Question

Int Business -3: Strategy Formulation and Implementation

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Answer the following questions

Define global integration as used in the context of strategic international management. In what way might globalization be a problem for a successful national organization that is intent on going international? In your answer, provide an example of the problem.

Answer 1

Meaning of Global Integration

Global integration means inter connect the international activities of the MNC across all countries, looking for the strengths of the large companies and trying to achieve synergy effects.Thus, the different countries in which a MNC operates can be linked to each other. This could be e.g.because economies of scale are particularly high in a specific industry, leading to the necessity of internationally standardized products. Alternatively it will result from comparative cost advantages of a country that offer an incentive to specialise the activities of certain foreign subsidiaries leading to inter dependence between the worldwide activities. Necessity for worldwide learning, in order to exploit knowledge company wide that has been created in a particular country, or the situation in which relevant actors around the MNC (e.g. customers, competitors, suppliers) are the same in different foreign markets, enhance the requirement and the potential to co-ordinate closely the different international activities. These interdependencies between countries are called "forces for global integration "

At the same time , a MNC operates under heterogeneous conditions in many different host countries. In each country the local unit is confronted with different local customers and host governments , competitors and substitution products. Multinational flexibility i.e., the ability of a company to exploit the opportunities that arise from the heterogeneity is necessary. This contingency conditions for MNC is called forces for local responsiveness and the pressure to adopt varies by industries.

Forces for Global Integration

In a global industry, a firms competitive position in one country is strongly affected by its position in other countries. The forces for global integration also called industry globalisation drivers , can be divided in 4 types

1.Market Drivers

2.Cost Drivers

3.Government Drivers

4.Competitor drivers