In business, global strategy refers to a strategic guide to a business organisation to globalisation. At the present scenario, the world becomes more connected which allows a company to generate revenue by utilising the resources prevailing in countries that are located outside the national border. Global strategy of a business is something that a business uses to apply to reap the rewards of conducting business in the worldwide market.
During the end of the twentieth century, a number of barriers related to international trade walls due to this, a large wave of companies started pursuing global strategies with the aim of gaining competitive advantages. Academic research on global strategy came around 1980s by literary works presented by Michael Porter, Christopher Bartlett, and Sumantra Ghoshal. Global strategy is associated with economic systems, and technological change more especially changes in information technology which facilitated the coordination of a multinational company’s strategy on the worldwide scale.
In developing a global strategy for a business, it is quite useful to differentiate between the three forms of a company’s business expansion in the international market which arise from its resources, capabilities as well as the current position in the international arena. Here, if a company uses to focus mainly on its domestic markets, then the strategies it applies outside its domestic markets are treated as international strategies. For instance, a chocolate manufacturing company might sell it’s excess produce i.e. chocolate outside its domestic country, but its core strategic focus still directed to the domestic market.
One of the main decisions in relation to set global strategy starts by considering how much substitutions or local variation are available for a particular in a domestic market. Business leaders nowadays tend to make a strong focus on the way to capture as much share in the foreign market as possible and in doing so they begin with by setting global strategy, adding new culture, launching new offices, supporting foreign currencies, and more. In today’s globalised world, almost every growth-seeking company focuses on setting global strategy to expand its business in the international market and to extract the benefits of globalisation. Experts from Assignment Help UK will now explain to you about the Global Strategy.
Definition and Discussion on Global Strategy
A global strategy is one that a company takes when it wants to compete and expand in the global market. In some other words, a company pursues global strategy when it wishes to expand its business internationally. A global strategy stands as the plans a business organisation uses to develop in order to target and ensure its corporate growth beyond its national borders.
More specifically, global strategy is something by which a company aims to enter into foreign markets to increase the volume of its goods’ sale abroad. Global strategy is a shortened term which covers three different strategies such as global, international, and multinational. Essentially, all these three different areas in relation to business refer to the strategies that are designed in order to enable a company to achieve or meet its corporate objective of business expansion in the international market.
In support of the definition provided by the Cambridge Dictionary, a global strategy is a detailed plan showing how a company or product or service could become successful in every country across the world and the planning process on how a company or product or service could gain success from the worldwide market. A global strategy involves integrated thinking about every aspect of the business such as its production sites, suppliers, markets, investors, and competition.
It also involves the assessment of every single product and service from national and international market standards’ perspective. It means a company needs to embed international perspectives while designing a product or service for placing it in the global market by applying global strategies. It also means meeting the world standards before seeking the world markets as well as being a world-class company also in the domestic market. An efficiently formulated global strategy helps a company to address the way to enter and build the required global presence, the optimal location or locations across the world for conducting value chain activities, and the way to continue global presence for gaining competitive advantage from the global market.
Global strategy requires companies to coordinate their strategies related to product and pricing across international locations and markets tightly; therefore, companies that pursue global strategy become highly centralised. As opposed to a multi-domestic strategy, a global strategy often become appropriate for the industries which include companies that face strong pressures in relation to cost reduction whereas the pressures from local responsiveness stand weak.
Therefore, the global strategy allows these companies to sell standardised products or services worldwide. Nevertheless, these companies are capable of taking advantage of economies of scale and the effects of the learning curve, because of their ability to produce standard quality products in mass that it can export in the global market. Global strategy assists a company to deepen its understanding of cultural differences at the local and national level to become a truly global company. My Assignment Help will now tell you about the importance of Global Strategy.
Importance of Global Strategy
On the micro-level, global strategy pertains to a company’s resource allocation to help the company in availing the profit opportunities related advantages outside its domestic markets. In broadest interpretation, a global strategy encompasses a company’s activities like overseas manufacturing, importing, and foreign investing.
However, in the marketing-related activities’ context, this text views a global strategy that includes a company’s business activities related to exporting, partnering and licensing in foreign nations to sell products and services in the markets of those foreign nations. On the other side, on the macro-level, this strategy is applied by countries, regions, trading partners, as well as other entities for accomplishing economic objectives that are related to competition and foreign trade. For instance, most countries use to impose different types of quotas, tariffs, and other trade restrictions on importing goods. Similarly, a number of nations form a group in order to form one or more self-serving business agreements which exclude global regions or other countries across the world.
States or nations often engage in business strategies, through tools like tax incentives, government-sponsored promotions with an intention to improve competitiveness in the global market or to assist companies in the local market. Whether it is on the micro or macro level, global strategy always supports a company to step-out for the international market and to expand its business successfully in such international arena. Furthermore, global strategy is very important from different perspectives.
From the perspective of a company, the global strategy helps a company to step-out for international expansion which provides a number of opportunities for sales that ultimately results in increased profits. Sometimes, it becomes tough for a company to sell its goods or services in a situation where there the profitability opportunity is very poor in its domestic market but there are a number of profit opportunities prevailing in the international market. At this situation, the global strategy helps the company to expand its business by selling its goods or services for availing the international market opportunities for profits.
Along with the new opportunities for sales, there are some other reasons for which a company needs to focus on expanding its business beyond the domestic market by applying a global strategy. For instance, if oil companies use to expand for securing resources then it called the act of seeking resource. Similarly, if cloth manufacturing companies expand for taking the advantage of low-cost labour available in some foreign countries then it should call the act of seeking efficiency. Furthermore, some companies found acquiring foreign companies for enhancing their market position against their competitors and this is called the act of seeking strategic asset.
From the perspective of a customer, international trade must lead to lowering the selling price prices for products and services. This is because they believe that with international trade a company becomes able to derive scope along with the advantages of economies of scale from the global market base. For instance, Nike sources all its sports shoes from countries like Vietnam and the Philippines where the cost of labour is relatively lower than the other countries. Moreover, some customers prefer to buy products that have a strong brand image globally.
For instance, soccer shirts branded by ‘Manchester United.’ Appropriate application of global strategy assists companies to create a global image which provokes customers to go for the brand that ultimately makes a brand successful in terms of attracting customers and revenue generation. From the international government organisations’ perspective, like the World Bank, global strategy is something through which barriers in conducting trade in the global market and the dominant thinking could be demean while providing some protection to few countries as well as industries. Thus, a global strategy stands as a vital aspect of these kinds of international negotiations.
Sources of Competitive Advantages from a Global Strategy
Global strategy leads companies to enter into the international market where they could create a customer base, build a strong image of their brand, and sell their products and services at profit by utilising the profit opportunities attached to the market. A perfectly designed global strategy helps a company to avail the competitive advantages from the international market. These competitive advantages arise from a number of sources such as:
- Advantage of a first mover and the only seller of a particular product or service to a specific market
- Transfer price
- Cross stabilisation between nations
- Economies of scale for accessing more markets and customers
- Operational flexibility
- The exploitation of resource of another country such as raw materials, and labour
- Extend of the life-cycle of a product (selling of older products in less developed countries)
- Broaden the opportunities of learning due to the diversity of the business operating environment
- Diversify the risks that are microeconomic in nature
- Diversify the operational risks such as labour-related issues, terrorisms, natural calamities and more
- Crossover consumers between markets – brand identification and reputation.
Benefits of Global Strategy
- Opportunities to gain economies of scale: Successful implementation of a global strategy helps companies to gain economies of scale. The concept of economies of the scale stands for the proportionate cost saving by increasing production level. The extra amount of cost savings which occur after increasing the production volume allows companies to reduce per-unit costs that always attract customers those who prefer to avail quality products at low cost and ultimately increases revenues. When a company is larger as well as has huge support from consumers, then it becomes able to produce more products at less cost. Materials are bought in larger volume to produce more which saves money on the manufacturing or production end. After adopting a global strategy, a company also becomes able to bought labour at a lower rate which also assists the company to gain the benefits of economies of scale.
- Improves brand recognition: Implementation of a global strategy by a company helps it to promote its brand in the global market which ultimately brings brand recognition in the global arena. The globally recognised brand assists a company to enlarge its customer base in the worldwide market and increase its sales volume.
- Customer satisfaction at the global arena: Customers located in multiple nations who have the demand for the same goods, service, and quality become able to expect as well as receive the same across the world. This increase customer satisfaction and trust towards the company which is highly significant for developing a loyal customer base across the global market.
- Diversification of business: When a domestic company step-out for an international market, a global strategy helps it to offset losses that the company might suffer during the economic downturn of its domestic country. The establishment of a thriving business in the overseas market can sustain the company’s domestic-based business for a long time.
- Recovery of R&D (research and development) costs: Global strategy helps a company to recover research and development cost along with some other development costs by allowing it to introduce new products and services across the foreign countries. The introduction of a new business model, products allow these foreign countries to contribute to such costs. Application of global strategy helps companies to extract the benefits of knowledge and innovative idea-sharing with foreign nations that ultimately reduce R&D costs and other development costs of the companies that apply such a strategy.
- The emergence of a number of new markets: Application of global strategy helps companies to find and enter into new markets that ensure greater sales for the companies. New markets create new customers base and new opportunities for companies to operate businesses in those markets that result in increased sales and profits.
- Reduces global poverty: The more a number of new markets emerge, the greater the employment opportunities and economic growth of the world. When a company implements a global strategy, it starts investing in the local markets of foreign nations in several ways. This practice creates new opportunities for jobs that help people of the foreign nations start working or get employment. Opportunities for job increases employment that ultimately eases out poverty from those foreign countries, and increases economic productivity.
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