Global expansion can propel your business to a whole new level of performance. It can lower costs, increase your customer base, and spur growth. Succeeding overseas hinges on choosing the right strategy for your business.
There are a number of different options your company can pursue. In this blog post, we take a closer look at international and transnational strategies to understand whether one of these approaches is the right choice to help you meet your globalization goals.
International vs transnational strategies: What sets them apart?
The key difference between these two strategies comes down to how organizations are structured—whether operations are centralized in the home country or are also located in overseas markets.
International companies—Headquarters and other key operations remain located in the home country
Transnational companies—While most operations are centralized, the organization also has overseas offices that carry out certain business functions, such as sales and marketing
A closer look at international strategies
An international strategy can be thought of as an extension of a company’s domestic strategy. Businesses with international strategies sell their products or services abroad, but their operations remain primarily centered in the home country.
With international strategies, there is typically:
A low degree of global integration—International companies are not focused on standardizing their offerings, processes, or operations across markets
A low degree of local responsiveness—These organizations don’t typically tailor their products or services to meet the needs of local customers, or structure their operations to better serve specific markets
Advantages and disadvantages of international strategies
When assessing whether an international strategy might be the right way to go for your business, consider the benefits, as well as the potential drawbacks.
Efficient processes and ease of management without the complexity of overseas offices
Lower costs thanks to streamlined operations centralized within the home country
Cons to consider:
Offering quality customer service to overseas buyers who reside in different time zones and speak different languages can be challenging
A closer look at transnational strategies
In contrast to international companies which tend to have centralized structures, transnational organizations expand their operations beyond the borders of their home country in order to meet their globalization goals.
Transnational strategies are characterized by:
A high degree of global integration—Transnational companies usually have a centralized corporate headquarters that oversees operations and works collaboratively with its overseas subsidiaries. Generally, key decisions are made centrally, but some transnational companies may allow their subsidiaries a greater level of autonomy
A high degree of local responsiveness—Local customization is used to address the unique needs and preferences of each market. This responsiveness helps transnational companies win over and retain customers
Transnational strategies: A best-of-both-worlds approach
Because this path to globalization combines a high degree of global integration and a high degree of local responsiveness, transnational strategies offer benefits for companies expanding internationally.
Advantages of a high degree of global integration
Increased brand recognition—Rather than investing in numerous brands across markets, transnational companies standardize their brand identity. They offer a recognizable, reliable brand experience that customers around the world depend on
Greater efficiencies—Global standardization creates significantly more efficient management and process. This can speed time to market, boost revenues, and foster innovation
Lower costs—Companies implementing a transnational strategy centralize resources as much as possible and maximize efficiencies in sourcing and production, which in turn helps to lower costs
Advantages of a high degree of local responsiveness
Easier entry into new markets—Customers prefer to buy from brands that truly understand them. Transnational companies, with subsidiaries in each market, have deep knowledge of the needs, preferences, and customs of local audiences. These businesses are able to connect with customers in a way that feels organic and authentic, which allows them to gain traction in new markets quickly
Increased competitiveness—Transnational companies deliver locally customized products or services backed by the confidence of a globally recognized and trusted brand. They offer competitive prices thanks to the efficiencies of global integration, and create a satisfying customer experience with sales, marketing, and service tailored for the audience’s language and culture. All of this can give transnational companies a significant advantage over local competitors
Local market benefits—With a transnational strategy, companies have the flexibility to choose region-specific localization of manufacturing and sourcing when there’s a compelling business reason to do so, such as lower labor costs or simplified supply chain logistics
4 key takeaways of transnational vs international strategies
There are upsides and downsides to both international and transnational strategies
The right strategy for your business depends on a variety of factors, including the type of product or service your company offers, the competitive landscape in the markets you’re targeting, and your goals for globalization
The degree to which your company benefits from local customization is another important variable to consider. For instance, if the appeal of your brand comes from your home country, then an international strategy with its low degree of local customization may be the better option for you
For companies pursuing a transnational strategy, localization is crucial for success overseas. Products or services—as well as marketing, advertising, and customer service—must be thoughtfully adapted to meet the needs of audiences in different locales
Build your strategy with an experienced translation and localization partner
Taking your company global has the power to transform your business. It can expand your customer base, create new growth opportunities, and drive revenue. But to capitalize on this potential, you need a strategy that will ensure your success.
The right partner can help you create a winning globalization blueprint. At Acclaro, we draw on our deep expertise in localization and our decades of experience helping to guide the world’s top brands through successful global expansion. Take the next step with us. Reach out today to learn more about growing your business internationally.