MULTIDOMESTIC POLYCENTRIC STRATEGY

Multidomestic Polycentric Strategy

Table of Contents

Introduction3

Analysis5

Limitations7

Pros and cons8

Implications of Global Product Policy on Financial Performance10

Generic Strategies for Multinational Corporations12

Domestic Based Export Strategy15

Domestic Value-Added Strategy16

Worldwide Value-Added Strategy17

Polycentric Orientation18

Geocentric Orientation20

Four Performance Based Contingency Frameworks21

Domestic Based Export Contingency Framework22

Domestic Value-Added Contingency Framework23

Worldwide Volume Maximization Contingency Framework27

Conclusion28

References31

Introduction

Increasing pressure from global competition has prompted managers and academic researchers alike, to reconsider the issues surrounding formulation of global strategy and the globalization of markets. Recent years have seen the emergence of a heated controversy about the design and applicability of such strategies. At one end of the spectrum, advocates of standardization argue that although differences between countries and/or cultures may exist, basic human needs are the same throughout the world. Therefore, managers need not address these differences specifically in their international strategies. The same products sold domestically can be sold in international markets with only minor changes in product attributes. This practice has the obvious benefits of economies of scale (Levitt 1983; Yip, Loewe, & Yoshino 1988), preserving the home country image, minimizing costs of alteration (Buzzell 1986), handling, and stocking the product, speeding up delivery (Buatsi 1986), and saving managerial time and effort (Buzzell 1986; Levitt 1983).

At the other end of the spectrum, advocates of the concept of market orientation using adaptation or local adaptation argue that while basic human needs may be similar everywhere, differences in cultural and other environmental factors significantly influence the buying behaviour of people in different countries. These important differences suggest a global strategy of universal product standardization may not be appropriate in many circumstances (Boddewyn, Soehl, & Picard 1986; Douglas & Wind 1987; Kotler 1985; Sommers & Kernan 1967).

The objective of this paper is to argue that high firm performance (in terms of such things as sales, profits, market share, etc.) depends, in large part, on the firm choosing a global strategy that is appropriate for its unique set of circumstances. That is to say, adopting an international strategy, whether standardization or adaptation is contingent upon the ability of a firm to choose the strategy that matches other critical variables. Specifically, the firm's international generic strategy and management orientation must be consistent with its marketing strategy and its external environment. To accomplish this objective, a conceptual contingency framework is developed to specify the relationships between these variables so as to lead the firm to high levels of performance. It is important to note that the conceptual framework presented here has been drawn from the literature in organization theory, business strategy and international marketing.

This paper begins with a review of previous literature in four general areas. First, the ongoing debate between advocates of adaptation and standardization from the international marketing literature is summarized. Next is a discussion of the theoretical basis of the framework, contingency theory, from the organization theory literature. Then, the concept of generic strategies is used to form the basis for the identification of four new international generic strategies based on the work of Porter (1980, 1985, 1986), Kogut (1984, 1985) and others in the strategy ...