MANAGING DIFFERENCES

The Central Challenge Of Global Strategy

 INTRODUCTION
The main goal of any global strategy should be to manage the large differences that
arise at the borders of markets. But before that we should know what global strategy
is
Global strategy: the organization 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.
Problems
Lack of sensitivity to local demand: For a new organization it would be very much difficult
to know the local demands of a customer and if a local demands is known also, then to
match with up the local taste, and local conditions is a very challenging job
 Transport and operation costs: If a products is manufactured in one country then
the finished products needs to be exported to other country, the costs for some
heavy products, like steel bars, may be greater than the economies of scale from
centralized production in one country.
Economies of scale benefits :may be difficult to obtain in practice: Lots of capitals
is required for building of plants, so local competitor with old machinery and
labour can produced the same goods at a very cheaper rate.
Management coordination costs: The managers and workers in different countries
often need to be consulted, and these things cannot be done on the telephone
and worldwide web. This means that senior managers operating a global strategy
need to spend time on visiting countries.
Barriers to trade: Various kind of taxes and other restrictions on goods and services
are set by national governments as the goods cross their national/country borders.
Other costs imposed by national governments to protect their home industries
Sometimes it may happen that in order to boost a particular sector government
may imposed various kind of cost in importing the similar products
 ADVANTAGE

In practice, the business case for a global strategy will vary with the product
category.
Economies of scope: Sometimes its cheaper to produce a range of
products rather than specialize in a handful of products.
Economies of scale: When a higher volume of production is done the per unit cost
of a product is reduced and the same product can be sold at a cheaper rate.
Global brand recognition: The benefit that derives from having a brand that is
recognized throughout the world for example,Apple,Walmart.
Global customer satisfaction: Multinational customers are provided with the best
services at various location throughout the world
 Lowest labour and other input costs: These type of situation arise when in some
countries cheap labour are available as compared to other countries. 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 maximum number of countries New models, and new
technique or 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: Sometimes due to the emergence of new market it
may happen that sometimes the sales are increased that means greater sales
from essentially the same products.
Note: Professor George Yip argues that the business case for globalization is
strengthened by competitive pressures: the fear of some companies that they will
be left behind other companies if they fail to globalize.
FROM A TO AA COMBINATION
To manage AA strategy requires considerable organizational
and material innovation.
Companies must do more than just allocate resources and
monitor national operations from headquarters. They need to
deploy a broad array of integrated devices ranging from
structure and system to style and socialization.
ADAPTION AND AGGREGATION
 P&G(Proctor & Gamble)

P&G started with Adaption strategy.

Halting attempts at Aggregation across Europe

P&G used Matrix Structure throughout 1980s but it

miserably failed , which led to CEO D.I.Jagers removal
in less than a year.

The next CEO, Lafley, used right fit of adaptation and

aggregation strategy and allowed room differences
across general business units and markets.
AGGREGATION AND ARBITRAGE
 TCS(TATA CONSULTANCY SERVICES

TCS Targeted a balance between aggregation and arbitrage

without losing its traditional arbitrage-based competitive
advantage.

TCS aims to build a coherent global network delivery model

which aims to build a delivery structure that consists of three kinds
of software development centers :-

The global centers( located in India and China)

The Regional Centers ( Uruguay, Brazil and Hungary)
The near shore centers (Boston and phoenix )

The coherent global delivery structure also seems to hold

potential for significant international revenue gains for example
contract between TCS and Dutch bank ABN AMRO.
ARBITRAGE AND ADAPTATION
 COGNIZANT

Cognizant applied arbitrage and adaptation strategy by

investing heavily in a local presence in it key market, US.

The cognizant applied two-in-a-box structure technique, and

the main challenge was poor coordination between delivery
and marketing that leads to tossing stuff over the wall(one
department blames other and vice versa) kind of situation
THE ELUSIVE TRIFECTA
There are serious constraints on an organization to apply AAA strategies' together.
The complexity in working collides with limited managerial bandwidth.
many people think that following only one strategy can help in achieving multiple
strategic targets.
Capable competitors can force a company to choose which dimension it is going to
compete with them.

To contemplate a AAA strategy

A company must operate in an environment where tensions
among Aggregation , Arbitrage and Adaptation are weak
which can be overcome by large scale economies or
structural advantages.