Essay, Pages 3 (567 words)
“Demand preferences are becoming more homogeneous across borders”, Theodore Levitt in his book “The Marketing imagination” raised this as the main reason for the process of globalization of both firms and markets. Companies/Firms engage in international activities or develop global strategies for two main reasons . To put it succinctly, the meaning of strategy in an international/ global context would be “Ways and means to compete successfully”.
Strategy in a global perspective would entail taking into account the fact that the firm is entering a fast changing competitive environment where the degree of certainty is bare minimum.
The focus remains on both creating and capturing value to sustain the firm’s future. Companies that pursue a global strategy do so because they believe that the rewards are far greater than the additional risks that they will encounter. Each firm has a different level of risk tolerance and this impacts the type of global strategy that they will pursue i.e. aggressive or conservative.
The expansion has taken place either through a multiple geographical base approach or else through strategic partnerships. Michael Porter in his book (Porter, 1986), analyses that global strategies are based on two concepts that of allocation and coordination. A framework for a global strategy Porter states (ibid. p. 36) would be studying conditions such as:
- Proximity to markets;
- Economies of Scale & Experience;
- Effective consolidation and coordination of activities;
- Comparative advantage of each country;
Any good global strategy takes into account the conditions for achieving cost reduction or differentiation. Global strategy is a fundamental requirement for any company that wants to establish itself internationally.
Previously companies used to practice “multi local” strategy which meant a variety of products depending on each market. A Global Strategy does not mean any one element such as standard product or service offering but it is a combination of factors tailored to each requirement.
A strategy is global to the extent that it is implemented across boundaries. The notion that companies can choose whether to be global does not apply in today’s time. The markets are global and businesses need to be a part of the process in order to survive. Firms are the entities which provide goods and services to the multitudes, and must constantly reshape themselves so they can create new opportunities for development. The protection of a firm’s capital base is one the foundation stones of any business principle.
In order to maintain the base and achieve the true potential of sustainable development , global business strategy must be adopted and integrated into the planning and measurement system of the business enterprise. Key questions for devising a global business strategy source: “IBM institute for Business Value Analysis” (2005). One of the most important factors to manage while deciding to go global is an effective tranisistion strategy .
Every stakeholder in the company including its human capital would face change with the expansion of the business strategy. Formerly the company was located in a single place and had a set business plan which was being practiced for years. The decision of going global must take into account that there will be change in the process , techonology used , perhaps even in the organization structure. By going global does not mean that the business can wipe its existing business strategy out and start anew, it needs to be carried into the new strategy and if necessary gradually phased out.