Running head: GLOBAL STRATEGIC PLANNING
Global Strategic Planning
Michael Parkhurst
Bellevue University
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GLOBAL STRATEGIC PLANNING
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Abstract
Strategic plans help a company determine how they will operate within a new area. This
can be done on a global or local level. Without a strategic plan a company would not be
able to understand the local market. This could lead to the company having to pull out of
the country. When creating a strategic plan a company must analyze the market,
identify competitors, create objectives, choose the country, determine method of entry,
and decide which products to offer. Following these steps will help a company
determine the best course of action for their global strategy. The cost of a global
strategy various depending on what county or countries a company is moving into and
their method of entry. Companies should always choose the best strategy to suit their
product needs.
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Global Strategic Planning
Strategic planning is important when taking on any new business endeavor. Most
companies complete one when they are first starting out. When a company decides to
move into the global market they should create a global strategy so they fully
understand the market they are entering and their vision for the global company.
Global strategy is a term that covers three different types of strategies. These
three strategies are international, multinational, and global. International strategy
revolves around the company focusing on the home market while having a few
overseas objectives. The competitive advantage in this type of strategy is developed for
the home county. A multinational strategy has a different strategy for each country they
operate in. This means the competitive advantage in each county is different. Finally,
global strategy looks at the world as a whole single unit and does not provide much
variations on the local level. The competitive advantage is determined by the entire
global economy not specific regions (Lynch, 2014).
One of the most important reasons to create a global strategy is to gain a
competitive advantage over competing companies in the region. Competitive
advantages can be gained through various ways including efficiency, strategy, risk,
learning, and reputation. Efficiency can include lower costs of materials or labor which
reduces the cost to produce the product. If a company strategically picks the right
market they may be the only producer of the product in that area. Global business can
spread the risk over many areas instead of one centralized location. The learning of
different cultures can lead to new and innovative products. The companies brand
reputation can grow and be more recognized around the world (Quick MBA, 2010).
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Another important aspect of a creating a global strategy is learning the different
laws and cultures around a county. During the creation of a global strategy a company
will complete a political, economic, social, and technologic analysis, or PEST analysis,
of the country or countries they are looking into entering (Business Case Studies, 2012).
A PEST analysis will help the company determine different factors of operating in a
different company. First it looks at the political factors affecting a company. These
factors might include the current type of government, when the next election is, what the
current business laws are, and what political factors are likely to change (Manktelow,
2015). China is a great example when talking about political factors. China is run by the
communist party which puts a lot more regulations on doing business. Knowing the
regulations and red tape that must be gone through is vital for success in China
(Jayaraman, 2009).
The next step in a PEST analysis is to determine the current economic health of
the country. This will show the company if the country they want to move into has a
stable economy, the amount of available workforce, and the current disposable income
(Manktelow, 2015). If a country has high unemployment and low disposable income
they might not have the available funds to purchase extra commodities. The social
factors look at a countries cultural profile. It takes into account the different working
habits of the country, the religious beliefs within the country, and the attitudes of the
people in the country (Manktelow, 2015). If McDonalds would have went into India trying
to sell only hamburgers they would have failed because of the difference in beliefs as it
pertains to cows. Finally, the PEST analysis looks at technology. Is there anything new
that the company could be using or that competitors in other countries are using that
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this company does not have? If the company is going to set up a bottling facility in a
different country, is the country able to handle to current machinery the company uses?
Not seeing these effects of technology could end up costing the company a large
amount of money (Manktelow, 2015).
Creating a global strategy is a multi-step process that includes analyzing the
market, identifying competitors, creating objectives, choosing the country, determining
method of entry, and deciding which products to offer. The first step in this process is
analyzing the market. This is where the PEST analysis comes in. A company can
complete the analysis themselves or they can pay an outside company to complete the
analysis. Next the company needs to determine who the primary competitors are in the
different areas they might want to conduct business. Will the company be competing
against other large multinational companies or primarily smaller local owned
companies? The amount of brand loyalty needs to be taken into account also. This will
help the company determine how to market their products (Lynch, 2014).
After the research has been completed on the countries and competitors the
organization can then determine its objectives. The company needs to determine what
types of profits they would expect from global expansion and what they expect from
their employees in regards to the expansion. The next steps are to decide which country
to operate in and mode of entry. These steps generally go hand in hand because the
mode of entry may be different with a particular company. The mode of entry refers to
how the company is going to get the product to the market. Will the company ship the
product from their home country or will they set up local distribution. For example if the
company is going to sell in Mexico they might just ship from their home country to their
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customers, but if they were moving into Germany it might be more cost effective to open
a regional bottling location somewhere within the country. Once the location and mode
of entry have been determined the company can decide which products they will offer
and what price they want to offer it at. The PEST analysis should have helped
determine how much the people of the company can afford to pay for the product, and
what type of products might do best within a particular country (Lynch, 2014).
The cost of a global strategy depends on different factors. For the PEST analysis
the cost would depend on if the company is going to conduct it themselves or have a
firm conduct it. If the company chooses to do the analysis itself, they would have the
cost of the labor and resources to conduct the analysis and these vary from company to
company. The cost for having a private company do the analysis would determine the
amount of countries included. Other costs could include the cost to adapt to the current
market place or capital costs of building an overseas facility.
Though the costs might seem high in the onset of global expansion it can provide
a variety of benefits. Global markets can increase sales by having a larger market of
consumers. They also help a company in efficiency by allowing the company to save on
shipping costs when ordering bulk supplies for their products. They can also renew a life
cycle of a product that may be outdated in one region by introducing it in a new region
(O'Farrell, 2014).
There are three ways a company can help balance the scale between global and
local strategy. First, the company needs to look at things from the global perspective.
They need to look at the policies of the company and make sure they are consistent
through the company worldwide. Next, they should work on meeting the local needs
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through adaptation. This gives the company the best chance at making sure local
products provide the right need and local regulations are met. Finally, the company
should look at things from a glocally position. Glocally means that normally an either or
approach to problems does not normally work. Companies should consider both sides
at the same time when tackling difficult issues (Center for Creative Leadership, 2015).
Value proposition adaption is important for some companies when doing
business in other countries. Value proposition adaptations might include how a product
is packages, looks, processed, and produced. It is possible the company might need to
change the size of a product to conform to the storage ability of its customers. They
might also have to change the way a product looks to be more appealing to a certain
country. These adaptations depend on the country or countries that the company
decides to do business in. For example most European countries have smaller
refrigerators than the US that won’t accommodate larger bottles (DeKluyver, 2010).
If Lottafizz Corp decides to go global they should use a multinational strategy.
This type of strategy would allow the company to cater to the specific needs of the area
they are operating in. Each country the company wished to enter should have a
separate analysis completed so they can adapt the product and its packing according to
that particular companies norms. If Lottafizz is going to open bottling facilities in different
regions they need to determine the laws and regulations pertaining to labor and
resources. If the company does not create a strategy they will have a rough time in the
global market and will not know what to expect before entering the market which can
lead to large fines or equipment costs.
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References
Business Case Studies. (2012). Developing a global strategy. Retrieved from
businesscasestudies.co.uk: http://businesscasestudies.co.uk/businesstheory/strategy/developing-a-global-strategy.html#axzz2RDi2teif
Center for Creative Leadership. (2015). A Big Balancing Act: Local vs Global. Retrieved
from Insights.ccl.org: http://insights.ccl.org/multimedia/podcast/a-big-balancingact-local-vs-global/
DeKluyver, C. (2010). Globalizing the Value Proposition. Retrieved from
Credoreference.com:
http://ezproxy.bellevue.edu/login?url=http://search.credoreference.com.ezproxy.b
ellevue.edu/content/entry/bepsmfund/globalizing_the_value_proposition/0
Jayaraman, K. (2009, November). Doing business in China: A Risk Analysis. Retrieved
from Digitalcommon.com:
http://digitalcommons.kennesaw.edu/cgi/viewcontent.cgi?article=1006&context=j
ekem
Lynch, R. (2014). How do you Build a Global Strategy? Retrieved from globalstrategy.net: http://www.global-strategy.net/how-do-you-build-a-global-strategy/
Lynch, R. (2014). What is global strategy? And why is it important? Retrieved from
Global-strategy.net/what-is-global-strategy: http://www.global-strategy.net/whatis-global-strategy/
Manktelow, J. (2015). Pest Analysis. Retrieved from www.mindtools.com:
http://www.mindtools.com/pages/article/newTMC_09.htm
GLOBAL STRATEGIC PLANNING
O'Farrell, R. (2014). Advantages & Disadvantages of a Global Strategy. Retrieved from
smallbusiness.chron.com: http://smallbusiness.chron.com/advantagesdisadvantages-global-strategy-11664.html
Quick MBA. (2010). Global Strategic Management. Retrieved from QuickMBA.com:
http://www.quickmba.com/strategy/global/
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