Global level strategy
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The document discusses global strategies and how companies can globalize. It defines a global strategy as treating the world as a single market by standardizing products across countries. A multi-domestic strategy involves customizing products for each local market. Sources of competitive advantage from a global strategy include economies of scale, exploiting differences in resources between countries, and strategic flexibility. The document also discusses types of global strategies like foreign direct investment, joint ventures, contractual agreements, and licensing.
Global level strategy
- 1. Presented by:- Presented to:- Rampal Chitwan Mam Gautam Dhanda (Faculty member) Ankit Paul
- 2. Global strategy:- Organization's strategic guide to globalization. A sound global strategy should address these questions: o what must be (versus what is) the extent of market presence in the world's major markets? o How to build the necessary global presence? o How to run global presence into global competitive advantage?
- 3. Contd.. It is appropriate in industries where firms are faced with strong pressures for cost reduction. Global strategies require firms to tightly coordinate their product and pricing strategies across international markets and locations. Firms that pursue a global strategy are typically highly centralized.
- 4. Why globalize? Expand global market share Restructure value chain on a global scale. Ultimate goal. Diversification. Expansion.
- 5. Types of global strategies: • Global strategy Multi-domestic strategy Transnational strategy
- 6. Multi-domestic vs. Global Strategy:- Multi-domestic Strategy Product customized for each market Decentralized control - local decision making Effective when large differences exist between countries Advantages: product differentiation, minimized political risk, minimized exchange rate. Global Strategy Product is the same in all countries. Centralized control - little decision-making authority on the local level Effective when differences between countries are small Advantages: cost, coordinated activities, faster product development
- 7. Philips followed multidomestic strategy:- Innovation from local R&D Entrepreneurial spirit Products tailored to individual countries High quality due to backward integration Matsushita followed a global strategy :- Strong global distribution network Financial control More applied R&D Ability to get to market quickly
- 8. Sources of Competitive Advantage from a Global Strategy Efficiency Economies of scale from access to more customers and markets Exploit another country's resources - labor, raw materials Extend the product life cycle- Operational flexibility - shift production as costs, exchange rates, Strategic First mover advantage and only provider of a product to a market Cross subsidization between countries Transfer price
- 9. Contd… 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
- 10. Globalization & Global Strategy — • GLOBALIZATION ? --Something to do with increasing interdependence between countries. • GLOBAL STRATEGY --At simplest level: Treating the world as a single market E.g. Japanese companies during the 1970s & 1980s, (YKK, Honda) standard products, developed & manufactured within Japan. --At more sophisticated level: Strategy that recognizes and exploits linkages between countries (e.g. exploits global scale, national resource differences, strategic competition) World as World as World as inter- separate single mkt. related mkts. national mkts. global strategy multidomestic strategy
- 11. Sumantra Ghoshal of INSEAD proposed a framework comprising three categories of strategic objectives and three sources of advantage that can be used to achieve them. Sources of Competitive Advantage Strategic Objectives National Scale Economies Scope Economies Differences Sharing Efficiency in Exploit factor cost Scale in each investments and Operations differences activity costs Balancing scale Market or policy Flexibility with strategic & Portfolio induced changes operational risks diversification Societal Experience – cost Innovation and differences in Shared learning reduction and Learning management and across activities innovation organization
- 12. GLOBAL STRATEGIES Four basic avenues that companies can take to market their products or services globally: Foreign Direct Investment Joint ventures Contractual agreements. Licensing (includes franchising)
- 13. Joint venture :-- Moscow, June 8, 2011 – Ford Motor Company and Sollers OJSC have signed agreements to establish a 50-50-owned joint venture in Russia. The new business, named Ford Sollers, is scheduled to start operations later this year.
- 14. BENEFITS FROM JOINT VENTURE :-- New technology used :- Basically it replaces the very expensive batteries with much smaller and inexpensive ones. This affords to position a car at much lower price. In any case it is a new product. It would help ford to increase the sales and production to regain the no.1 position in U.S or other markets.
- 15. Mergers and Acquisitions:- In 1999, Global Crossing acquired Frontier Corporation, the former Rochester Telephone Corporation Renamed the company Global Crossing North America, Inc. It sold the local telephone operations it owned, including the Frontier name, to Citizens Communications in 2001, which renamed itself Frontier Communications in 2008.