Expanding into overseas markets can deliver powerful advantages for your business—from opening up new talent pools to expanding your customer base to increasing revenues and profits. To capitalize on these opportunities, you need the right globalization strategy. A transnational business strategy is one option to consider.
What is transnational strategy?
Transnational strategy is one of the four main blueprints for global expansion. What makes each of these strategies unique is the degree to which it focuses on achieving global integration or local customization.
Organizations with a high degree of global integration tend to be based primarily in the home country, and their products or services are fairly standardized across all their markets.
On the other hand, organizations with a high degree of local customization are typically more decentralized, and their offerings are highly tailored to meet the needs of customers in each specific locale.
The four approaches to globalization strategy are:
International strategy—Companies following this strategy aren’t focused on the benefits of global standardization or responsiveness to local customers. They enter new markets without making significant changes to their products, pricing, or operations. An international strategy is often the approach a company takes when it’s just beginning to expand beyond its home country.
Global strategy—These highly centralized companies aim to reap the rewards of global standardization with lower costs and greater efficiencies. They offer the same products and services in all their markets with very few changes and compete on price rather than their ability to meet local demands.
Multidomestic strategy—This is the opposite of global strategy. These decentralized companies compete on their ability to give local customers exactly what they’re looking for. They deliver highly tailored products and services, marketing, and customer service to meet the specific needs, preferences, and requirements of each market.
Transnational strategy—This approach combines aspects of both global and multidomestic strategies. Transnational strategy companies focus on being responsive to local markets, as well as reaping the cost and efficiency benefits of global integration. Organizations following this strategy will usually have a corporate headquarters that oversees operations and works collaboratively with its foreign subsidiaries.
What are the benefits of transnational strategy?
A transnational strategy offers a best-of-both-worlds approach to global expansion. It can give companies a competitive edge by combining the significant cost and efficiency benefits of global standardization with the power of local customization to win over and retain customers.
Additionally, a transnational strategy can:
Reduce resources needed—Transnational business strategy typically strikes a balance between global standardization and local customization by creating efficiencies upstream in the value chain, such as in manufacturing. Compared with a multidomestic strategy with its decentralized model that relies on creating separate brands and producing different products or services tailored for each market, a transnational business approach will typically require fewer resources.
Create supply chain efficiencies—Global integration delivers real advantages when it comes to supply chains. It expands opportunities for sourcing raw materials and lowers prices. Transnational strategy companies enjoy all these benefits with the added flexibility to choose region-specific localization when there’s a compelling business reason to do so.
Forge stronger customer relationships with local customization—Not surprisingly, customers prefer brands that understand their needs and deliver precisely the products or services they’re looking for. A transnational global strategy, with its focus on localizing offerings for each market, allows you to create a superior customer experience, increase engagement, boost satisfaction, and create lasting customer relationships.
Mitigate risk through diversified operations—If a company’s operations are centralized in a particular location, then it’s vulnerable to potential damage from political or economic upheavals that occur there. A transnational business, structured with a corporate headquarters that works collaboratively with foreign subsidiaries, mitigates against this risk by spreading its operations over different countries.
Transnational strategy examples: Three leading brands that found global success
Some of the world’s top brands have employed a transnational strategy to drive their international expansion. Here are three success stories that can help give you more insight into whether a transnational strategy may be the right approach for your company’s globalization efforts.
The healthcare experience varies widely from one country or region to the next. There are different laws, regulations, standards of care, and approaches to wellness. UnitedHealth Group has built a worldwide presence, providing medical and dental insurance benefits for over 7.7 million workers across 131 countries.
The company employs a transnational strategy to meet patient needs in every market, tailoring its offerings for the local language, culture, customers, and preferences. It does this by partnering with local insurance companies to create medical plans customized for the region’s healthcare system, as well as by building relationships with local healthcare providers and pharmacies.
The online homestay marketplace Airbnb is available in 220 countries and 62 languages. The company owes its global success to a transnational strategy that recognizes certain travel needs are universal—such as a clean, secure place to stay—while others are specific to each particular market.
To power its global expansion, Airbnb invests in understanding local cultures, customers, and communities. It uses those insights to create curated content, site features, and specialized services that meet customer needs in each market. The company’s approach provides the personalized experience customers are seeking, while also maintaining consistency across regions and around the world.
Perhaps the most well-known home furnishings brand in the world, IKEA has 460 stores in 62 markets. The company adopted a transnational strategy in the 1990s to address performance issues, and that move has helped to spur its global success.
Competitive pricing is a key part of IKEA’s appeal. To keep costs down, the company offers a standard set of products across markets, uses the same branding worldwide, and centralizes functions such as packaging and design.
At the same time, IKEA’s “matrix” structure allows for regional flexibility, including localized advertising and some tailoring of products. In each country, there is a service office that is connected to the organization’s global service office. This interconnection among headquarters and local operations facilitates knowledge sharing, which helps to improve performance globally.
Four key takeaways about transnational strategy
A transnational strategy employs a high degree of global integration to create efficiencies and lower costs
The benefits of global integration are augmented with a high degree of local customization to meet the needs of customers in each market
A transnational strategy is typically more cost-effective and resource-efficient than a multidomestic strategy, which heavily relies on tailoring products for each specific locale
Because transnational companies adapt their products and localize their marketing for each individual region, they are better able to deliver the experience customers are looking for
The right localization partner can help you build your transnational strategy
Successful international expansion starts with creating the right globalization strategy to help your company meet its goals. A transnational strategy offers a best-of-both-worlds approach—pairing the cost and efficiency benefits of global integration with the local customization required to truly meet customer needs.
When you’re ready to get started, take the next step with a translation and localization agency that helps the world’s leading companies succeed across cultures. Acclaro will partner with your organization every step of the wayto develop and implement your strategy. Contact us today to learn how we can help your business open up new opportunities around the world.