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Global Strategy is a shortened term that covers three areas: global, multinational and international strategies. Essentially, these three areas refer to those strategies designed to enable an organization to achieve its objective of international expansion.

Strategic management the study of a company's responses to external issues. In Wikipedia. We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy.

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 benefits more from globalization than do others, and some nations have a comparative advantage over the nations in certain industries.

To create a successful global strategy, managers first must understand the nature of the global industries and the dynamics of global competitions.

In developing global strategy, it is useful to distinguish between three forms of international expansion that arise from a company’s resources, capabilities and current international position. If the company is still mainly focused on its home markets, then its strategies outside its home markets can be seen as international. For example, a dairy company might sell some of its excess milk and cheese supplies outside its home country. But its main strategic focus is still directed to the home market.

In South Korea, international and global soft drinks strategy will involve mixing both the global brands like Coke and Sprite with the local brands like Pocara Sweat

However, the Apple iPod was essentially following the same strategy everywhere in the world: in this case, the advertising billboard was in North America but it could have been anywhere.

One of the basic decisions in global strategy begins by considering just how much local variation, if any, there might be for a brand.

Another more basic decision might be whether to undertake any branding at all. Branding is expensive. It might be better to manufacture products for other companies that then undertake the expensive branding. Apple iPods are made in China with the Chinese company manufacturing to the Apple specification. The Chinese company then avoids the expense of building a brand. But faces the strategic problem that Apple could fail to renew its contract with the Chinese company, which might then be in serious financial difficulty.

As international activities have expanded at a company, it may have entered a number of different markets, each of which needs a strategy adapted to each market. Together, these strategies form a multinational strategy. For example, a car company might have one strategy for the USA – specialist cars, higher prices – with another for European markets – smaller cars, fuel efficient – and yet another for developing countries – simple, low priced cars.

Global Issues In Strategic Management

For some companies, their international activities have developed to such an extent that they essentially treat the world as one market with very limited variations for each country or world region. This is called a global strategy. For example, the luxury goods company Gucchi sells essentially the same products in every country.

Implications of the three definitions within global strategy:

International strategy: the organisation’s objectives relate primarily to the home market. However, we have some objectives with regard to overseas activity and therefore need an international strategy. Importantly, the competitive advantage – important in strategy development – is developed mainly for the home market.
Multinational strategy: the organisation is involved in a number of markets beyond its home country. But it needs distinctive strategies for each of these markets because customer demand and, perhaps competition, are different in each country. Importantly, competitive advantage is determined separately for each country.
Global strategy: the organisation treats the world as largely one market and one source of supply with little local variation. Importantly, competitive advantage is developed largely on a global basis.

The business resources needed to sell internationally might typically include a sales team, brochures of products in various languages and an office team to handle sales orders back in the home country.

The business resources in going global are much greater. Typically, companies need manufacturing plant in various low labour cost countries, global branding and advertising, sales teams in every major country, expensive patent and intellectual property registration in many countries, etc.

So, why ‘go global’ if the required resources are much greater and, incidentally, more complex to manage? Because the business rewards are supposed to be much greater for a global strategy. And so are the risks!

Hence, many companies do not have a ‘global strategy’ in the way that it is defined in international business literature. Even some major multinationals do not have a true global strategy in the sense of completely integrated production, no localized brands, etc.

For example, the highly successful multinational company PepsiCo dominates savoury snack products around the world. However, it still has local brands like Walkers Crisps in the UK. It does not use its Lays brand name in the UK, but employs Lays in much of the rest of the world. Why? Historical reasons that began with the PepsiCo acquisition of Walkers, which was already UK market leader.

Even if companies have a global strategy, this takes years to develop and requires substantial resources. It needs many millions of US$ and substantial management time and expertise. For example, Coca Cola took many years to develop its current position in the world soft drinks market.

For most companies, including many smaller companies, it is more realistic to develop an international or multinational strategy.

Benefits of Global Strategy

Economies of scope: the cost savings developed by a group when it shares activities or transfers capabilities and competencies from one part of the group to another
Economies of scale:the extra cost savings that occur when higher volume production allows unit costs to be reduced
Global brand recognition: the benefit that derives from having a brand that is recognized throughout the world
Global customer satisfaction: mulitnational customers who demand the same product, service and quality at various locations around the world
Lowest labour and other input costs: these arise by choosing and switching manufacturers with low(er) labour costs – for example, computer assembly from imported parts in Thailand and Malaysia where labour wages are lower than in countries making some sophisticated computer parts (such as high-end computer chips) in countries like the USA
Recovery of research and development (R&D) costs and other development costs across the maxium number of countries – new models, new drugs and other forms of research often amounting to billions of US dollars. The more countries of the world where the goods can be sold means the greater number of countries that can contribute to such costs.
Emergence of new markets: means greater sales from essentially the same products.

Cost of a Global Strategy

Lack of sensitivity to local demand: Leavitt argued that people would be prepared to compromise on their individual tastes if the product was cheap enough deriving from economies of scale and scope. Is this really correct? Other writers argued that

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