Globalization of
Strategy
MGMT 480
Dr. Keith Robbins
Meagan DenOuden
Globalization

Process of closer integration and exchange between
different countries and peoples world-wide

Made possible by:

Falling trade and investment barriers

Advancements in telecommunications

Reduced transportation costs
Why Globalize?






Resource-based: resources are the key to a firms superior
performance
Superior Craftsmanship: better/cheaper labor in different
countries
Transportation costs: decrease costs by having warehouse
in country
Better production efficiency
Avoid political, trade, and regulatory rules
Gain access to a larger market
Why Globalize?
Competitive Disadvantage

If you are not global in your reach and your rivals are…
4
Dominant Multinational Market Groups

The G-7 Nations

NAFTA – (soon to be AFTA?)

Pacific Rim /Asia

EU
5
The Group of 7 Nations
Formerly the G8 (Russia) These meetings of the leaders of
the United States, Britain, Italy, Japan, France, Germany,
and Canada are the way the powerful industrialized
nations of the world seek to work out differences
between themselves and arrive at policies that can
reduce conflict and other problems elsewhere.
6
The European Union
Austria, Belgium, Bulgaria, Croatia, Cyprus (Greek part)
Czech Republic, Denmark, Estonia, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Romania, Slovakia, Slovenia, Spain, Sweden,
United Kingdom
7
Evolutionary Development of a Global
Corporation
1. Export-import activity
Evolution of a
global firm entails
progressively
involved strategy
levels
2. Foreign licensing and technology transfer
3. Direct investment in overseas operations
(manufacturing plants and global
management skills)
4. Substantial increase in foreign investment
(foreign assets comprise significant portion
of total assets)
8
Comparative Management Framework

Compare and Contrast the Management Models, Practices,
Principles, Strategies, Policies…Across Classes of
Organizations

Could be Profit vs Not-For-Profit, Small vs Large , Private vs
Public

Most Often Concerned with Comparative Analysis Among
Different Regions of World
9
Multi-domestic Strategy

Also known as localization strategy

Maximize local responsiveness, hoping that local
consumers will perceive them to be domestic
Be perceived as local.
Multi-domestic Strategy
Pros


Reduced exchange-rate
exposure
Value creation in host
country
Cons

Costly and inefficient

Highly autonomous units
Multi-domestic Strategy Examples
McDonalds
Heinz

China: Rice McWraps


Italy: Pizzarotto


Saudi Arabia: Mc Arabia
Chicken


India: No beef → muttonbased and vegetarian
burgers

Lowered prices based on
average income

Always sell ketchup
China → soy sauce
Indonesia → chili sauces
Brazil → tomato sauces
Multi-domestic Strategy Examples
Hard Rock Cafe
MTV

Hawaii → fresh fish

Feeds for UK and Ireland

Retail shops → carry
location specific items

Feeds for Germany,
Austria, and Switzerland

London: t-shirts with
London written on it


Prague: signature pins
Feeds for Scandinavia,
Italy, France, Spain, and
Holland
Global Strategy

Attempts to reap significant economies of scale and
location economies by pursuing a global division of labor
based on wherever best-of-class capabilities reside at the
lowest cost

Arises due to:

High pressure for cost reductions

Low pressure for local responsiveness
Lowest costs possible.
Global Strategy
Pros

Obtain the lowest costs

Economies of scale
Cons

If you can’t get the lowest
costs you won’t succeed

No local responsiveness

No product differentiation
Global Strategy Examples
Lenovo
 Computer
Manufacturers; Makers
of the ThinkPad
 Hubs in Beijing,
Shanghai, Raleigh, and
Japan
 Manufacturing in
Mexico, India, and
China
Walmart
 Tried
to enter Germany
 Wanted
door greeters
and polite staff
 Couldn’t gain enough
market share and keep
their costs low
Transnational Strategy

Also called glocalization

Attempts to combine the benefits of a localization
strategy with those of a global strategy

High local-responsiveness and lowest cost attainable
Think globally, act locally.
Transnational Strategy
Pros

Economies of scale

Location

Learning
Cons

Costly and difficult to
implement

Exchange rate exposure
Transnational Strategy Examples
Unilever



Brand & innovation lead
to lower environmental
impact
Sustainable growth
operations in multiple
continents
Create a positive social
improvement
Coca-Cola

Retains the same secret
formula in each country

Sells in 200 countries
world-wide

Bottles will be in local
language