This essay is about Global Strategic Management.

Essay by dejavu78 December 2003

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Global Strategic Management

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 benefit more from globalisation than does others, and some nations have a comparative advantage over other nations in certain industries. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition.

Sources of Competitive Advantage from a Global Strategy

A well-designed global strategy can help a firm to gain a competitive advantage. This advantage can arise from the following sources:


*Economies of scale from access to more customers and markets

*Exploit another country's resources - labour, raw materials

*Extend the product life cycle - older products can be sold in lesser developed countries

*Operational flexibility - shift production as costs, exchange rates, etc. change over time


*First mover advantage and only provider of a product to a market

*Cross subsidisation between countries

*Transfer price


*Diversify macroeconomic risks (business cycles not perfectly correlated among countries)

*Diversify operational risks (labour problems, earthquakes, wars)


*Broaden learning opportunities due to diversity of operating environments


*Crossover customers between markets - reputation and brand identification

Sumantra Ghoshal of INSEAD proposed a framework comprising three categories of strategic objectives and three sources of advantage that can be used to achieve them.

Assembling these into a matrix results in the following framework:

The Nature of Competitive Advantage in Global Industries

A global industry can be defined as:

*An industry in which firms must compete in all world markets of that product in order to survive.

*An industry in which a firm's competitive advantage depends on economies of scale and economies of scope gained across markets.

Some industries are more...