Multidomestic strategy: Global success through localization

Expanding into overseas markets can power your company’s growth—as long as you have the right blueprint for maximizing your success. There are four main types of globalization strategy. Here we take a closer look at multidomestic strategy, an approach that puts localization front and center. 

What is a multidomestic strategy?

Multidomestic companies rely heavily on local customization for their competitive edge. They win and retain customers in new markets by adapting their products, marketing messages, sales materials, customer service, and other key functions to meet the needs of local audiences.

A multidomestic strategy typically includes:

• A low degree of global integration—Multidomestic companies tend to be organizationally decentralized. They have offices in each locale, with the flexibility to respond to local trends. Rather than building a single global brand, these companies invest in region-specific brands that are designed to appeal to customers in each market
• Very high local responsiveness—This approach to global expansion hinges on understanding local audiences and what they’re looking for. Products and strategies are highly tailored for each individual market. Local offices are empowered to make business decisions that meet the needs of the region’s customers

What sets a multidomestic strategy apart from other types of globalization strategies?

There are some key differences between multidomestic strategy and the other three approaches to global expansion. 

Multidomestic vs international strategy

An international strategy can often be a company’s first step in the global expansion process. Businesses start selling their products or services in new markets while keeping most of their operations located domestically. 

International strategies are often pursued by companies that sell consumables or luxury goods where the brand’s cachet comes from the home country. Think American jeweler Tiffany & Co. or German car brand Porsche. 

In contrast, multidomestic companies have decentralized structures. They become part of the regions where they do business, with local offices that have a high degree of autonomy. 

Multidomestic vs global strategy

With a global strategy, companies keep their products or services basically the same across all the markets where they do business. They build a single, unified brand without making many changes to their marketing messaging. For this approach to work, the brand needs to have universal appeal. Apple is a good example of a company that successfully employs a global strategy. 

Companies that use multidomestic strategy take the opposite approach. They appeal to consumers in each individual market by creating brands, products, and messages that are specifically tailored for local languages, cultures, needs, and preferences. 

Multidomestic vs transnational strategy

Organizationally, transnational companies share a number of similarities with multidomestic firms, but there are key differences, too. Both types of companies have operations in the locales where they do business. However, transnational firms tend to keep their corporate headquarters in their home country, while multidomestic companies are much more decentralized with operations spread across their markets, 

Like multidomestic strategy, transnational strategy relies heavily on localizing products and messaging to deliver what customers are looking for in each particular region. Companies like Walmart and McDonald’s have followed the transnational approach to global success. 

What are the benefits of multidomestic strategies?

Pursuing a multidomestic strategy can yield significant upsides for your company, but it’s important to weigh all the factors before deciding if it’s the right path to take. Here are some pros and cons to consider:

Fine-tuning offerings for local audiences is good for business

Customers value products and services that are made with them in mind and many are willing to pay more for it. A CSA survey found that 66% of business buyers and 34% of consumers would be willing to purchase a more expensive product or service in order to get a localized experience. Customizing offerings for each region increases market penetration, expands your customer base, and makes your business more competitive. 

Operating in different locales delivers local market advantages

Business conditions vary greatly from one market to the next. This can work in your business’ favor. For instance, lower labor costs can help give you a price advantage. Hiring local employees can also provide much-needed expertise for critical business functions, such as sales, marketing, localization, and market research.

Mergers and acquisitions can give you a head start in overseas markets

Breaking into new markets takes time. Local customers need to become aware of your brand, and you have to find ways to win them over. With a multidomestic strategy, you don’t necessarily need to start from scratch. Your company can acquire local businesses that have an existing brand presence trusted by customers and sizable market share. 

Consider the potential drawbacks

Alongside the benefits, keep in mind these possible downsides of multidomestic strategy:

• Creating different brands, customizing products or services, localizing sales and marketing, and maintaining separate offices across markets takes a significant investment. So, costs can be higher compared to other international strategies
• Because local offices enjoy a high degree of autonomy under this strategy, it can be challenging to ensure consistency and quality standards worldwide
• Spreading operations across markets can introduce the potential for redundancies and inefficiencies
• The lack of global standardization and centralization can keep multidomestic companies from realizing economies of scale

A strong localization strategy is key to success for multidomestic businesses

Customers aren’t all alike. Different languages, cultures, and worldviews shape different needs and preferences. For a multidomestic strategy to succeed, your business will need a significant investment in localization, including:

• Tailoring your products or services for every market or region 
• Creating separate sales strategies and marketing campaigns fine-tuned to resonate with customers in all the locales you do business
• Adapting language, imagery, and user interfaces for each individual audience

Multidomestic strategy examples: Brands that succeed thanks to local customization

Multidomestic strategy has been a winning move for some of the world’s top brands. Here are two examples that can help give you more insight into whether this approach may be the right way to go for your company. 

Johnson & Johnson

There’s no more universal need than healthcare, but laws governing the industry and attitudes about wellness vary greatly from one locale to the next. Johnson & Johnson, a leading pharmaceutical and medical technology company, has successfully met that challenge with its multidomestic strategy. 

It operates in 60 countries, with manufacturing and research facilities located worldwide, and offers its products, under different brands, in more than 200 countries. 

Phillips

Phillips is known for its wide array of products, spanning everything from medical technology to consumer electronics to personal care products like toothbrushes. The company, founded in 1891, has grown into one of the world’s leading corporations, thanks in no small part to its multidomestic strategy. 

Phillips’ decentralized structure allows decisions to be made locally in each market to better serve customers. Products are specifically tailored for each region, adapted for local languages, cultures, and tastes, as well as for differences in available resources. 

Build your global expansion strategy with a trusted partner

Creating and implementing a globalization strategy can be a complicated task. But you don’t have to go alone. An experienced translation and localization company can help you navigate your way to success.  

At Acclaro, we’ve created strategies that helped the world’s leading companies thrive across languages and cultures. We’re here to help you make the right moves as you move forward with global expansion. Get started to learn more about how we can partner together.