What Is a Multidomestic Corporation?
As global access expands, the ability and desire to communicate with other parts of the world increases. Corporations in the U.S. buy companies in Russia or Korea to expand their footprint. Corporations in Korea purchase companies in the U.S. or England for similar reasons. More corporations are becoming multinational corporations with a market presence in many different countries. When multinationals localize their presence, they are considered multidomestic corporations.
A multidomestic corporation is a multinational corporation that operates on a localized management structure. Instead of centralizing and making all decisions from one primary location, the multinational corporation decentralizes. It allows managers, presidents or their equivalents and others in the country of operation to make the decisions. Because of this focus on assigning significant management and operational powers to the countries in which they operate, this structure is termed "multidomestic."
Multinational corporations that operate as multidomestic corporations believe that the way to replicate their success in their home market is to leverage the market know-how and cultural intelligence of the various domestic markets in which they have sizable enterprises. Every country has cultural nuances that foreigners may not be able to fully understand and exploit. In addition, multidomestic corporations tend to encounter significantly less resistance when waves of nationalism sweep through a country. This is because many citizens identify these companies as one of their own.
Coca Cola is a large, U.S.-based multinational corporation based in Atlanta, Georgia. Coca Cola has a large market presence in scores of countries around the world. Their offerings range from Coke to Fanta to a host of other products. The products sold in different countries are tailored to meet the consumer demand in each specific country. Coca Cola has locally based operations in countries in which it has significant sales. In addition, before Coca Cola started buying its bottlers to cut costs, the majority of its bottlers were locally owned.
Not all multinational corporations are corporate behemoths such as Walmart, Honda or Nestle. With the advent and rapid spread of the Internet, deep-water telecommunication fiber optics and wireless phones, it is easier for small- to medium-size businesses to conduct business internationally with a multidomestic structure. A mid-size construction services firm may not send employees and subcontractors to foreign countries. Instead, it hires a country manager to source and oversee construction projects. That country manager hires local or regional project managers, superintendents and subcontractors.