Multidomestic and global companies are similar in that both involve operations in two or more countries. The central difference is strategic. Multidomestic companies change some aspect of what they do in each country, whereas global companies maintain the same basic business approach in each market.
Multidomestic Purpose and Strengths
A multidomestic company adapts to each market based on differences in resource availability, cultural values, product usage and marketing opportunities. Primary strengths of a multidomestic approach include:
- Customized offerings: A core strength is a company's ability to tailor its activities and products to the interests and needs of each market. A business may offer high-end goods in a more affluent market but scaled-down. lower-priced goods in a market with lower per-capita income.
- Concentrated efforts: Business activities are concentrated on success in a single market. This focus allows for optimized production, marketing and services.
- Quick response: A company's ability to react to the changing needs of the marketplace is greater with a multidomestic strategy. Each local headquarters or business unit is close to the action and can identify evolving trends sooner than a distant central headquarters.
Global Purpose and Strengths
A global company is more centralized. Its operations and primary decisions are made at a central headquarters in the home country. Its primary trait is that business-level strategies are constant across all markets. For instance, a luxury brand remains just that in all countries of operation. Relative strengths include:
- Cost advantages: It is much less expensive to operate as a global provider, according to the PlannedSkills website. When a business doesn't have to customize its products, business systems and marketing to each market, it saves a lot of money.
- Brand consistency: It is easier to build a global brand image when the message is consistent. Some companies desire the synergy that results when customers in different markets interact about the same products.
- Economies of scale: Closely tied to cost advantages, economies of scale is achieved when a company gets the best costs on supplies and business activities. With a global strategy, a business can leverage a vast supplier and distributor network to optimize efficiency and secure the best price.