1. Global Strategy
Aparna Priyadarshini
AIM, Manila ,Cohort 5
Date 23rd Feb, 2010
2. International Strategy
• Scope: Across all geographical markets
• Pre-requisites: A firm has a competitive advantage in its core
business in the domestic market
Why a different strategy for going global?
The following factors which influence business are different across
geographies: PESTEL Framework
P- Political T-Technological
E-Economical E-Ecological
S-Social L-Legislative
3. Strategic Trade-off and Choices
Homogeneity
Competitive Advantage Strategic Choice
Static Arbitrage: Use the differences To sell Standard or Customized
as opportunities to create horizontal product?
and vertical Multinationals
Scale Of Operations
Global efficiency: Large organizations Where to compete? Prioritize the
can treat the world as a single allocation of resources in the existing
economy and sell standardized and new markets.
products. E.g. Japanese firms
Volatility
Innovation and Dynamic Arbitrage: Where to locate activities? The choice
Continuously re-optimizing firm’s is about both the number of site and
activities as per the change in dynamic specific location of each site.
factors like currency value etc.
4. Three A’s of Global Global Strategy
The Three A’s of Strategy
“One size does not fit all”
Modifying the existing business model to
foster success in a foreign environment. Ex
MTV, Pizza Hut, KFC
“One for all, all for one”
Finding similarities in national markets and
producing a standardized product for them.
Ex Hyundai Heavy industries
“Difference Counts”
Taking advantages of the various
differences in factor markets across
Aggregation
Adaptation countries. Ex Manufacturing in China
Arbitrage
5. In-house versus Market
When should organizations own their activities in the foreign market?
5. Retaining market power
1. Joint production has 3. Marginal cost of
transfer pricing problems. producing the output is
zero.
2. Monopoly buyer, 4. True value of
monopoly seller. proprietary knowledge
is unknown.
6. When should companies choose to enter into
Local Partnership?
To acquire market knowledge that
foreign investors cannot easily purchase
Control a key segment of the local
value chain that would otherwise block entry.
To access political connections and inexpensive
resources (such as finance and technology) that can
be acquired only from local partners.
7. The Journey Model for International
opportunity
Using the core competency
to execute the strategy
Global competiveness
Analyzing feasibility Formulating the strategy
Identifying opportunities
8. The dynamics of Emerging markets
• The RIPE Model: Build on familiarity with
Resource resource markets, like
Market
factors of production.
E.g.- Indian IT industry
Exploit the
understanding of the
product market. E.g.
EXECUTION
Jollibee
Product Institutional Treat Institutional voids
Market Voids as opportunities and
build their business
around filling these
9. Innovation with customer focus extrapolated
for global success - M&M success mantra
Anand Mahindra’s take on Globalization
• There has to be an internal logic for each company to become
global operation.
• Balance between domestic and international market
• Intellectual capital-culture is important.
• Strategy is a function of industry, country, the price and the cultural
fit.
• Invest when the time is right.
10. Recommendations
• Strike a balance between domestic sustainability and global
expansion.
• Decide where to compete and where to collaborate.
• Centralized strategy formulation but decentralized execution.
• Keep an eye on the strategic health rather than just focusing on
short-term financial health.
