Global strategies aim to meet worldwide customer needs at lowest cost by locating activities strategically. A true global strategy considers global customer needs rather than individual countries. However, crossing borders greatly increases complexity due to varied legal, cultural, political and social factors between countries. To become truly global, companies transition through five stages - from export-focused to developing a shared value system worldwide. Successfully globalizing requires understanding diverse national cultures which continuously evolve. Common entry strategies are exports, licensing, joint ventures and wholly owned subsidiaries, each with advantages and disadvantages for strategic coordination, control and cost.

1. Strategy Management
Global Strategies

2. Global Strategies
GLOBALIZATION, in its true sense, is a way of corporate life
necessitated, facilitated and nourished by the trans-nationalisation
of the World economy and developed by corporate strategies. It is
a mind-set which views the entire world as a single market.
A global strategy seeks to meet the needs of customers worldwide,
with the highest value at the lowest cost. This may mean
 locating production in countries with the lowest labour costs or
abundant natural resources;
 locating research and complex engineering centres where skilled
engineers and scientists can be found; and
 locating marketing activities close to the markets to be served.
A global strategy includes designing, producing and marketing
products with global needs in mind, instead of considering
individual countries alone.
However, when a business crosses the national borders of a given
country, it becomes enormously more complex – a wide range of
legal, political, cultural and sociological dimensions enter the
picture.
Dr. B. K. Mukherjee 2

3. Case: Arvind Mills
MISSION STATEMENT OF ARVIND MILLS CO. LTD
“To achieve global dominance in select businesses built around its core
competencies through continuous product and technical innovations and
customer orientation with a focus on cost effectiveness.”
It is interesting to note that the Mission statement concentrates on core
competencies, instead of specific products or businesses (eg, Denim or
Saris). These competencies include knowledge of all aspects of the
textile business, the ability to think global, strategic flexibility, speed and
financial engineering skills.
RENOVISION ON THE ART OF GLOBAL DOMINANCE
 Source raw materials wherever they are cheapest.
 Manufacture wherever in the world is most cost effective.
 Sell in those global markets where prices are highest.
 Raise finances globally.
 Forge international strategic alliances (eg, Fiat cars sold by Tata Motors
Dr. B. K. Mukherjee 3
in India).
 To manage all these, take on the best talent from all over the world. And
you will have achieved the stature of a true multinational.

4. Stages of Globalization
Kenichi Ohmae, in his well-known book, “The Borderless World”, has
identified five different stages of development before a firm becomes a
truly global corporation:
Stage-1: Arms-length export/service activity of essentially domestic company
which moves into new overseas markets by linking up with local dealers
and distributors.
Stage-2: The company takes over these activities on its own.
Stage-3: The domestic based company begins carrying out its own
manufacturing, marketing and sales in the key foreign markets.
Stage-4: The company moves to a full insider position in these markets,
supported by a complete business system including R&D and engineering.
The domestic headquarters has to extend its reach and provide support
functions, such as HRM and finance, to all overseas activities. All through
stage-4, the ‘headquarters mentality’ continues to dominate, with different
local operations linked to each other through their relation with the centre.
Stage-5: The company moves toward a genuinely global mode of operation,
where it has to denationalize its thinking and create a system of values
shared by corporate managers around the globe.
Dr. B. K. Mukherjee 4

5. Complexities of Globalization
ENVIRONMENTAL AND CULTURAL DYNAMICS [Ramaswamy & Namakumari]
This can be understood by studying the people of different countries, their
patterns of life, their social interactions, their sensibilities, their faiths and
fancies: in other words, the global manager has to become a native in the
foreign land. He has to communicate with the people in their lingo and
idiom.
Endel J. Kolde has said: “Multinational enterprises must function in a world of
contrasts: old and new, primitive and modern, pious and agnostic,
unutterably beautiful and sickeningly squalid, educated and ignorant,
progressive and stagnant, sophisticated and naïve – all in constant
agitation. To interpret this volatile diversity, to make sense of this apparent
chaos, we must try to identify the underlying forces – the prime movers –
which produce the global dynamics.”
Cultural diversity continues in spite of modern communication and transport
having brought nations closer. A nation’s history, its social and religious
heritage, the value system of its people, the code of conduct handed down
through generations – all these comprise a nation’s culture.
Moreover, culture is not static. It often undergoes continuous evolution. Sizing
up the cultural dynamics of different nations of the world is one of the
biggest challenges of global business.
Dr. B. K. Mukherjee 5

6. Entry strategies
Generally three approaches are followed in entering foreign markets:
1. EXPORTS: Produce at home and export abroad. This is the primary route
to entry into global markets.
2. LICENSING: Enter into contractual agreements for Licensing/Franchising
of technology and know-how with interested foreign companies, without
owning assets in a significant way.
3. To own and control assets abroad through
 JOINT VENTURE with foreign partner, thereby benefiting from the local
partner’s knowledge and understanding of the host country’s competitive
conditions, culture, language, political and business systems. However,
there is a risk of losing control over technology.
 DIRECT FOREIGN INVESTMENT by way of a WHOLLY-OWNED
SUBSIDIARY by setting up a completely new operation in the host
country, or
 MERGER or ACQUISITION: By acquiring an established company and
using it to promote its products in the host country, eg. Vijay Mallya’s UB
Group acquired a small British company, Wiltshire Brewery, thereby
gaining ready access to a chain of 300 pubs throughout Britain to market
its Kingfisher and Kalyani brands of beer.
Although it is the most costly method, many high-tech companies prefer
wholly-owned subsidiaries to joint ventures or licensing arrangements.
Dr. B. K. Mukherjee 6

7. Advantages & Disadvantages
Entry Mode Advantages Disadvantages
Exporting  Location and experience curve
economies
High transport costs
Trade barriers
Problems with local mkt agents
Licensing  Low development costs and risks  No location and exp. curve eco.
 No global strategic coordination
 Lack of control over technology
Franchising  Low development costs and risks  No global strategic coordination
 Lack of control over quality
Joint ventures  Access to local partner’s knowledge
 Shared development costs & risks
 Political dependency
 No global strategic coordination
 No location and exp. curve eco.
 Lack of control over technology
Dr. B. K. Mukherjee 7
Wholly-owned
subsidiaries
 Protection of technology
 Global strategic coordination possible
 Ability to realize location and
experience curve economies
 High costs and risks
[Hill & Jones, p.287]