Globalisation as a strategic decision - Strategic Management

Figure illustrates the fact that for the individual company globalisation is a strategic decision. The diagram is derived from points made by M. Cvar in a 1986 study of patterns of success and failure in global competition. Globalisation is not a naturally occurring state but is man-made, and the triggers are the identification of common segments in different countries that enable a product to be defined globally.

The study also showed that the successful global companies had five factors in common. They had all developed a pre-emptive strategy, effectively becoming the agency that created the global market. All managed their companies on a global concept and measured their performance on this basis. It was also observed that all had higher than average R & D compared to their industry. All had demonstrated a measure of single-mindedness in overcoming obstacles to globalisation.

Global-competition

The implication of the global dimension is that for many companies strategic thinking has to stretch beyond the country dimensions that may have been traditional in the industry. Whether the company seeks to create a global business, on the lines suggested by Cvar, or whether it chooses to let a competitor initiate this process is a matter for the individual company. Once the industry goes global the opportunities for the company with only a local market view will certainly change, and may diminish. Prahalad and Doz suggest that the key factors in deciding how to operate are the need for integration on a global basis contrasted with the need for local responsiveness.

If these two concerns are seen as two sides of a matrix, it follows that different businesses can be positioned on the matrix and appropriate strategy decided. However, the authors point to a factor which most strategists will have already observed, that the number of industries where global integration is the dominant factor increases every year. The pressures are created by customers and competitors, and it is dangerous to assume that an industry which has local responsiveness as the key factor today will remain like this in the future.

Figure provides a diagram which was inspired by the Prahalad and Doz matrix. Exhibits provide a set of questions to enable organisations to plot the industry situation, and the way their company is operating. In this diagram the need for a globally integrated approach is seen as one end of a spectrum, the other end of which is a need for a totally local response to the market. The vertical arm of the quadrant measures whether the company is operating in a global or multilocal way.

Quadrants B and C are on the face of it potentially appropriate company responses. Quadrant D could be appropriate if the company has been able to identify niches in each market which are defensible. However, my experience is that the statement ‘we are niche players’ is often a rationalisation to explain the strategy, and often has no basis of fact behind it. It is hard to think that an answer which fell in quadrant A could be appropriate, and behaving globally in markets that cannot become global seems like a quick route for disaster.

Going global from start up

I have not refined and tested Figure yet in real situations, as I have with most of the other methods and models I have described in this book. So far its use has been restricted to teaching the concepts of global strategy .

Company-fit with competitive need


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