Question

How do organizations make decisions to pursue a global strategy?

How can expanding globally become a threat to a multinational enterprises (MNEs) reputation? Explain with the help of a real-world example.

What is meant by cultural distance? How does it affect a firm? Use a real-life example of a business affected by cultural difference.

What are IKEA’s external and internal challenges? Which ones pose the greatest threat? Why? How would you address the challenges?

What can IKEA do to continue to growth globally, especially given its strategic position to double annual store openings?

Answer 1

Organisations take into considerations a lot of factors when it has to make a decision to pursue the global strategy, it takes into account factors like probable investment that is required, the amount of traffic that the company is estimating etc. and basis that if the calculation is such that it feels that revenues in the long run would be more than the investment then the company pursue the strategy to go global.

Expanding can hamper the reputation since the company has to deal with local suppliers, local competitors and other third party sources to set up the business and they might not work as efficiently as required. The already set reputation of the company is mostly because of the services and quality it provides and if that is hampered then the reputation might take a hit.

Example: McDonald started business in India but beef is banned here and they did not realise this and going global hampered it reputation initially.

Cultural difference means that since the workforce is diverse and people of various religions, race, creed, skillset etc. work together so there could be communication gaps and differences which is termed as cultural distance. It hampers the productivity of the firm since there is no synchronisation between the teams.