In response to the increasing competition in many industries, corporations are restructuring themselves to operate globally. The international configuration of businesses gives access to cheaper resources and costs, large produce markets, and subsidized financing opportunities (Deng et al., 2020). For instance, an organization may adopt a multi-domestic system where all market activities are serviced separately. A multi-domestic system can be associated with goods and services that are easy to replicate but costly to transport over long distances. In this case, the marketing may be multi-domestic while production is integrated internationally. The main objective of performing international integration is to answer each market’s requirements. As a result, there will be increased independence in productivity, where the performance and efficiency attained by each market are unrelated to those taking place in others.
On the other hand, other businesses may be globally integrated, which involves a system of production situated in numerous nations and typically comprising complex commodities. In such a case, logistics operations are significant as manufacturing and shipping capabilities should be effectively reconciled (“Global production strategies,” n.d.). In this scenario, there will be an interdependence in productiveness as every constituent of the supply network directly affects the final product’s quality and cost.
One of the features of global production networks is a regional specialization that involves spatial separation of the production-based upon competitive advantages. Each location focuses on manufacturing a particular product, but it is free to import what it requires from other regions (“Global production strategies,” n.d., para. 5) Another attribute is vertical transnational integration characterized by different production stages at regions offering the best competitive edges. The raw materials are obtained from regions where they are most available, and the assembling occurs at regions with high skills levels and cheap labor costs depending on the type of product. An excellent example of vertical integration is the manufacturing of television, where research may be conducted in an essential market like Japan. Countries like Germany and South Korea provide components while assembling occurs in low-wage states such as Thailand.
In a centralized global production, the entire manufacturing process takes place within only one nation and is exported to the international market. The strategy is commonly challenging to relocate activities, such as goods that are difficult to reproduce like crafts and attract vast economies of scale (“Global production strategies,” n.d., para. 2). Furthermore, in regional production, manufacturing occurs within every region that produces a commodity with the size of the manufacturing system linked to the size of the regional market. This system particularly applies to soft drinks with high distribution costs and well-known manufacturing technologies. In addition, the approach relies more on regional accessibility rather than economies of scale.
Some of the potential problems for a company that uses a global production strategy are choosing between the potential trade-offs, responsiveness to market preferences, and effectiveness in delivery and production. Organizations that apply a global strategy will sacrifice sensitivity to local needs within each segment to focus on efficiency. In addition, the organization is forced to offer essentially the same types of products in each market to gain economies of scale. Similarly, a transnational business attempts to balance the desire for efficiency with the need to adjust to local tastes within different nations. For example, KFC and McDonald’s use the same brand name and core menu items worldwide while making concessions to local preferences. The main concern for organizations using a multi-domestic strategy is that they abandon cost-effectiveness to fulfill the requirements of their consumers (Walters, 2019). An excellent example is Heinz, where foods are customized to respond to local tastes.
References
Global production strategies. (n.d.). Web.
Deng, P., Liu, Y., Gallagher, V. C., & Wu, X. (2020). International strategies of emerging market multinationals: A dynamic capabilities perspective. Journal of Management & Organization, 26(4), 408-425. Web.
Walters, S. (2019). “What are the benefits of multi-domestic marketing strategies?” Azcentral-part of the USA today network. Web.