills that ensured entrepreneurial success. Some of the factors Philips Company employed to ensure entrepreneurial success was conducting a research where they came up with the following solutions;
- Involving employees who were in tune with their passion- involving people who were genuinely passionate about the problem the company was trying to solve and were energized to stand any challenge which came their way.
- Involving employees who always questioned how it can be done better.-those who largely suggested on how to improve and better the production.
- Optimistic about all possibilities employees. - to be entrepreneurial by nature is to be optimistic, people who don't spend time thinking about what they can't do, people with aggressive challenges and big goals and push the boundaries of what was once thought impossible.
- People who take calculated risks and they can execute.-people who work autonomously, decisively and they can act on ideas to get real feedback.
How Philips Company used multi-domestic strategy in tailoring products to individual countries
Using the multi-domestic strategy, Philips Company introduced different aspects to different countries depending on their purpose. They adapted to each market based on differences in resource availability, cultural values, product usage and marketing opportunities. Some of the multi-domestic strengths Philips Company employed include;
- Customized offering. - Company's ability to modify its activities and products to match the interests and needs of each market.
- Concentrated efforts. – This allows product, marketing and services optimization.
- Quick response. – Company's ability to effectively react to the changing needs of market place by identifying evolving trends.
How Philips Company used multi-domestic strategy to maintain high quality through backward integration
Reducing cost while saving money and improving efficiency are the two main reasons why MNEs pursue backward integration. S. Fredric (2010) defined backward integration as a process where a company is acquired that lies somewhere behind it on the production line for the entity that purchases the company. One way on how money can be saved through integration is saving money on transportation costs. Although L. Lau (2014) argues that it is not always advisable to pursue backward integration since it does not always result in saving money or efficiency in business development. Research one by S. Kyle (2011) shows that Philips Company maintained high quality by expanding the business to an area that was related to the production of the company.
Some of the factors that affected Philips Company multi-domestic strategies include the following;
- Industry standards remained diverse. - Slow but high cost harmonization standards.
- Customers continued to demand locally differentiated products.
- Being an insider remained critically important. – The perceived country of origin of the products had a bearing on the take up of the product and so local manufacture of goods was initially important to overcome the skepticism.
- Global organizations were difficult to control and manage. - finding ways to incorporate operations, it was very difficult to decentralize and replace home country loyalties in different market countries.
- Management myopia effect.