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
*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...