Jan 30th, 2009 by Scott Hebert
It is no secret that organizational strategy is linked to market strategy. When a company first begins to move into the global marketplace, it must decide how it will interact with each market. The company could decide to utilize a multinational strategy. This strategy develops products and marketing specific to each national market. It benefits from the ability to quickly adapt to local trends, but it cannot take advantage of scale economies. Companies with a multinational strategy tend to develop a decentralized organizational structure. This structure pushes decision-making down to lower-level organizations. In this way, companies with multinational strategies allow their international subsidiaries to forge their own path in each market (Wild, Wild, & Han, 2008).
A company may decide to develop a global market strategy. These companies use the same products and marketing strategy in every country in which they operate. The cost-savings associated with employing scale economies allow these companies to offer their products at lower prices. Additionally, lessons learned in one market can be shared with globally. Unfortunately, this strategy prevents a company from realizing important differences in local preferences. These companies develop a centralized organizational structure. Business decisions are made at the highest level and pushed out to all markets (Wild, Wild, & Han, 2008).
McDonald’s Corporation is an excellent example of company with a global strategy and centralized organizational structure. McDonald’s has over 31,000 restaurants in 120 countries. Although these restaurants are typically franchises, they all receive food and packaging from the same approved vendors. This means that a McDonald’s in the U.S. is just like a McDonald’s in Russia. All decision-making regarding menus and marketing are made at the corporate level in the U.S (Hoover’s, 2009).
Honda Motor Co., on the other hand, is a company that has developed a multinational strategy and a decentralized organizational structure. Honda develops it’s products in the regional markets in which it operates. The company has over 500 subsidiaries and affiliates throughout the world. The company is headed by an executive council Japan, but operations are divided across six regions (Honda, 2009). This allows Honda to sell cars and motorcycles that are most suited to the preferences of each region. Additionally, the fact that Honda vehicles are manufactured in the region they are sold encourages the local population to view these vehicles more positively.
Cadbury Schweppes is another global company that operates with a multinational strategy. The confectionery industry is particularly well-suited to this kind of operation since tastes are so localized.Cadbury operates subsidiaries in almost every region of the world. Although day-to-day management is handled by the Chief Executive Committee, each region is represented on that committee (Cadbury, 2009). This decentralized organization allows Cadbury to react quickly trends.
Cadbury Scweppes. (2009). Cadbury global: Our company. Retrieved January 30, 2009.
Honda Motor Co., Ltd. (2009). Honda worldwide profile. Retrieved January 30, 2009.
Hoover’s. (2009). McDonald’s. Retrieved January 30, 2009.
Wild, J. J., Wild, K. L., & Han, J. C. (2008). International business: The challenges of globalization. (4th ed.). Upper Saddle River, NJ: Pearson.