1. Home replication strategy 1.1.

Definition Home replication strategy is the international replication of home based competencies such as production scales, distribution and brand power. The company centralizes product development functions in its home country. After product differentiations are finished in home country, innovations will be transferred to apply in local market in order to capture and extend additional value. Customization or modification to products are often neglected and distracted due to the distinctiveness of the products. When a firm pursues a home replication strategy, it simply duplicates competencies that it enjoys in the home-country in its expansion into foreign markets. This lends itself to strengths in the area of cost reduction because R&D costs would be low as the firm makes little attempt to localize the product. It is also easy to implement as it usually takes the form of exporting, franchising, or licensing. 1.2. Characteristics The firm views international business as separate from, and secondary to, its domestic business. Such a firm may view international business as an opportunity to generate incremental sales for domestic product lines. Products are designed with domestic customers in mind, and international business is sought as a way of extending the product lifecycle and replicating its home market success. The firm expects little knowledge flows from foreign operations. 1.3. Advantages and disadvantages of strategy a. Advantages Company could cut the production cost down in the first stage of investment due to the centralization of production and R&D. Due to its low cost and easy implementation, firms often engage in the home replication strategy as it initially expands into foreign markets In local market, the company does not need to implement manufacturing but importing finished goods and apply marketing model similar to that in home market. For business, this can be a competitive strength for new comers whose own product distinctiveness over other competitors in local market. This strategy can leverage home country-based advantages. b. Disadvantages Within the home replication strategy, a firm most often adjusts its structure to include an international division. This international division is separate from all other divisions and oversees activities such as

exporting, franchising, and licensing. This structure often leads to critical problems The primary drawback of this strategy is its low dedication to local responsiveness, which often results in alienation of foreign customers who may not have the same values or needs as customers in the homecountry Foreign subsidiary managers do not have sufficient voice with managers of domestic divisions. This is partly due to the fact that an immediate response to an issue raised by a subsidiary manager is not possible because the responsibilities of decisive powers are always at the national headquartering level, causing delayed and disconnected communication. Thus, the actions of the international division are often disjointed from the rest of the firm. Sometimes it may result foreign customer alienation. 1.4. Example of home replication strategy a. Overview of Mercedes-Benz Mercedes-Benz is a multinational division of the German manufacturer Daimler AG, and the brand is used for automobiles, buses, coaches, and trucks. Mercedes-Benz is a German company that is renowned for creating innovative and stunningly designed vehicles. From their inception in 1886 they have created ground-breaking vehicles that have utilised expertly designed engines and technology. Although the company had the first patent on a petrol engine, which was used in stage coaches, it was not until 1901 that their first production automobile was released and it was not until 1928 that the company became known as Mercedes-Benz. Since that time Mercedes have become synonymous with advanced design, technology and safety features which have made their vehicles some of the most renowned vehicles in the world. Mercedes-Benz products appear all over the world. b. The home replication strategy of Mercedes-Benz Some companies directly transfer their main competitive advantages from their home market to a foreign market. This strategy is called home replication strategy. Mercedes-Benz is a perfect example of taking an entirely different approach to how the brand is promoted. Where, with its previous supplier, it was faced with a selection of catalog promotional items also offered to other companies. Nobody buys a Mercedes-Benz because they need a car, they buy one because they want one and pay premium for it. By creating a range of products that people actually wanted. Mercedes-Benz relies on its well-known brand name and its reputation for building for well-engineered, luxurious cars capable of traveling safely at very high speeds. It is this market segment that Mercedes-Benz has chosen to exploit internationally, despite the fact that only very few countries have both the high income level and the high speed limit appropriate for its products. But consumers in Asia, the rest of Europe and the Americas are nevertheless attracted by the cars mystique. By the identical

technology applied for all of the manufacturer and assembly in the world, MercedesBenz create very famous brand. 2. Multi-domestic strategy

2.1. Definition The multi-domestic strategy is an action plan that the firm develops to produce and sell unique products in different markets. Multi-domestic strategy is an extension of the home replication strategy. This strategy focuses on a number of foreign countries/ regions, each of which is regarded as a standalone domestic market worthy of significant attention and adaptation. 2.2. Characteristics - Headquarters delegate considerable autonomy to each country manager allows him/her to operate independently and pursue local responsiveness. - Managers recognize and emphasize differences among national markets. As a result, the internationalizing company allows subsidiaries to vary product and management practices by country. - Country managers tend to be highly independent entrepreneurs, often nationals of the host country. They function independently and have little incentive to share knowledge and experiences with managers elsewhere. - Products and services are carefully adapted to suit the unique needs of each country. 2.3. Advantages and disadvantages a. Advantages While sacrificing global efficiencies, this strategy is effective when there are clear differences among national and regional markets and low pressures for cost reductions. For example, MTV started with a home replication strategy (literally broadcasting American programming) when first venturing overseas. It has now switched to localization (multi-domestic strategy). For Western Europe alone, MTV now has 8 channels, each in a different language. If the foreign subsidiary includes a factory, locally produced goods and products can be better adapted to local markets. The approach places minimal pressure on headquarters staff because management of country operations is delegated to individual managers in each country. Firms with limited international experience often find multi-domestic strategy an easy option as they can delegate many tasks to their country managers (or foreign distributors, franchisees, or licensees, where they are used). b. Disadvantages

 The economies of scale are very low due to the customization of distribution, production and marketing. The firms foreign managers tend to develop strategic vision, culture, and processes that differ substantially from those of headquarters. Managers have little incentive to share knowledge and experience with those in other countries, leading to duplication of activities and reduced economies of scale. Limited information sharing also reduces the possibility of developing knowledge-based competitive advantage. Competition may escalate among the subsidiaries for the firms resources because subsidiary managers do not share a common corporate vision. It leads to inefficient manufacturing, redundant operations, a proliferation of products designed to meet local needs, and generally higher costs of international operations than other strategies. It is also more expensive to coordinate the different subsidiaries than when using a home replication strategy or global strategy. It is potentially too much local autonomy. Each subsidiary regards its country to be so unique it is difficult to introduce corporate-wide changes. 2.4. Example of multi-domestic strategy a. Overview of Starbucks Starbucks Corporation is an international coffee company and coffeehouse chain based in Seattle, Washington. As opening the first location in 1971 in Seattles Pike Place, nowadays, Starbucks has become the largest specialty coffee store, with nearly 16,000 stores and more than 170,000 partners (employees) in 44 countries (Starbucks, 2007), and has already gone public in American and Japan market. Since 1992, its stock has risen a staggering 5,000 percent. The success of Starbucks lies in its ability to create personalized customer experiences, stimulate business growth, generate profits, energize employees, and secure customer loyalty-all at the same time. Starbucks is a brand that has managed to achieve global recognition and fame. The brand's prosperity and success has brought them into popular culture. Starbucks has become a household name and an icon for the generation. b. Multi-domestic strategy of Starbuck To expand market, the company has adopted a multi-domestic strategy as its global strategy. It is multi-domestic because the company tailors its products and services to the needs of the market. Culture is a significant factor in their marketing strategy as well. The company's decision to open branches in foreign markets is based on research information on customer traffic and local real estate. Starbucks is constantly involved in innovation and experimentation so that their products will always remain

appealing to consumers. Starbucks also did not rely on traditional marketing strategies to promote their products to consumers. Starbucks has established its presence in China as part of its global strategy. The trend of company globalization of many Western firms has brought a lot of opportunities and challenges for doing business in Asian countries that are currently experiencing a strong economic growth. One of the countries in Asia that is considered to be a viable market is China. With China having the biggest population in the world, it is highly possible that Western firms seriously consider expand their business and operations in the Asian country. Of course, this will not be easy as Western firms would need to overcome the social and cultural barriers that could affect their long-term survival in the country. There are also several products that need to have customized features to suit the needs of the different cultural and national markets like the current market of China. Products and services are evaluated by Western firms so that these would fit the needs and wants of their Chinese customers. There is a lot of money that can be generated from China not by only the large multi-national corporations but also American companies that are small and medium in size. The gross domestic product of China is expected to increase. China is a lucrative market for the United States because of the country is the fourth biggest market for exports. Every Western company that wants to expand their operation in China will have to consider a lot of political, financial and cultural barriers. They must consider learning how to adapt the practice of working in a business environment that is rarely seen in the marketplace. The development of a carefully-planned strategy is important.