How to Build a Successful International Business Strategy
Today, businesses are looking for ways to grow in a competitive economy. Creating an international business strategy allows organisations to reach new customers, enter new markets, and increase revenue potential. So, how do successful companies enter new markets and build an effective international strategy without compromising efficiency and relevance? Let’s break it down with insights and practical examples.
What Is an International Business Strategy?
An international business strategy is a plan that outlines how a company will enter and grow its business in global markets. The framework should include a market analysis, resource allocation, competitiveness, and operational decisions that enable businesses to go beyond domestic production.
Their strategy may include components like:
- Identifying key global markets
- Creating or changing their product or service to sell in those markets
- Production and export methods
- International staff or partners who can help
A study published in the Global Strategy Journal highlights the advantages of global expansion: “One of the advantages of global strategy as a field is that it is subject to continuous changes in the international context that bring forth new opportunities for understanding how to manage under novel conditions, opening opportunities for generating insights on topics and developing sophisticated theoretical advances.”
Choosing the right strategy lies in understanding the cultural differences, business goals, economic conditions, consumer preferences, and regulatory rules.
Types of International Business Strategies
There are four main types of international business strategies to guide the approach:
Global Standardised Strategy
This focuses on tailoring products or services across all markets to prioritise efficiency and cost reductions over local adaptation. For example, Apple largely standardises their products for brand consistency. Whether you’re in America or in Asia, the iPhone will look, feel, and function the same with minor local adjustments like date/time settings or power adapters. In contrast, Cadbury’s Dairy Milk adapts its products and marketing to suit regional tastes while staying true to its identity. In Australia, they use locally sourced milk, giving a creamier and milder taste than in the UK version, which uses a different milk-to-cocoa ratio.
Multi-Domestic Strategy
This approach means a business does not focus on cost or efficiency but rather on the response to local requirements within each target market. Each market is treated uniquely and requires customisation to suit its needs. For example, Unilever’s products in food, beauty, and personal care are adapted with campaigns aimed to suit local cultures and tastes.
Transnational Strategy
By using a transnational strategy, this combines a multi-domestic and global strategy, balancing efficiency with response to local market needs. For example, in Japan, McDonald’s sells matcha ice cream or drinks because matcha is a cultural element rooted in the traditional tea ceremony and an integral part of the country’s spiritual culture. By offering matcha flavoured items, McDonald’s connects with local tastes and cultural preferences, making it more appealing to local customers.
International Strategy
If businesses are using the international strategy, then this favours domestic capabilities and knowledge to enter the international markets with minor adaptation. This is typically through exports or licensing agreements. For example, Microsoft offers the same software worldwide and changes only the language and regulatory compliance.
Benefits of an International Business Strategy
Adopting a well-planned business strategy is bound to be beneficial for businesses in the long term. The World Bank highlights that “firms with international exposure — measured through exports or foreign ownership — tend to be larger, more productive, and better managed.”
New Market
Entering foreign markets has become a common way for companies to stay on track with the competition. McKinsey & Company research shows that companies that expanded internationally generated 1.9 percentage points more annual total shareholder return (TSR) than those locally.
Global Brand Recognition
Selling products or a service under a single global brand across different countries is a way to be easily recognised on the global market. Your logo or brand name will be internationally recognised.
Revenue Growth
The more international exposure, the greater the increase in revenue potential. Companies can tap into the largest customer bases and growth opportunities in emerging markets against domestic economic conditions.
Economic Scale
Leverage the sourcing and production with cost-saving facilities and optimise supply chains. According to a BCG survey, 33% of corporate leaders are prioritising cost reductions as their most critical priority, with growth being the main focus.
Competitive Advantage
International business operations provide access to new technologies, skilled talents, and innovative practices. As mentioned by Michael E. Porter, professor at Harvard Business School, “Firms can be more productive in any industry, shoes, agriculture, or semiconductors, if they employ sophisticated methods, use advanced technology, and offer unique products and services.”
How to Create a Successful International Business Strategy
Every international strategy will be different based on the company’s needs and preferences. Here is a general guideline for businesses looking to grow internationally
1. Market Research
Take time to understand the market and goals of your international strategy. Assess the demands, competitive landscape, and regulatory environment in the target market. Every business wants to increase its customer base, but your goals should be tailored to this.
Consider frameworks like:
Porter’s Five Forces: Aframework that identifies and analyses industry competition.
- Threat of new entrants
- Bargaining power of suppliers
- Bargaining power of buyers (customers)
- Threat of substitutes
- Competitive rivalry
PESTLE Analysis: This stands for Political, Economic, Social, Technological, Environmental, and Legal factors. This framework, introduced by Harvard Professor Francis J. Aguilar in the Scanning the Business Environment book, is useful during strategic planning, entering a new market, or launching a product/service.
McKinsey’s Strategic Horizons: Best for growth and innovation.
- Horizon 1: Maintain and defend the core business
- Horizon 2: Nurture emerging business
- Horizon 3: Create genuinely new business
Hofstede’s Cultural Dimensions: Great for understanding cultural differences.
- Power Distance
- Individualism-Collectivism
- Masculinity vs Femininity
- Uncertainty Avoidance
- Short vs. Long-Term Orientation
- Indulgence vs Restraint
2. Know Your Product or Service
Know exactly what you plan to sell and promote in the market. If you have one main product or service, then this should be straightforward. However, if you are selling numerous offerings, then decide which should be the main priority.
3. Plan Marketing Strategy
Think and develop an overall marketing approach by deciding on things like messaging. Do you want a unified message across all markets or different messages for each target market? Determine if you’re pursuing a global brand reach or maintaining consistency within each region.
4. Distribution Strategy
Decide on the entry mode in the market. According to Washington State University’s International Entry Modes, the five most common international expansion entry modes are:
- Exporting
Exporting is the marketing and direct sales of domestically produced goods to another country. Exporting is a traditional and established method of reaching international markets. This is low risk, low control, and the easiest way to enter an international market.
- Licensing and Franchising
A company looking to enter a global market quickly with low financial and legal risk might use a licensing agreement with a local partner. Another way is to sell franchises, where a company lets a foreign partner use its brand and sell its products or services. Licensing offers less control; it risks creating competitors and depends on strong intellectual property (IP) and contract laws.
- Joint Ventures and Strategic Alliances
Strategic alliances and joint ventures are now widely used, helping companies share both the risks and resources of entering international markets. Alliances involve collaboration without forming a new company, while joint ventures create a jointly owned business. This is a higher cost than exporting or licensing, with potential integration issues between corporate cultures.
- Acquisition
An acquisition is when a company gains control of another by buying its stock, exchanging shares, or paying its owners directly. Acquisitions offer fast, established access to new markets but are costly, often making them impractical for companies in developing countries. This can be costly with integration issues with the home office.
- Foreign Investment and Subsidiaries
Foreign direct investment (FDI), acquisitions, and greenfield start-ups involve owning facilities in the target country, requiring the transfer of capital, technology, and personnel. This can be high cost, high risk due to unknowns, and slow entry due to setup time.
4. Build Strategic Partnerships
Establish partnerships with local partners who understand market dynamics. According to Joshua Conrad Jackson, Assistant Professor at the University of Chicago Booth School of Business, in his Harvard Business Review article, he says, “These relationships create a line of communication between an organisation’s global leaders and the stakeholders who understand the preferences and habits of local consumers.”
4. Monitoring
Track performance KPIs across your target regions and adapt based on customer feedback, regulatory changes, or market shifts (e.g., post-pandemic digitisation or UK Brexit-related trade changes).
International Business Strategy Examples from Top Companies
Starbucks
Starbucks is one of the most popular coffee chains in the world, known for its international strategy, with 32,000 stores in 80 countries. The success lies in a unified product offering, a standardised shop look, and branding. Later, a shift in local adaptation occurred from special menu drinks and food tailored to local cultures and preferences. For example, in China, during the New Year, Starbucks will introduce special beverages and mooncakes, attracting locals.
Netflix
Netflix’s international strategy has changed the entertainment industry through its globalisation strategy. As one of its main strategies, the company has partnered with key local businesses like telecommunication providers to make content available as part of their video-on-demand offering.
Netflix operates in over 190 countries and includes a localised interface, contributing to a 50% growth in international subscribers. The most recent success of the Korean series Squid Game has become Netflix’s most-watched series globally, viewed over 142M times in the first month. The example shows how locally produced content can achieve global reach through Netflix’s international strategy.
Spotify
Spotify is one of the biggest audio streaming platforms in this generation. Its international business strategy showcases how to adapt technology and music on a global scale. Some of its core strategies include forming partnerships with regional record labels and artists, alongside developing culturally adapted user interfaces and marketing campaigns. For example, Spotify introduced podcast content in Spanish and Portuguese, featuring creators like La Cotorrisa from Mexico, which is the largest Spanish-language podcast on Spotify with 2.8 million followers.
Rolex
Rolex’s international business strategy is built on its exclusivity and luxury distribution, strategic marketing, celebrity endorsements, and an emphasis on the heritage and craftsmanship of its watches. It focuses on quality, durability, and adaptability to the changing market and trends. For example, in the Middle East, Rolex created limited-edition watches with Arabic dials tailored to regional markets while maintaining global design standards.
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Conclusion
In a globalised society, many businesses often use an international strategy if their products or services succeed abroad without local adaptation. It’s a great approach to the market in global recognition but requires careful planning, research, and strategic execution in both theory and practical experience.
By following evidence-based strategies, through trial and error and learning along the way, businesses can navigate through the complexities of the global markets to achieve international growth in the future.
FAQs
Why is international business strategy important?
An international business strategy is crucial as it allows companies to access new markets, diversify market streams, mitigate risks, and reduce dependence on domestic markets. In this era, international business provides access to new technologies, talent pools, and innovative practices that enhance competitiveness.
What challenges do businesses face when going international?
There are numerous challenges that companies face, which require strategic planning and expert guidance. Common challenges include:
- Cultural differences
- Regulatory and legal barriers
- Economic and political risks
- Supply chain complexities
- Management of international teams
All would require a tailored international strategy to achieve a higher success rate.
Can studying a programme help me build a career in international business strategy?
Yes, absolutely! A programme like the MSc International Business Management (Double Degree) at Gisma will equip you with the essential knowledge and skills for understanding and developing effective international strategies. These will lead you to roles in international business like sales manager, brand marketing manager, human resource manager, international trade specialist, and more.
What industries benefit most from international strategies?
Practically all industries will benefit from international business expansion. Industries like technology, manufacturing, finance, retail, education, healthcare, and automotive can excel globally. This is especially relevant given that emerging markets now account for around 34% of total global GDP (gross domestic product), highlighting growth opportunities beyond domestic borders.
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