Question

Assess potential global strategies for the organization.

• What are the four types of global strategies
• What are the benefits to using each of those strategies?
• What are the drawbacks to each strategy?
• Would each strategy (by type) be appropriate for your company? Why or why not?

Answer 1

Global startegy can be said as the strategy that a business undertakes when it's expanding the business in global market,or in simple terms strtegies used in the process of globalization of firm.If we futher break it into simple form then we can say"Strategy a business persue when they wish to expand globally".

Types of Global strategy:

1)Export

Export strategy is mainly related to the decision making of products export potential.When a company is trying to enter international market without taking much risk it exports it's products abroad with it's main focus still on domestic market.

Advantages:For export one needs to increase it's production and the greater the production means economies of scale.The intermediaries are less in direct export hence profit margin will be more.

Disadvantage:

The cost of doing direct export in initial days require huge outlay.Unstable market or changing currency value also cause risk at the times of payment.Whent he value of money fluctuate it effets everyone in the cross border business.

2)Transnational strategy

It is used when a company faces significant cost pressure from international competitors but must also offer products that meet local customer needs.Transnational strategy in layman tems can be said as responding to local needs.For example McDonalds follows this Transnational strategy.Here the outlet function as per the local requirement of people.For example eating Beef is banned in India hence they are not into any scuh product and are catering to the needs of the locals.

Advantage:This strategy takes advantage of the cultural differences cross border to mint profit.They respond in localized manner as per the requirement.Another advantage is since the business is decentralized the cost of labor also varies.

Disadvantage:

Lack of Understanding:having full understanding of market is very important .If you miss on this point then you loose your business.There is also a risk of loosing control over the business since it is in other country and theri is always social,political risk involved.

3)Multidomestic Strategy

This strategy is related to customized product or processes related to the condition of a country.It is a local approach to reach the market rather than the global approach.This approach customizes the product selection, payment methods, and marketing to the values and regulations in each country where it operates.

Advantage:Ability to customize.

Disadvantage:Economies of scale can't be reach through customization.

4)Standardization Strategy

This strategy is used when the whole world is considered as one maket with little or no variation.The assumption that one product will meet the need of all market is being followed here.

Advantages: It  centralises many common activities, such as product design, gaining scale economies in manufacturing, simplifying the supply chain, and reducing marketing costs.

Disadvantages:Belief that single product will fit all countries market irrespective of psychological,demographical changes.

Now the strategies are appropriate or not toatlly depends on the type of organization .For example For international outlets like McDonalds and KFC ,they are using Transnational strategy.Hence it depends upon the condition,product and prganization type that which strategy should be followed.Beverages producting firm such as COKE and PEPSI follows Standardization Strategy.