When competing internationally, strategy making is more complex for five reasons: (1) different countries have home-country advantages in different industries; (2) there exists location-based advantages to performing different value chain activities in different parts of the world; (3) varying political and economic risks make the business climate of some countries more favorable than others; (4) companies face the risk of adverse shifts in exchange rates when operating in foreign countries; and (5) differences in buyer tastes and preferences present a conundrum concerning the trade-off between customizing and standardizing products and services. A company must choose among three alternative approaches for competing internationally: (1) a multidomestic strategy or "think-local, act-local" approach to crafting international strategy; (2) a global strategya "think-global, act-global" approach; and (3) a combination of "think-global, act-local" approach, known as a transnational strategy. A think-local, act-local or multidomestic strategy is appropriate for industries or companies that must vary their product offerings and competitive approaches from country to country to accommodate different buyer preferences and market conditions. The think-global, act-global approach (or global strategy) works best when there are substantial cost benefits to be gained from taking a standardized and globally integrated approach and little need for local responsiveness. A transnational approach ("think global, act local") is called for when there is a high need for local responsiveness as well as substantial benefits from taking a globally integrated approach. In this approach, a company strives to employ the same basic competitive strategy in all markets but still customize its product offering and some aspect of its operations to fit local market circumstances.

The goal of this exercise is for you to understand how and why differing market conditions across countries influence a companys strategy choices in international markets and the three main strategic approaches for competing internationally.

Before completing this exercise, review Chapter 7, Strategies for Competing in International Markets; specifically, the section entitled International Strategy: The Three Main Approaches, as well as Figure 7.2 and Table 7.1.

If your companys product is mobile phones, which of these strategies do you think it would make better strategic sense to employ?

Multiple Choice

• A transnational strategy would be appropriate since the same strategic theme could be employed, but country-to-country customization is necessary to accommodate consumer preferences in mobile phone features.

• A multidomestic strategy is called for since mobile phone features must be tailored to the specific market conditions and buyer preferences in each country market.

• A global strategy would be appropriate since most mobile phones are constructed to work globally and buyer needs across the world are relatively universal.

• A transnational strategy would make better strategic sense since it would be difficult to employ essentially the same strategic theme in all country markets.

• A global strategy makes best strategic sense since country-to-country customization to fit local market conditions is necessary.

If your companys product is dry soup mixes and canned soups, would a multidomestic strategy, a transnational strategy, or a global strategy seem to be more advisable?

Multiple Choice

• A multidomestic as local market conditions preclude a uniform, coordinated worldwide strategic approach.

• A transnational strategy since processed food companies compete in two or more countries simultaneously.

• A global strategy since local managers need little latitude in decision-making.

• A transnational approach is appropriate. Country-to-country customization to accommodate differences in taste preferences is necessary.

• A multidomestic strategy since customer needs and preferences vary greatly in the soup industry.

If your companys product is large home appliances, such as washing machines, ranges, ovens, and refrigerators, would it seem to make more sense to pursue a multidomestic strategy, a transnational strategy, or a global strategy?

Multiple Choice

• A multidomestic strategy is recommended because of significant country-to-country differences in customer preferences, buying habits, and government regulations in the large appliance industry.

• A global strategy would make more strategic sense because of the opportunities for economies of scale in appliance manufacturing and the operation of centralized distribution centers.

• A multidomestic strategy is advised because of the need for manufacturers to utilize the same marketing approaches worldwide.

• A global strategy would be advised since buyer needs are universal across the world.

• A multidomestic strategy would fit the industry environment best since customer preferences and electrical standards vary from country to country.

If your companys product is apparel and footwear, would a multidomestic strategy, a transnational strategy, or a global strategy seem to have more appeal?

Multiple Choice

• A multidomestic strategy is advised because of the need for manufacturers to utilize the same marketing approaches worldwide.

• A multidomestic strategy would fit the industry environment best since customer preferences and style preferences vary from country to country.

• A global strategy would make more strategic sense because of the opportunities for economies of scale in apparel and footwear manufacturing and the operation of centralized distribution centers.

• A global strategy would be advised since buyer needs are universal across the world.

• A transnational strategy is preferred since apparel and footwear items can reflect global fashion trends while being customized as needed because of country-to-country differences in customer preferences and tastes.