Global Strategy - Assignment Point
Global Strategy
Subject: Human Resource Management | Topics:

Global Strategy Journal is defined clearly by its focus on international and global organizational strategic management, rather than a universalism approach to the study of strategy.

Global markets are international markets where products are largely standardised.

Michael Porter argued that industries are either multi-domestic or global.

Global industries: competition is global. The same firms compete with each other everywhere.

Multi-domestic industries: firms compete in each national market independently of other national markets.

In general businesses adopt a global strategy in global markets and a multi-local strategy in multi domestic markets.

Global strategy

Companies such as Sony and Panasonic pursue a global strategy which involves:

  • Competing everywhere
  • Appreciating that success demands a presence in almost every part of the world in order to compete effectively
  • Making the product the same for each market
  • Centralised control
  • Taking advantage of customer needs and wants across international borders
  • Locating their value adding activities where they can achieve the greatest competitive advantage
  • Integrating and co-ordinating activities across borders
  • A global strategy is effective when differences between countries are small and competition is global. It has advantages in terms of
    • Economies of scale
      Lower costs
      Co-ordination of activities
      Faster product development

However, many regret the growing standardisation across the world.

Multi domestic strategy

  • A multi-domestic strategy involves products tailored to individual countries
    Innovation comes from local R&D
  • There is decentralization of decision making with in the organisation
  • One result of decentralization is local sourcing
  • Responding to local needs is desirable but there are disadvantages: for example high costs due to tailored products and duplication across countries

This advantage can arise from the following sources:

 

  • Efficiency
    • Economies of scale from access to more customers and markets
    • Exploit another country’s resources – labor, raw materials
    • Extend the product life cycle – older products can be sold in lesser developed countries
    • Operational flexibility – shift production as costs, exchange rates, etc. change over time
  • Strategic
    • First mover advantage and only provider of a product to a market
    • Cross subsidization between countries
    • Transfer price
  • Risk
    • Diversify macroeconomic risks (business cycles not perfectly correlated among countries)
    • Diversify operational risks (labor problems, earthquakes, wars)
  • Learning
    • Broaden learning opportunities due to diversity of operating environments
  • Reputation
    • Crossover customers between markets – reputation and brand identification

Global Strategy

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