What is a Global Strategy?
A global strategy is the set of goals and objectives that an organization has developed in order to operate internationally. It may refer to how the company aims to compete on a worldwide scale while still catering specifically to a particular geographic region. Fintalent’s global strategy consultants note that companies can pursue either a ‘local strategy’, which focuses on exploiting local opportunities and mitigating local risks, or a ‘global strategy’, which focuses on shaping the relative competitiveness of a company in global markets.
An effective global strategy must be based on an assessment of the firm’s global capabilities and its external environment, including competition and the nature of customer demands (see adjacent diagram). This approach calls for a detailed analysis of a firm’s position relative to its competitors in different locations. The analysis should look at combinations of variables such as financial measures (e.g., profit margins, return on investment) with non-financial indicators (e.g., brand awareness) that are sensitive to strategic decisions made by competitors.
How can firms develop a global strategy that delivers value?
First, firms need to recognize that globalization is not a ‘one-way street’. They should devote as much attention to what they can do for the world as what the world can do for them. For example, companies need to think about how they can use their products and services to improve the quality of life and make the world a better place (both environmentally and socially). In many ways, this is just good business sense. Research shows that companies which consistently pursue development of innovative products and services are likely to deliver superior long-term financial results. Companies should also be prepared to collaborate. They may have to share some of their intellectual property, but in return they should receive the resources to develop new products and services. There is nothing wrong with cooperating with other companies in order to grow their business, provided that the partners can reach agreement on what each party is getting out of the relationship.
How does a firm develop a global strategy?
Firms have various options for developing global strategies. Initially, they need to assess whether an existing international business unit (IBU) should remain local or if it should be brought back into the company’s home country as part of a global strategy. If the IBU is to remain local, then it must be properly managed on a day-to-day basis. If it is to be brought back into the home country, then a new global strategic plan will have to be developed with strong integration of all the different functions of the business.
The majority of firms that start out pursuing an international strategy will be better off if they maintain their local capabilities. By not incorporating all functions within one unit, firms can maintain their autonomy and freedom to make decisions that are relevant to their local market and customer base. Firms with a global strategy might want to develop a program for bringing key functions (e.g. finance, human resources, technology and strategy) together.
What barriers do firms face when pursuing a global strategy?
In short, firms face three main barriers when implementing a global strategy. The first barrier is one of organizational structure. This can be especially difficult for manufacturing operations. The second is cultural differences between different countries (e.g., in non-western countries people typically do not like to make direct eye contact). Finally, there is the issue of language (in many companies globalization has led to increased use of English as a common business language). In order to overcome these barriers and fully exploit opportunities in foreign markets, firms have to think carefully about their market entry strategies. This has become increasingly important over the past few years as the number of competing firms has increased. Where firms do not have the capacity to develop an adequate strategy, Fintalent offers the option of hiring expert global strategy consultants on ad hoc basis.