Introduction
In the contemporary and ever-evolving context of the globalized economy, there is often a notable emphasis on two significant entities: enterprises that originate from a global perspective and multinational corporations. Although these concepts may appear interchangeable, they encompass different approaches to international business, each with significant ramifications (Malodia et al., 2023). To gain a comprehensive understanding of the intricacies and distinctions between these two entities, it is imperative to thoroughly examine their underlying attributes, approaches, and ramifications within the global economic sphere (Malodia et al., 2023). The primary objective of this paper is to provide insight into the fundamental differences between globally-born enterprises and multinational organizations, with a specific focus on their distinct beginnings, operational frameworks, and strategic goals.
Expansion approach
First, Netflix is an MNC characterized by its expansion approach to international markets, while Spotify is an international new venture based on its expansion approach to foreign markets. Lecture 1 highlights that multinational companies establish themselves in domestic markets before expanding their business activities and functions to other countries abroad. This is evident in Netflix, which established itself in its home country, the United States, before expanding its operations and functions to other countries (Onyusheva and Bakar, 2021). It started operating in the US only in 1977 and took a long time before internationalizing. Based on the Uppsala theory of internationalization, multinational companies internationalize through incremental processes and market knowledge (Arvidsson, 2019). It is supported by lecture 1, which reveals that multi-national companies internationalize incrementally achieved through learning phases. The theory suggests that multinational companies lack adequate market insights; therefore, they should first have strong domestic domination before internationalization. In this context, the domestic market is used to enable the multinational company to successfully pursue the internationalization process. For example, domestic markets equip a company with increased market knowledge and the ability to identify opportunities and risks in the business environment. The business world is characterized by market dynamics that require companies to constantly change and adapt quickly and accordingly (Vahlne, 2020). Thus, the domestic market enables a company to identify critical areas of commitment and where to focus its resources. This is evident in Netflix, which focused on the US market, achieved many consumers, and increased growth.
Operating in foreign markets is perceived to expose companies to different market conditions and environments. A multinational company achieves internationalization by beginning its operations in the nearby markets before penetrating other international markets. Since their internationalization is achieved incrementally, nearby markets play a crucial role in enabling direct relations of market commitment and knowledge in those markets. It is strengthened by the ability of the company to utilize human resources and other resources in those markets effectively. According to Vahlne (2020), deriving better and more knowledge about international markets has the potential to achieve a strong market position. It enables a company to have general knowledge about the markets. Also, a company gathers market-specific insights, which makes the internationalization process easier. This is evident in Netflix, which started internationalization by penetrating markets based on geographical location. In 2010, it penetrated the Canadian market, which shares characteristics of the US, especially cultural similarities.
According to Beugelsdijk et al. (2018), cultural sensitivity affects purchasing power and business in international markets. The similarities between the US and Canada enabled Netflix to easily establish itself and acquire a market position in Canada and other nearby markets. For example, it understood the accepted business practices and behaviors professionally, which enabled the company to present itself in the best way in international markets. Most importantly, Netflix’s penetration in Canada was the basis for gaining knowledge about global expansion capabilities for markets far from the US. Thus, it quickly expanded to about 43 countries, especially Western Europe and Latin America (Onyusheva and Bakar, 2021). By doing this, it continued to gain more knowledge about internationalization. For example, it learned the significance of partnerships in the internationalization process. It partnered with content providers and other companies to ensure that it satisfied the needs and demands of the consumers. Also, as a multi-national company, it collected adequate market information from the consumers. It used the market data to fathom the preferences and interests of the consumers, including their changing behaviors. Thus, by 2020, Netflix had established its operations in more than 190 countries and more than 183 subscribers, although most were US individuals (Onyusheva and Bakar, 2021).
On the contrary, new international ventures aim at tapping global markets, and they expand at or during their early growth stages. According to Ferguson et al. (2019), these companies are characterized by their abilities to manage and overcome market entry barriers before strongly establishing themselves in the domestic markets. This is evident by Spotify’s ability to internationalize a few years after its inception. The company was launched in 2008, and by 2011, it achieved global expansion due to its focus on international markets. It considered and managed the market barriers before internationalization (Wong and Farabi, 2023). For example, it formed licensing agreements that assisted in offering song varieties to its users. Lecture 1 suggests that technological advancements have enhanced the internationalization of born global firms. Internet and technology applications enable companies to offer products and services to consumers efficiently. This is evident in Spotify, which disrupted the music industry as it strove to transform into a digital era by applying the trends in technology. Since its inception, it aimed to provide solutions to the global challenges faced in the music industry. Today, the company is recognized as the main music streaming platform worldwide, and by 2021, it had more than 345 million users and about 155 million subscribers for premium options (Wong and Farabi, 2023).
Differentiation
Second, Netflix is a multinational corporation, whereas Spotify is a born global company in terms of how they have differentiated their products and services in their markets. Spotify aims to provide content that will differentiate itself from its competitors. In contrast, Netflix aims to differentiate its content to increase its target market as it already has the market leader competitive advantage against its competitors. According to lecture 1, born global firms have highly innovative and differentiated products that are unique compared to their competitors in global markets. Whereas according to lecture 2, multinational companies often already have the “superior ability” advantage over their competitors as they are already established and more dominant compared to the competitors, hence the reason why they expand to international markets when faced with competition instead of creating further differentiated products compared to its competitors. According to Malodia et al. (2023), the differentiation between born global firms and multinational compositions is different. Born global differentiation is more aggressive in standing out from competitors to enter and grow in its target markets, while multinational corporations’ differentiation is not for standing out against competitors but rather to deliver superior value to its customers through leading-edge products.
Product Life Cycle Development
Third, Netflix is a multinational corporation, whereas Spotify is a born global company due to its product life cycle development. According to the product life cycle theory, multinational companies often enter foreign markets when competition in their home countries has become saturated after their products have matured and competition gets cost-based. Whereas born global companies, since inception, are always focused on expansion to foreign markets. This is evident in the case of Netflix and Spotify; Spotify, during its global expansion in 2011 and 2013 the form was aggressively expanded into international markets to achieve a global outreach and dominance faster and did not focus on establishing itself in a particular market before expanding to other regions (Wong & Farabi, 2021). On the other hand, Netflix first focused on growing in the USA and Canada, where it got to expand to other regions such as Latin and Europe later on when its markets began becoming saturated due to increased entry by new firms, which led to a slower growth hence also introducing low-cost monthly subscription (Onyusheva & Baker, 2021). According to Hagen & Zucchella (2014), multinational corporations have longer product life cycles that often adopt the various stages of introduction, growth, maturity, and decline and often expand to other geographic zones to diversify risk, which can rise from market saturation while born global firms have shorter product life cycle developments which is the reason of their aggressive internationalization despite their size and age in the markets.
Competitive Advantage
Fourth, Netflix is a multinational corporation, whereas Spotify is a born global company due to its approaches towards internationalization. Multinational corporations often enter foreign markets due to their superior advantage over local firms, which gives them the competitive advantage of entering overseas markets without high costs, as the monopolistic advantage theory expounded. However, born global companies scale up aggressively in foreign markets without brand recognition. This is evident with Netflix’s dominance in host countries, as the company already has massive brand recognition, saving market entry costs (Onyusheva & Baker, 2021). This is unlike Spotify, which has lesser awareness even in host countries, increasing market entry costs. Al-Kwifi et al. (2020) state the superior advantage increases the multinational corporations’ economies of scale, further accelerating the company’s expansion into other foreign markets, which is evident with the global domination of Netflix even in developing economies.
Conclusion
In conclusion, Netflix is a multinational company, while Spotify is a BGF/INV based on its characteristics and approaches to internationalization. Netflix gained dominance in the home country before internationalizing to foreign markets. Also, its internationalization is characterized by an incremental approach evident in various growth phases. On the contrary, Spotify has aimed to focus on international markets since its launch. Its services are differentiated for unique foreign markets.
References
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