Transnational Strategy

Its aim is to maximize

local responsiveness but
also to gain benefits
from global integration.
Even though this seems
impossible, it is actually
perfectly doable when
taking the whole value
chain into
considerations. Transnational companies often try to create economies of scale
more upstream in the value chain and be more flexible and locally adaptive in
downstream activities such as marketing and sales. In terms of organizational
design, a transnational company is characterised by an integrated and
interdependent network of subsidiaries all over the world. These subsidiaries have
strategic roles and act as centres of excellence. Due to efficient knowledge and
expertise exchange between subsidiaries, the company in general is able to meet
both strategic objectives.

Transnational strategy seeks to combine the best of multidomestic strategy and a

global strategy to get both global efficiency and local responsiveness. For many
industries, given the differences across markets and the similarties being fostered
by the flatteners, this form of strategy is highly desirable and appropriate. The
difficulty is that combining the multidomestic and global strategies is hard to do
because it requires fulfililng the dual goals of flexibility and coordination. Firms
must balance opposing local and global goals. On the positive side, firms that
effectively implement a transnational strategy often outperform competitors who
use either the multidomestic or global corporate-level strategies.
The Ford Motor Company and BMW are examples of firms pursuing a
transnational strategy. Ford, for example, is focusing on the “world car,” building
one core car that will be sold globally. This strategy lowers Ford’s development
costs, because rather than developing different cars for different countries or
regions, Ford will sell the same car to all markets. The world car strategy,
however, poses a major hurdle: how to design a car that appeals to consumers in
many different countries. To tackle the issue, Ford took a page from BMW, which
uses the concept of “fashion forward” when designing its 3 Series cars for multiple
markets. The secret, according to Verena Kloos, president of BMW’s
DesignworksUSA studio in California, is to “show consumers what the next big
thing is, not reflect what they think now.” As James D. Farley, Ford’s global
marketing chief, sees it, the global appeal of the 3 Series rests on trust and
aspiration. People worldwide see the same design, which builds trust through
ubiquity and familiarity and leads them to aspire to own the car themselves.

International Strategy and the Local Environment

An international
company therefore has
little need for local
adaption and global
integration. The
majority of the value
chain activities will be
maintained at the
headquarter. This
strategy is also often
referred to as an exporting strategy. Products are produced in the company’s home
country and send to customers all over the world. Subsidiaries, if any, are
functioning in this case more like local channels through which the products are
being sold to the end-consumer.
Sometimes, firms expanding into new geographic markets find that they must
adapt certain components of their strategies to accommodate local environments.
In the United States, for instance, Dell is famous for the business model that
allows it to skip middlemen and go directly to suppliers and customers. In its early
years, Dell experimented with a brick-and-mortar retail strategy but quickly
retrenched. As it expanded into international markets, however, Dell has found
that it has to suspend its direct model, at least temporarily. Why? Basically
because it needs local intermediaries to help develop both a base of business and
acceptable levels of customer awareness and sophistication. Such has been the
case first in India and then in China, which constitute huge markets for Dell.

Figure. Dell’s Local Operations in Xiamen, China

Courtesy of Dell, Inc.

While Dell provides a good example of adaptation, most global firms tend to
approach corporate strategy from the perspective of their domestic market
constraint, which can be problematic. Microsoft is a case in point. The United
States and the European Union (EU) have very different traditions and models of
competition, which in turn means that strategies must vary across these important
markets. Had you not been aware of these differences, you might think that
Microsoft followed an ideal resource-based corporate strategy in its
diversification into Europe. It bundled its Windows operating system with the
Internet Explorer browser and other software to increase the company’s perceived
value and, therefore, customers’ willingness to pay. It also used its extensive
experience with home-computer software, operating systems, and applications to
better penetrate the server market for software and operating systems, where
customers are primarily businesses. Finally, Microsoft tried to lock out
competitors by including its Windows Media Player as a standard feature in both
its server and home PC operating systems.

The EU, however, has made these Microsoft tactics illegal: the bundling strategy
“deters innovation and reduces consumer choice in any technologies which
Microsoft could conceivably take an interest in and tie with Windows in the
future. The EU signaled its disapproval by imposing a fine of over $600 million
and giving Microsoft ninety days to release versions of its Windows operating
systems for home PCs and servers without the Windows Media Player and to
begin providing rivals access to the details of the code underlying its proprietary
server systems, used primarily in business settings. This is not the first time such
differences in regulatory environments have been ignored or underestimated by
global firms. Just a few years earlier, the European Commission’s ruling dealt a
fatal blow to the all-but-done merger between Honeywell and General Electric
(GE), citing that the merger would reduce competition in the aerospace industry.

How Vinamilk implements International Strategy for Foreign market

approach:

Vietnam Dairy Products, better known as Vinamilk, eighth on the Nikkei's latest
Asia300 ranking of power performers, was founded in 1976, a year after the
Vietnam War ended.
Vinamilk started off by selling condensed milk, once considered a luxury good,
at affordable prices. The company is a pioneer in Vietnam's dairy industry and has
persuaded generations of Vietnamese to make milk part of their diet.

The company is the leading enterprise in the dairy processing industry, currently
occupying 54.5% market share of liquid milk, 40.6% market share of powdered
milk, 33.9% market share of drinking yogurt, 84.5%. market share for yogurt and
79.7% market share for condensed milk nationwide.

The international business path of Vinamilk

It can be seen that Vinamilk's first gateway to international business is the Middle
East market. In 1998, Vinamilk started exporting its first powdered milk products
to the Middle East, with the main market being Iraq under the United Nations' oil-
for-food program. This is the first milestone in the company's world market. Since
then, after many years of seeking markets, participating in trade promotion
activities, Vinamilk's products have been exported to 43 countries around the
world with a variety of products, such as : powdered milk, nutritious powder,
condensed milk, liquid milk, soy milk, yogurt, juice, ice cream ... Vinamilk's
products are available in a variety of countries, such as: Cambodia, Thailand, and
Korea. , Japan, China, Turkey, Russia, Canada, USA, Australia ... In addition, the
company is continuing to seek and expand markets to Europe, Africa, South
America.

In the period of nearly 20 years of joining that international market, there have
been important milestones determining Vinamilk's success today.

- In 2010, after being licensed by the Ministry of Planning and Investment to

invest abroad, Vinamilk bought 19.3% of Miraka Limited's shares in New
Zealand. This can be said to be Vinamilk's first factory investment project in the
world market.

- In May 2013, the Board of Directors selected Vinamilk's commercial

representative in the US market. On June 18, 2013, Vinamilk's Board of Directors
approved to increase the investment capital in Miraka Company, and at the same
time approved the investment in Driftwood Milk Company after Vinamilk was
issued the number by the FDA (US Food and Drug Administration). signed the
shipment to the US. In May 2016, VNM increased its investment capital and
bought a 100% stake in Driftwood Company.
- On 25/5/2016, Vinamilk inaugurated Angkor Dairy Factory in Phnom Penh,
Kingdom of Cambodia after 10 years of penetrating and exploring this market.
By March 2017, VNM had 100% ownership of this dairy factory. Continuously
in the end of May 2016, Vinamilk held many events in Myanmar, Cambodia, and
Thailand ... marking the expansion of Vinamilk's investment and expanding
market share abroad, especially in the ASEAN region. .

- On May 12, 2017 in Beijing, Vinamilk achieved a memorandum of cooperation

to supply Vinamilk's dairy products into the Chinese market - a very large and
potential market with the world's highest population, total The market value of
milk is about 30 billion USD / year.

It can be seen that the large consumer market and the attraction of international
brands are the goals of Vinamilk. This is clearly demonstrated through:

1. Ideas from the early days

Right from the first days of joining international business with Iraq market in
1998, Vinamilk has established a strategy of expanding its product market to
foreign countries, firstly the Middle East market - a potential market. Potential,
populous and unsatisfied about milk demand As a result, Vinamilk's export
market share has grown from Iraq to the whole Middle East region, when this
region's revenue accounts for a large proportion of export revenue in particular,
as well as Vinamilk's overall revenue. In the period of 2010-2015, Vinamilk's
sales in the Middle East market increased by about 38%. In recent years, there has
been a continuous increase in the penetration of this market, when actively
participating in product trade fairs and World Trade Centers held in Middle
Eastern countries. Recently, at the beginning of last year, Vinamilk signed a
contract to export $ 12.5 million worth of baby formula for children to the Middle
East market on the first day of the 2016 Gulfood Fair at the Trade Center. World
Trade Dubai. These activities will create a solid premise for Vinamilk's 10%
annual growth target in this market.

2. Wide spread ideas and global brand goals

* Cambodia and Southeast Asia markets

At the time Vinamilk built Angkor Dairy Factory in Cambodia - the first and only
dairy factory in Cambodia, Vinamilk had more than 10 years of exploring and
penetrating the Cambodian market, with the goal of turning the country into an
export market. second largest export of the Company. Cambodia is a very
potential market when considered as a new "economic tiger" in Asia, economic
growth in recent years has continuously reached over 7% / year, people's lives
have been improved. There has been a need for health care and improvement of
the human body, including the very high demand for milk. However, in contrast
to rising demand, the country's milk processing industry is underdeveloped. In
2016, the per capita milk consumption in Cambodia was 5 kg, only one third of
that in Vietnam and because there was no factory yet, 100% of domestic milk
consumption was imported. Because of this potential, plus the support of the
Governments of Vietnam and Cambodia, Vinamilk joined forces with Cambodian
BPC to set up Angkor Dairy Company Limited (BPC holds 49%, Vinamilk holds
a 51% stake). By the beginning of 2017, Vinamilk continued pouring an
additional 11 million USD to hold the entire factory. These steps have shown the
tremendous attraction of the Cambodian market to Vinamilk and at the same time,
Angkor is expected to be a model for Vinamilk to expand to other markets in the
region such as Myanmar.
* American and European markets

Previously, in 2013, Vinamilk also invested in holding 70% of the Driftwood

Dairy Holding Corporation Factory (California, United States) - one of the oldest
and leading dairy manufacturers in Northern California. By 2016, Vinamilk
acquired all shares of this factory. In 2015, Driftwood's total revenue reached
USD 119 million, equivalent to over VND 2,600 billion, contributing about 6.5%
of VNM's consolidated revenue. In addition, Vinamilk also opened a subsidiary
in Poland in the hope that it will be a bridge for the company to advance to the
European market.

Thus, although it has created a firm foothold in the Vietnamese dairy market,
Vinamilk is not satisfied but is having a strategy to bring the brand out of the
country, with a vision to become a world icon in Vietnam. food industry. The
company's goal is to achieve a profit of $ 3 billion, equivalent to VND 66 trillion
between 2012 and 2017 and become one of the 50 largest groups of dairy products
in the world. Participating in international business will help Vinamilk quickly
realize its goals.