Global Strategic Management

Global Strategic Management - Global Strategic Management...

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Global Strategic Management During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage. However, some industries benefit more from globalization than do others, and some nations have a comparative advantage over other nations in certain industries. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition. Sources of Competitive Advantage from a Global Strategy A well-designed global strategy can help a firm to gain a competitive advantage. This advantage can arise from the following sources: Efficiency o Economies of scale from access to more customers and markets o Exploit another country's resources - labor, raw materials o Extend the product life cycle - older products can be sold in lesser developed countries o Operational flexibility - shift production as costs, exchange rates, etc. change over time Strategic o First mover advantage and only provider of a product to a market o Cross subsidization between countries o Transfer price Risk o Diversify macroeconomic risks (business cycles not perfectly correlated among countries) o Diversify operational risks (labor problems, earthquakes, wars) Learning o Broaden learning opportunities due to diversity of operating environments Reputation o Crossover customers between markets - reputation and brand identification 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. Assembling these into a matrix results in the following framework: Strategic Objectives Sources of Competitive Advantage National Differences Scale Economies Scope Economies Efficiency in Operations Exploit factor cost differences Scale in each activity Sharing investments and costs Flexibility Market or policy-induced Balancing scale with strategic Portfolio
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changes diversification Innovation and Learning Societal differences in management and organization Experience - cost reduction and innovation Shared learning across activities The Nature of Competitive Advantage in Global Industries A global industry can be defined as: An industry in which firms must compete in all world markets of that product in order to survive. An industry in which a firm's competitive advantage depends on economies of scale and economies of scope gained across markets. Some industries are more suited for globalization than are others. The following drivers determine an industry's globalization potential. 1. Cost Drivers o Location of strategic resources o Differences in country costs o Potential for economies of scale (production, R&D, etc.) Flat experience curves in an industry inhibits globalization. One reason that the facsimile industry had more global potential than the furniture industry is that for fax
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Global Strategic Management - Global Strategic Management...

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