Global Strategy


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Global Strategy

  1. 1. Global Strategy Aparna Priyadarshini AIM, Manila ,Cohort 5 Date 23rd Feb, 2010
  2. 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. 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. 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. 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. 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. 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. 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. 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. 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.
  11. 11. THANK YOU