To develop international, multinational and global business strategies, we’re going...Read More
‘Global Strategy’ is a shortened term that covers three areas: global, multinational and international strategies. Essentially, these three strategies enable an organisation to achieve its objective of international expansion.
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 (and, no, I don’t know what the brand tastes like!)
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.
Importantly, global strategy on this website is a shorthand for all three strategies above.
In various books and research papers, you may see reference to other forms of ‘global strategy.’ For example, you will see ‘multi-domestic strategies’. These are useful and can be explored in their context. However, the three strategies outlined above cover the main possibilities.
Companies talk about ‘going global’ when what they really mean is that they are moving internationally, outside their home countries. It is important to clarify precisely what is meant by such wording because the strategic implications are completely different.
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.
Hence for many companies, especially smaller companies with limited resources, it is more realistic to develop an international or multinational strategy.
Read more in Chapter 19 of Lynch Strategic Management.