GLOBAL STRATEGY

Submitted by:

Reyes, Sharmaine C.
Fernandez, Jersie Jhony Q.
Ferrer, Megaworld B.
Geronimo, Timothy B.

Submitted to:
Prof. Anwarul Wadud
A global strategy is one that a company takes when it wants to compete and
expand in the global market. In other words, a strategy businesses pursue when
they wish to expand internationally. A global strategy refers to the plans an
organization has developed to target growth beyond its borders. Specifically, it
aims to increase the sales of goods or services abroad.
‘Global strategy’ is, in fact, a shortened term that covers three
strategies: international, multinational, and global. Companies must pursue
strategies in those three areas if they wish to expand internationally.

 According to the Cambridge Dictionary, a global strategy is:

 “1. A detailed plan for how a business or product can be successful in all
parts of the world.”
 ” 2. The process of planning how a business or product can be successful
around the world.”

The Three key differences between Global and International Strategy are:

 1. The first relates to the degree of involvement and coordination from the
centre. Coordination of strategic activities is the extent to which a firm’s
strategic activities in different country locations are planned and executed
interdependently on a global scale to exploit the synergies that exist across
different countries. An international strategy does not require strong
coordination from the centre. A global strategy, on the other hand, requires
significant coordination between the activities of the centre and those of
subsidiaries.
  2. The second difference relates to the degree of product standardization
and responsiveness to local business environment. Product standardization
is the degree to which a product, service, or process is standardized across
countries. An international strategy assumes that the subsidiary should
respond to local business needs unless there is a good reason for not doing
so. In contrast, the global strategy assumes that the centre should
standardize its operations and products in all the different countries, unless
there is a compelling reason for not doing so.

 3. The third difference has to do with strategy integration and competitive

moves. ‘Integration’ and ‘competitive move’ refer to the extent to which a
firm’s competitive moves in major markets are interdependent. For
example, a multinational firm subsidizes operations or subsidiaries in
countries where the market is growing with resources gained from other
subsidiaries where the market is declining, or responds to competitive
moves by rivals in one market by counter-attacking in others.

What is global strategy and why is it Important?

 ‘Global Strategy’ is a shortened term that covers three areas: global,
multinational and international strategies. Essentially, these three areas
refer to those strategies designed to enable an organisation to achieve its
objective of international expansion.
 In developing ‘global strategy’, it is useful to distinguish between three
forms of international expansion that arise from a company’s resources,
capabilities and current international position. If the company is still mainly
focused on its home markets, then its strategies outside its home markets
can be seen as international. For example, a dairy company might sell some
of its excess milk and cheese supplies outside its home country. But its
main strategic focus is still directed to the home market.
Implications of the (3) definitions within the global strategy

 International strategy: the organisation’s objectives relate primarily to the

home market. However, we have some objectives with regard to overseas
activity and therefore need an international strategy. Importantly, the
competitive advantage – important in strategy development – is developed
mainly for the home market.
 Multinational strategy: the organisation is involved in a number of markets
beyond its home country. But it needs distinctive strategies for each of
these markets because customer demand and, perhaps competition, are
different in each country. Importantly, competitive advantage is
determined separately for each country.
 Global strategy: the organisation treats the world as largely one market and
one source of supply with little local variation. Importantly, competitive
advantage is developed largely on a global basis.

What are the benefits of a global strategy? And what are the costs?

The business case for achieving a global strategy is based on one or more of
the factors set out below – see academic research by Theodore Leavitt,
Sumanthra Ghoshal, Kenichi Ohmae, George Yip and others. For the full,
detailed references, go to the end of Chapter 19 in either of my
books, Corporate Strategy or Strategic Management
1. Economies of scope: the cost savings developed by a group when it
shares activities or transfers capabilities and competencies from one part of
the group to another – for example, a biotechnology sales team sells more
than one product from the total range.
2. Economies of scale:the extra cost savings that occur when higher volume
production allows unit costs to be reduced – for example, an Arcelor Mittal
steel mill that delivers lower steel costs per unit as the size of the mill is
increased.
3. Global brand recognition: the benefit that derives from having a brand
that is recognized throughout the world – for example, Disney..
4. Global customer satisfaction: mulitnational customers who demand the
same product, service and quality at various locations around the world –
for example, customers of the Sheraton Hotel chain expect and receive the
same level of service at all its hotels around the world.

5. Lowest labour and other input costs: these arise by choosing and
switching manufacturers with low(er) labour costs – for example, computer
assembly from imported parts in Thailand and Malaysia where labour
wages are lower than in countries making some sophisticated computer
parts (such as high-end computer chips) in countries like the USA
6. Recovery of research and development (R&D) costs and other
development costs across the maximm number of countries – new models,
new drugs and other forms of research often amounting to billions of US
dollars. The more countries of the world where the goods can be sold
means the greater number of countries that can contribute to such costs.
For example, the Airbus Jumbo A380 launched in 2008 where development
costs have exceeded US$ 10 billion.
7. Emergence of new markets: means greater sales from essentially the
same products.