Element of Transactional Strategy

A transnational strategy is a set of planned actions defined by a company to have operations in markets abroad. This term generally applies to the methods and structures that allow a firm to initiate and maintain functions in foreign countries while preserving central coordination at one specific location.

Transnational Strategy Mean in Business

A transnational strategy is assumed to take advantage of the benefits provided by simultaneous operation in multiple countries. The objective might be to expand sales, to produce at lower cost or to achieve economies of scale. There is a central coordination or headquarter and several decentralized organizational structures located abroad.

The complexity and size of the relationships among the different sites depend on the specific business model. The degree of control maintained by the central office also varies from one company to another.

It is necessary to have uniform business policies and technologies but at the same time enough capacity to adapt to the conditions of every foreign operation. The ultimate goal is to improve the overall corporate performance through the concurrence of resources and markets available in several countries.

Example

Prisma is a large Spain-based manufacturer of mid-cost furniture. It has two production facilities located in Spain and they export to several foreign markets. After some research and analysis, the Board of Directors concluded that a production and marketing facility placed in Asia would allow the company to have lower costs and to expand sales significantly in that region.

But the Board also identified that design professionals were massively available in Latin America at low cost. The firm then designed a transnational strategy to be implemented in five years. The strategy included three new manufacturing facilities in countries abroad and only one of the original production sites in Spain. It also embraced a design and innovation division placed in Latin America and marketing and sales structures in some European, Latin American and Asian countries. The ultimate objective was to diminish the average unit cost and increase sales substantially.

Common Characteristics

Businesses focused on meeting a specific need in single-sales transactions, rather providing a range of products or services as part of a comprehensive solution, are likely to adopt a transactional strategy. A defining characteristic is that the relationship between the business and customer typically lasts only as long as it takes for the sale to be completed. For example, a mortgage title company typically fulfills a single need issuing title insurance and the often more businesslike relationship between a customer and the company typically ends at the end of the transaction. In contrast, a bank focuses on serving a customer’s short- and long-term financial needs and therefore works to establish a lasting relationship with customers.

Focus and Objective

A pure transactional strategy and corresponding marketing efforts focus first on converting potential buyers into paying customers and second on maximizing each sale. This strategy relies solely on product, pricing, placement and promotion the four Ps of marketing to deliver value and create a positive perception about the business in the minds of prospective customers. The main objective is increasing sales through product availability and value-based perceptions.

Pricing Strategy

Price is the most important of the four Ps in a transactional strategy. This can work for and against the business depending on circumstance and the ability to control inventory costs. A main issue is that transactional strategies can require the business to adopt a defensive pricing strategy. Because value perceptions are essentially based on price, customers may abandon your business if a competitor lowers prices unless you follow suit. Defensive pricing strategies taken to an extreme can, in a worst-case scenario, threaten the future of a business by eroding profit margins.

Consumer Environment

A marketing strategy that doesn’t include relationship-building activities can be less expensive for a small-business owner to implement. Customers are viewed as a means to an end, rendering such things as a customer service department and a trained sales staff essentially unnecessary. While this strategy may be successful when consumer demand is high and the economy is expanding, it may fall short if demand lags or the business can’t further reduce costs or prices.