Global Business Strategy

By: EconomyWatch   Date: 29 June 2010

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Global Business Strategy can be defined as the business strategies engaged by the businesses, companies or firms operating in a global business environment and serving consumers throughout the world. Global business strategies are closely related to the business developing strategies adopted by businesses to meet their short and long term objectives. The short term goals of the business would be related to improving the day-to-day operations of the company while the long term objectives are generally targeted towards increment of the profits, sales and earnings of the company in the long run ensuring growth and stability of the business and dominance over the national or regional market.

This is essentially the point where a global business strategy differs from a national business development strategy as different other factors such as product standardization and adaptation come in. The factors of product differentiation and diversification are relevant in the case of both national and global business strategy in the wake of rising competition in both the national and international market. Global business strategies have emerged as a result of globalization and internationalization of established domestic companies which is purported to increase the value of the company in question. Increasing pressure of globalization and the rising global competition have prompted managers and academicians to rethink the formulation of global business strategy. As previously mentioned, global business strategies rests on two pillars of standardization and adaptation which have been in severe conflict in the recent years. This debate have been backed by claims of theorists from both sides who have exchanged salvos regarding which of the two is more profitable for the global businesses functioning in a unique set of circumstances.

Standardization of production by firms who engage in global business entails producing the same product for the national as well as the international markets with only minor changes in attributes. This is mainly explained by the fact that basic human needs are the same in all countries across the world. This strategy to expand the global business has been supported by personalities such as Levitt, Buzzell, Yip, Loewe and Yoshino. The concept of standardization first emerged in the 1960’s and then again resurfaced in the 1980’s and it has been adopted very effectively by many Japanese and European firms which have experienced higher levels of product and process innovations which in turn have acted as source of comparative advantage for these companies in the international market. The arguments in favor of the global business strategy of standardization are as follows: -

  • It benefits in the economies of scale accruing to the company with it being able to produce in large quantities using more or less the same techniques of production
  • It preserves the image of the home country which houses the global corporation since it helps in minimizing the costs of alteration, design or modification, handling and stocking the product, speeding up delivery systems. It also helps in saving the managerial time and effort to take decisions regarding the manufacture of different products.
  • It helps in faster accumulation of the learning experience as fallout of the learning-by-doing approach.

At the opposite end of the spectrum, advocates of the strategy of market orientation using the techniques of adaptation or local adaptation argue that while basic human needs may be similar everywhere, standardization may not be the word as differences in cultural and other environmental factors significantly influence the buying pattern of people in different countries. Supporters of this theory include Boddewyn, Soehl Picard, Douglas, Sommers and Kernan.

Global Business strategies are a field of study effectively addressed by the interdisciplinary issues of marketing, organization theory, business strategy and international management and concentrates on maximizing the firm performance. It depends on choosing a global strategy that is apt for the set of circumstances facing each business. Choosing an international strategy, be it standardization or adaptation is contingent upon the ability of the firm to suit its marketing strategy and the external environment. A conceptual contingency framework is often theorized between the critical variables of the business such as high sales revenue, capacity utilization and specific relationships between these variables and their effective implementation can lead to high levels of performance. One of the key features affecting global business strategies is the effect of the WTO (World Trade Organization) rules on trade in goods and services, Foreign Direct Investment and Intellectual Property Rights. These affect crucial business interests and negotiations and agreements between developed countries have an impact on the current burning issues such as AIDS, environmental protection and climate change, global security and international migration.

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