As you research methods of operating on a global scale, you may have come across 4 potential international expansion strategies: transnational, global, international, and multi-domestic.
Each strategy has its pros and cons, but we’re big fans of the transnational approach. We think it best paves the way for worldwide brand recognition while building customer goodwill in each local market.
So if you’re unsure what a transnational strategy entails, let’s explore how it works and how it compares to other business expansion strategies (real-life case studies of each strategy in action included!)
We’ll also share exactly how your business can benefit from a transnational strategy, some pitfalls to avoid along the way, and tips for pulling off a transnational strategy without a hitch.
What is a Transnational Strategy?
A transnational strategy is a strategy where a business retains centralized operations in 1 country while expanding internationally by acquiring new operations and assets abroad. This strategy attempts to balance high levels of global integration, brand recognition, and scalability with high local responsiveness.
That’s because, for a start, the business still has its parent company’s central office in 1 country (typically the one in which the business was first founded), while opening local subsidiaries in other countries to serve as its local branches. These local branches will also often adopt a localized approach to sales and marketing, tapping into their market’s unique culture to appeal to customers there.
With such an organizational structure, a multinational corporation stands to benefit from streamlined operations and management. It can also win the favor of the local audience if it effectively adapts its products and messaging to suit their tastes. Repeat this formula across multiple countries, and the business is on its way to building a globally recognizable brand.
McDonald’s is an excellent example of a business that has executed a transnational strategy. The fast food chain uses a franchise model to enter overseas markets while overseeing all operations from its Chicago headquarters. And whichever market the business ventures into, it takes care to localize its offerings.
If you’re in Japan this spring, for example, you can look forward to tucking into a limited-edition Setouchi-Lemon Tartar Bacon Teritama burger, which includes tartar sauce made from lemons in the country’s Setouchi region.
Meanwhile, if you’re in Korea, you could grab a Bulgogi Burger – which is marinated in Korea’s “favorite Bulgogi sauce” – from your local McDonald’s outlet there!
How Does a Transnational Strategy Differ From Other Types of International Business Strategies?
As mentioned earlier, a transnational business strategy is 1 of the 4 main strategies for operating across international borders. The other 3 are:
Let’s dive into these international business strategies and check out how they differ in terms of global integration and local responsiveness.
Businesses undertaking a global strategy will define 1 universal brand that applies to all their target markets. While they may tweak their products and positioning to fit a market’s local needs and preferences, such changes are usually minimal.
Consider multinational company Apple, for instance. Its computer, tablet, smartphone, and smartwatch products are largely uniform throughout the world, no matter which country you’re in. Perhaps the most notable difference would be the power plug bundled with Apple products, since different countries have different power plug and voltage requirements!
Given how a global strategy involves limited market differentiation, it ranks high for global integration: businesses that adopt this strategy will put out a largely homogeneous brand experience regardless of where in the world you’re interacting with it.
In return, however, there may be a trade-off in local responsiveness where the business is slower to adapt its offerings to local cultural norms and preferences. Pursuing a global strategy may thus result in the business experiencing lukewarm reception from its target audience if customers find its products unappealing or unhelpful to their needs.
A business applying an international strategy will manage most of its operations from a base in its home country, but serve markets in different countries by importing or exporting its products there. In other words, the business uses its country of origin as a selling point for its products and services.
For example, watch manufacturer Rolex has its head office in Geneva, Switzerland, where all operations – such as product research, development, and assembly – take place. Finished watches are exported from Switzerland to the business’s respective target markets. The business also provides after-sales service to customers all over the world from its global headquarters.
An international strategy may be a straightforward method of expanding abroad as you manage your global operations from a home base. It also facilitates a globally integrated front for your business as you present the same branding to customers regardless of their country. (Just like how Rolex strongly emphasizes its watches’ Swiss origins!)
But at the same time, using an international strategy may result in poorer local responsiveness as you take limited steps to tailor your products for local markets.
Last but not least, a multi-domestic strategy entails operating entirely separate strategies for product creation, sales, and marketing depending on the local markets the global business is selling to.
If you’re in the United States (U.S.), for example, you may be used to seeing the Always line of sanitary pads on grocery store shelves. They’re also sold online on the Always.com website, which refers to U.S. schemes like flexible spending accounts (FSAs) and health savings accounts (HSAs).
Always-branded pads are produced by multinational consumer goods retailer Procter & Gamble, which sells them under different names in various parts of the world.
(Also, notice how the Whisper India website is green, unlike the Always website’s blue color scheme.)
Procter & Gamble’s pads are also known by yet another name in Portugal! There, they’re sold under the “Ausonia” name. And not only is the Ausonia website awash with pink hues, but its content is also in Portuguese (the official language of Portugal).
The result of all this is that Procter & Gamble has at least 3 websites selling the same product under 3 different names in 3 different countries, where the business has gone with significantly different branding approaches and color schemes for each one.
A multi-domestic strategy scores high for local responsiveness due to its highly customized approach to marketing and sales for each target market. But it fares less well with respect to global integration, as businesses employing this strategy effectively have to maintain different brands for each market they operate in.
A transnational strategy is one of the most favorable approaches for international expansion as it ranks well for both global integration and local responsiveness. A business that pursues such a strategy has a strong chance of building a globally recognizable brand, while taking care that its products and services meet the needs and preferences of its target markets across the world.
What are the Benefits of a Transnational Strategy?
Apart from the advantages discussed so far, global companies that embrace a transnational strategy can also:
Increase operational efficiency: A transnational business balances centralized management in 1 country with a local presence in each target market. By consolidating management in this manner, you can streamline your operating procedures as each local office will adopt the same general method of doing business. At the same time, you can establish local supply chains and hire residents to staff your local branches – and reduce your manufacturing, import, and employment costs.
Improve global scalability: When you successfully create a globally recognized brand, your potential for expansion is almost unlimited as your business is already a familiar name in your target markets. You won’t have to build your reputation from the ground up with each new local branch.
Enjoy ease of market penetration: By prioritizing their local customers’ wants and needs, transnational businesses can ensure their offerings resonate with them. This results in a competitive advantage over rivals that choose a one-size-fits-all approach to business, and allows the transnational business to gain a foothold in new markets quicker.
What Are the Challenges Associated With Adopting a Transnational Strategy?
Despite the gains to be had from adopting a transnational strategy, be aware of the potential challenges that may arise as you do so. These include difficulties in:
Finding a good balance between global standards and local circumstances: The more you localize your approach to doing business for each market, the more it will differ from your universal standard of reference. For example, using region-specific slang in your copy will necessarily result in your text evoking a more local flavor than copy that you’ve written in neutral terms for an international audience. You’ll need to decide on the extent of localization you’re comfortable with, without deviating too much from the global positioning and voice you’ve established.
Maintaining centralized control: If you have a large number of local branches spread over multiple regions, maintaining control over all of them – and coordinating their operations – can pose a major obstacle. The instructions issued from your global headquarters may take time to filter down locally, hindering the speed at which you can roll out new products or marketing initiatives. Language and time zone differences may only hamper the task even further.
Achieving high levels of local responsiveness: One of the draws of a transnational strategy is how it can help you adapt your offerings for improved appeal in local markets. But the associated localization work can be a challenge in itself – for one, you’d need a strong understanding of your target markets, including language and cultural differences and knowledge of local customs. You’d also need a solid action plan for tailoring your products to suit such local context accordingly.
Tips for Developing a Transnational Strategy
If you’ve decided that a transnational strategy is for your business notwithstanding its potential challenges, then use these tips to prime your transnational strategy for success!
Determine how you will balance global integration and local responsiveness: While both are key components of an effective transnational strategy, decide how much of your branding and products you will localize to meet local preferences and needs, while standardizing your processes to achieve global economies of scale and competitiveness.
Develop a robust translation and localization strategy: If you’re targeting international markets, translate and localize your branding, marketing materials, and web content for your target audiences. Here, it helps to invest in expertise and tools that produce quality, cost-efficient, and scalable translations as your business expands overseas. For instance, our Weglot website translation solution supports rapid content translation and effective content localization, without duplicating your website for multiple markets, to facilitate high local responsiveness for any global marketing strategy.
Here's a quick video that explores more about building a content localization strategy:
The Transnational Strategy: Providing the Best of Both Worlds as You Venture Abroad
As we’ve seen, there are various strategies for entering the global markets – from a transnational strategy to a global strategy, international strategy, and even a multi-domestic one. Of all these, however, a transnational strategy provides the best of both worlds in terms of global integration and local responsiveness.
A transnational strategy sets international companies up for presenting a globally uniform image, while tailoring their offerings to the local audience’s wants, pain points, and culture. This balance may be just what your business needs as you grow your international customer base – and worldwide sales revenue – for the long term.
While translating and localizing your website as part of your transnational strategy, try our Weglot website translation solution. It uses a combination of machine learning translations sourced from leading providers to instantly and accurately translate website content. All translations are stored in a central Weglot Dashboard for further refinement and localization, and Weglot will automatically display your translations under language subdomains or subdirectories.
Weglot integrates with all major website and ecommerce platforms, including WordPress, Webflow, and Shopify (and custom-built sites), and you can test its translation capabilities on your website by signing up for a free 10-day trial.
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