1.

A global business strategy consists of:

• Global ambition
• Global positioning
• Global business system
Stating the relative importance of
region and countries for a company.
Choice of countries, customer
segments and value proposition
Global structure, processes, co-
ordination and HRM.

2. Global ambition:
• There are two global indices:
- Global Revenue Index (GRI) is the ratio of the company
distribution of sales in the major world regions to the industry
distribution of demand in the same region.
- Global Capability Index (GCI) is the ratio of the company
distribution of assets or personnel in the major world regions to
the industry distribution the same region. Distribution of assets is
used when the company is engaged in a capital-intensive
industry. Otherwise, the distribution of personnel is used.
• Types of global ambitions
Depending on the value of the GRI and GCI, there are five main global
ambitions for different players.
- A Global player aspires to establish a sustainable competitive
position in the key markets of the world and to build an integrated
business system of designs spread over those key markets. It has both
a high GCI and a high GRI score.
- A Regional player captures a strong competitive advantage in
one of the key regions of the world (North America, Europe and Asia)
and is a relatively weak player in the other parts. It has both a low GCI
and a low GRI score.
- A Regional dominant player sells in more countries than a
regional player but it does not yet sell across the key markets of the
world. It has a medium score for CGI and GRI.
- A Global exporter sells across the key markets of the world
products manufactured or services operated in its home country and
builds operations only to support the export drive. It has a low CGI
and a high GRI score.
- A Global sourcer procures a large fraction of product
components in factories located outside its base market and
concentrates its sales in its domestic market. It has a high GCI and a
low GRI score.
3. Global positioning :
• Global positioning involves:
- Choice of countries
- Value proposition adopted.

• There are five types of countries where global positioning occurs:

 - Key countries Countries critical for the long-term
competitiveness of the company owing to its size, growth or resources
available.
- Emerging countries Countries that exhibit high growth rate for
particular industry.
- Platform countries Countries which can serve as a ‘hub’ for
setting up regional centres, global factories
that are ‘platforms’ for further development
- Marketing countries Countries with attractive markets without
being as strategically critical as the key
countries.
- Sourcing countries Countries with a strong resource base but
limited market prospects.

• Value proposition:
- The value proposition comprises:
(a) Choice of value attributes
(b) Customer value curve
(c) Degree of world standardization of products/service
offering.
- Value attributes are the elements of the products/services that
customers value when making their purchasing decision; examples
include price, design, functionality, performance, quality and
customization.
- The customer’s value curve is the set of value attributes for
particular group of customers and a particular product/service.
- Degree of world standardization of products/services:
(a) A standardized value proposition adopts a similar
or standard value attribute to the same type of customer segments
across the world.
(b) An adaptive value proposition adopts a similar or
standard value proposition for different countries/regions.
• Choices of global positioning:
There are eight choices of global positioning depending on the company’s
decisions on:
- Scope of targeted customer segments (broad/focused player)
- Approach of making a value proposition in different countries
(standardized/adaptive)
- Choice of generic strategies adopted (differentiation or cost
leadership).

4. Global business system:

• Elements
- A global business system decomposes the company value chain
into elements which are spread and integrated across the world.
 - It involves building and developing capabilities to compete
successfully on the global market space; global capabilities are
embodied into a business system deployed in various countries
• Value chain:
Each company has a different value chain according to the type of industry
in which is operates and the degree of vertical integration it has adopted.
One can distinguish three major generic components of a value chain:
- Innovative activities (R&D, design, knowledge)
- Productive activities (procurement, manufacturing, back office,
operations, logistics)
- Customer relationship activities (marketing, sales, distribution,
customer service)
• Capabilities
- Types:
(a) Capabilities that lead to a differentiation proposition, such
as superior quality, customization, innovative design.
(b) Capabilities which lead to cost leadership, such as low-cost
labour/raw materials.
- Factor determining global competitive advantages: proprietary
ownership or access to valuable assets, resources or competencies
- Types of sustainability in competitive advantage:
(a) Customer loyalty Can be built on brand or high
switching costs involved
(b) Positive feedbacks Can result from network externalities
and experience effects
(c) Pre-emption of capabilities Based on the appropriation by one
company of key resources or assets
that competitors will find difficult to
access or to develop since they
require investment of resources
and/or time
- Modes of building competitive advantage:
(a) First-mover advantages Being amongst the first competitors
to enter a given market.
(b) Leveraging advantages Exploiting capabilities already built
in other countries.
• Evolution of firms in globalization process:
- There are three stages of progress:
(a) Export
(i) Sales is the only element in the value chain which is set up
in foreign countries and not through direct investment but
through local distributors, agents or licensing; a
representative office can be set up at this stage if the market
size justifies it.
(ii) As the company progresses through the export stage, it
invests in marketing subsidiaries actively to manage the
 marketing mix; their role is to co-ordinate the activities of
the distributors, organize promotion and set up logistics and
service centres: these marketing subsidiaries may
eventually take over the local distributors.
(b) Multinational
The company manages a portfolio of relatively independent
worldwide wholly owned subsidiaries or joint ventures.
(c) Global
A global company integrates and co-ordinates its
worldwide operations to take advantages of economies of
scale, transfer of know-how and resources optimization;
this leads to an interlocked set of value chain activities
which falls broadly into three categories: the activities
which have a global role to serve the whole world (global
activities), those which have a regional role (regional
activities) and those which are purely local (local
activities).
• Partnerships:
- Companies usually need to acquire and complement their
capabilities by setting up partnerships; global strategic partnerships
are often critical for achieving a global presence and building
global competitive advantage.
- Forms of strategic alliances include:
(a) Global alliances to pool complementing capabilities
to reach world markets and achieve a critical mass in R&D
(b) Partnerships – joint ventures, franchises or licensing
for market entry.
(c) Acquisitions.
5. Global organizations
• Organization choice is dependent on:
- The nature of the competitive context in the industry:
Phases of global development include:
(a) Early export
(b) Early multinational subsidiaries
(c) Full multinational
(d) Global
(e) Global multi-business
- The strategic positioning adopted by the firm
• Organizational dimensions cover:
(a) Structure
(b) System/processes
(c) Culture
6. Global corporate strategy:
• For a multi-business corporation, the four elements of the global
corporate strategies are extended in scope:
- Corporate global ambition specifies the different global profiles
for each business e.g. whether the corporation wants to be a global
player in all of the businesses it controls.
- Corporate global positioning considers which businesses the
corporation wants to be in: does it want the businesses to share a
common global brand and/or standard competitive positioning?
- Global business system describes how business units share
resources, assets and competences to obtain synergies and what the
company’s priorities are in resource allocations among businesses.
- Global organization explains the role of corporate headquarters
and the company organization by
function/products/countries/region
To take the example of the Asia Pacific region, and to refer to our earlier discussion of
country clusters, one can classify countries into five main groups:

Table 1: Cluster characteristics, Asia Pacific

Hubs Emerging Newly Resource- Advanced

giants industrialize rich countries
d economies developing*
countries
Population L H M M/H M/H
GDP L M M L H
GDP per H L M L H
capita
Infrastructur H L H L H
e
Skills H L H L H
Labour costs M L M L H
Risks M M L/M H H
Natural L M L H L
Resources Japan = L
Australia =
H
Notes : L = Low, M = Medium, H = High

*These countries share many common characteristics with the emerging giants.

• Hubs: Singapore and Hong Kong

• Emerging giants: India and China
• Newly industrialized economies: Taiwan, Korea, Malaysia
• Resource-rich developing countries: Indonesia, the Philippines,
Thailand
• Advanced countries: Australia and Japan. Table 1 gives the key
characteristics of those clusters. The choice of countries between
clusters and within a cluster will ultimately depend on the strategic
ambition of the global firm and the relative importance it attaches to
the various factors
Key points

1. Entry decisions take into account:

• Country attractiveness analysis
• Entry strategy
A country attractiveness assessment is based on two
dimension:
• Market and industry opportunities
 • Country risks (many organizations publish country assessment
results based on various economic/political/social factors.
3. Market opportunities assessment measures the potential
demand in the country for a firm’s products or services based on:
• Market size
• Growth
• Quality of demand
4. Demand:
• Overall demand is assessed based on a combination of:
- Macroeconomic correlation approach (estimating demand
based on correlation with given macroeconomic indicators)
- Consideration of other factors:
(a) Degree of urbanisation
(b) Climate conditions
(c) Income distribution
(d) Lifestyles
(e) Savings rates
- Trend analysis with comparable countries:
(a) On a per capita basis
(b) On absolute value
• Demand for most mass consumer goods in emerging markets is
often triggered by the ‘middle-class effect’:
- The increased number of people who become middle-class (i.e.
reach a certain disposable income threshold) causes an
increased demand for modern branded products
• Quality of demand:
- Nature and diversity of market segmentation prevailing in a
country and the profile of customers value curve in each
segment
- There are two generic segments:
(a) Low-end segment:
(i) Undifferentiated products
(ii) Mass production and distribution
(iii) Price-sensitive
(b) High-end
(i) Differentiated products
(ii) Functionalities and performances
(iii) Less price-sensitive
- Developing world segmentation
(i) Huge low-end commodity market
(ii) Rising middle-class but still relatively small segment
(iii) Tiny highly wealthy segment
- Industrialized country segmentation:
(i) Diverse segmentation
(ii) Middle-class market dominates
 • Demand characteristics of a country:
- Market growth, market size, segmentation, customer value
curve, distribution and competition.
- Depends on country life cycle cluster country belongs to
- country life cycles clusters:
(a) Defined based on a country’s wealth and its
growth rate – a country goes through a ‘country life cycle’
depicting the relationship between the country’s wealth and
its long-term growth rate.
(b) Types of country life cycle cluster include:
(i) Developing countries
(ii) Emerging countries
(iii) Newly industrialized economies
(iv) Industrialized countries

5. Industry opportunities assessment determines profitability

potential of a company’s presence in a country given the following factors:
• Quality of industry competitive structure (including Porter’s five-
force Industry Analysis Framework):
- Intensity of rivalry
- New entrants and entry barriers:
(a) High capital investments
(b) Short product life cycles
(c) R&D costs
(d) Proprietary products
(e) Industry standards
(f) Economies of scale
(g) Large distribution channels
(h) Some closed markets
(i) Fear of retaliation
(j) Regulatory requirements, e.g. licenses
- Bargaining power of:
(a) Suppliers
(i) Scarcity or proprietary nature of supplies
(ii) Concentrated suppliers
(iii) Threat of forward integration
(b) Buyers:
(i) Low switching costs
(ii) Concentrated buyers
(iii) Threat of backward integration
- Threat of substitutes: alternative value proposition
- Profitability
(a) Short-term
(b) Long-term
• Resource availability:
- Natural resources:
 (a) Examples include raw materials and geographical
location
(b) Governments are protective of country’s natural
resources
- Human resources: examples include low-cost labour, skilled
personnel Infrastructure skills)
- Infrastructure and support industries resources:
(a) Examples include power, telecoms, road
(b) When combined with good geographical, provide
a competitive advantage to a country to become a regional
centre
• Government
- Investment incentives granted by governments:
(a) Types of incentives
(i) Fiscal incentives-tax reduction, exemption of import or
export duties
(ii) Financial incentives-subsidies
(iii) Competitive incentives-preferential purchases
(iv) Operational incentives-preferential rates for rents,
land, power and telecoms
(b) Incentives play only a limited role in inducing
foreign investment
- Government intervention:
(a) Price controls
(b) Regulatory constraints
(c) Taxation

6. There are four categories of country risk:

• Economic risks:
- Economic growth
- Variability of economic factors
- Inflation
- Cost of inputs
- Exchange rates
• Competitive risks (non-economic distortion of competitive
context):
- Corruption
- Cartels
• Operational risks:
- Infrastructure:
(a) Power, telecoms and transport
(b) Suppliers
- Regulations
(a) National preferences
(b) Constraints on local capital, local content or local
employment
 (c) Taxes
• Political risks:
- Employees’ exposure:
(a) Gangsterism
(b) Kidnapping
- Operational exposure:
(a) Market disruption
(b) Labour unrest
(c) Racketeering
(d) Supplies shortage
• Shareholder’s exposure (loss of capital or loss through inability to
repatriate dividends):
(a) Asset destruction (e.g. war or riots)
(b) Asset spoliation
(c) Asset immobility (e.g. freeze)