Transnational Strategy: How It Can Work For Your Business (2024) – Shopify

Ecommerce has leveled the playing field for businesses and made the world much smaller. A product manufactured in Taiwan can be delivered to a doorstep in suburban St. Louis, Missouri, in a matter of days. The international business world is no longer a pond dominated by a few global companies—it’s a thriving ecosystem where everyone can get a bite of the action.

In fact, the business environment has evolved to the point where even a small business with modestly ambitious growth plans can benefit from a global expansion strategy. This evolution can put a lot of niche business owners between a rock and a hard place: How can a small operation plot global expansion without forfeiting the quality of service that made it special to begin within?

Enter the transnational strategy.

What is a transnational strategy?

In a transnational strategy, companies find and connect efficient, cost-effective parts of the business globally, usually in operations and marketing. They also invest in local market research to tailor products or services to local cultural norms. It’s a best-of-both-worlds approach, where you standardize global business operations and branding while adapting products to local market differences. This approach helps your business achieve economies of global scale—cost savings gained from increased production.

Though a transnational strategy is multifaceted, it hinges on two key elements:

• High global integration. Global integration standardizes products, services, operations, and marketing efforts worldwide.
• High local responsiveness. Local responsiveness customizes products, services, operations, or marketing to appeal to demands and expectations in different markets.

For example, fast-food chains often use a transnational strategy to grow internationally. Logos, self-order kiosks, and food prep stations may follow standardized plans, but the product selection differs by local preferences. For example, an old-fashioned cheeseburger is on the menu in Kansas City, Missouri, while a crispy teriyaki sandwich is served up in Kyoto, Japan.

Transnational strategies vs. other global expansion strategies

A transnational strategy is one of four main global business expansion strategies, along with a multidomestic, international, and global strategy. These strategies overlap and differ in a few key ways:

Multidomestic strategy

A multidomestic strategy completely tailors products and services—and often operations and marketing—to local market needs. Where a transnational strategy finds the happy medium between both global integration and local responsiveness, a multidomestic strategy prioritizes high local responsiveness. Multidomestic strategies can make your company feel part of the local culture, but can often be costly and disjointed.

For example, a multidomestic strategy could work if your business sells low-cost, easy-to-make items for customers that value local pickup. You could provide specifications for product packaging and pricing while outsourcing manufacturing and distribution to experienced, in-country partners.

International strategy

In an international strategy, your business manages most of its operations from your home country but supplies foreign markets through exports.

In contrast to a multidomestic strategy, an international strategy puts more weight on global integration, particularly from a marketing and operations standpoint. It operates out of a single, centralized node, allowing for better cost controls and efficacy than a multidomestic strategy. However, an international strategy has low levels of local responsiveness, which can alienate local customers in more distinct international markets.

An international strategy works best if your business produces a distinct or premium product that’s deeply associated with your home market. Think geographic specialty goods like wines, gourmet foods, handmaid furniture and home décor, or luxury fashion and accessories. In these contexts, operating from a single base country or head office can even be part of your brand’s unique selling proposition.

Global strategy

A global strategy reproduces your home market’s operations in overseas markets around the world. As with an international strategy, products and services adhere to a universal guideline in all target markets. However, like a multidomestic strategy, manufacturing may take place overseas. A global strategy has low responsiveness to local demands—beyond minor tweaks in product features, like ensuring the correct power plugs for each target market.

A global strategy is well-suited to a globally recognized brand that produces universal products that require complex designing or manufacturing and relies on its global brand recognition. For example, mobile phones, athletic shoes, and standard household appliances all benefit from unified international exposure.

While these other global expansion models favor either high global integration or high local responsiveness, a transnational strategy aims to balance both.

Advantages of a transnational strategy

Adopting a transnational strategy includes several practical advantages:

Operational efficiency

A transnational strategy boosts operational efficiency by sharing knowledge and best practices across countries. Higher operational efficiency allows for flexible resource allocation, simplified communication between international teams, higher supply chain reliability, and lower risk.

Global scalability and deeper market penetration

A transnational strategy combines standardized global processes with customization to meet local demands, protecting your business from potential supply chain and labor issues at home.

You can make local offerings with local resources, which isolates a single market’s supply chain disruptions to the affected region—they won’t disrupt your entire operation. Under this style of supply chain management, your business remains more adaptable.

Similarly, a business can quickly and effectively gain local footing when entering new markets. It’s much easier to cultivate demand with localized goods than entirely unfamiliar products. And with efficient, uniform operations worldwide, you can ramp up local market penetration by delivering those customized goods even faster.

Challenges of a transnational strategy

A transnational strategy may be a well-suited global expansion strategy for many small businesses, but there are still some practical challenges to note:

Finding the happy medium

The more locally responsive your approach, the harder it is to maintain globally integrated systems. Your business must consistently find the middle ground: meet local needs without becoming excessively hyperlocal and standardize global operations without losing local flavor.

For example, many coffee shop chains source bakery products locally and roast coffee beans at a central location for uniformity of taste. Customers across regions know they can get a reliable cup of coffee, while neighborhood bakery options offer local flair, indicate company support for the community, and are fresher than imported baked goods.

Quality control

Maintaining quality becomes far more complex with different local branches or distributors spread out over different regions. Mitigate this by recognizing that some disconnect is inevitable, and let risk inform how you build your internal communications policies.

For example, if your business operates in multiple Southeast Asian countries, you can institute weekly virtual meetings for regional peers to discuss their operations. This promotes natural information-sharing networks that can address similar challenges early while respecting local autonomy.

When Indonesia’s team finds a successful solution to supply chain delays, the Malaysia and Philippines teams can quickly adapt it to their own markets.

Brand dilution

If your brand wholly adapts to every local taste and demand, it may lose cohesion internationally. In a successful transnational strategy, it’s important to maintain strong, coherent brand recognition globally. Very little, if anything, should be done to change the core branding components at the local level. Think about Starbucks, McDonald’s, and H&M. You can spot their locations from blocks away, whether their signs are in Spanish, Cyrillic, or Hindi.

However, working with local marketing and branding consultants might be beneficial when adjusting ancillary brand elements and ensuring successful local market integration. That might mean partnering with local companies to accurately translate brand content into the regional language. It could mean hiring on-the-ground agencies knowledgeable in regional sensitivities, design preferences, and local advertising trends.