global issues in strategic management wikipedia

Industries in which costs drop by at least 20% for each doubling of volume tend to be good candidates for globalization. Industries for which the larger expenses are in R&D, such as the aircraft industry, exhibit more economies of scale than those industries for which the larger expenses are rent and labor, such as the dry cleaning industry. One reason that the facsimile industry had more global potential than the furniture industry is that for fax machines, the production costs drop 30%-40% with each doubling of volume the curve is much flatter for the furniture industry and many service industries. Potential for economies of scale (production, R&D, etc.) Flat experience curves in an industry inhibits globalization. The following drivers determine an industry's globalization potential. Some industries are more suited for globalization than are others. The Nature of Competitive Advantage in Global IndustriesĪn industry in which firms must compete in all world markets of that product in order to survive.Īn industry in which a firm's competitive advantage depends on economies of scale and economies of scope gained across markets. Societal differences in management and organizationĮxperience - cost reduction and innovation

Assembling these into a matrix results in the following framework:īalancing scale with strategic & operational risks Sumantra Ghoshal of INSEAD proposed a framework comprising three categories of strategic objectives and three sources of advantage that can be used to achieve them.

Crossover customers between markets - reputation and brand identification.

Broaden learning opportunities due to diversity of operating environments.

Diversify operational risks (labor problems, earthquakes, wars).

Diversify macroeconomic risks (business cycles not perfectly correlated among countries).

First mover advantage and only provider of a product to a market.

Operational flexibility - shift production as costs, exchange rates, etc.

Extend the product life cycle - older products can be sold in lesser developed countries.

Exploit another country's resources - labor, raw materials.

Economies of scale from access to more customers and markets.

This advantage can arise from the following sources: Sources of Competitive Advantage from a Global StrategyĪ well-designed global strategy can help a firm to gain a competitive advantage. To create a successful global strategy, managers first must understand the nature of global industries and the dynamics of global competition. However, some industries benefit more from globalization than do others, and some nations have a comparative advantage over other nations in certain industries. During the last half of the twentieth century, many barriers to international trade fell and a wave of firms began pursuing global strategies to gain a competitive advantage.

Global issues in strategic management wikipedia