The use of Global Strategy
The word 'global strategy' refers to three different types of strategies: global, multinational, and international. In essence, these three tactics allow a company to realize its goal of worldwide expansion.
It's helpful to distinguish between three types of worldwide expansion that result from a company's resources, capabilities, and current international position while formulating a "global strategy."
If a company's primary focus is still on its native market, its efforts outside of that market can be considered international. A dairy company, for example, may sell some of its excess milk and cheese supplies outside of the country. However, the company's primary strategic concentration remains on the domestic market.
Implications of the three definitions within global strategy:
- International strategy: The organization's goals are mostly focused on the domestic market. However, we have specific goals in mind for our worldwide activities, necessitating the development of an international strategy. Importantly, the competitive advantage – which is critical in strategy formulation – is primarily built for the domestic market.
- Multinational strategy: The company is active in a number of markets outside of its own country. However, different methods are required for each of these markets because to differences in client demand and, possibly, rivalry in each country. Importantly, each country's competitive edge is determined independently.
- Global strategy: With little local variation, the organization regards the entire world as one market and one source of supply. Significantly, competitive advantage is mostly developed on a global scale.
Are there any other forms of global strategy?
In various books and research papers, you may see reference to other forms of ‘global strategy.’ For example, you will see ‘multi-domestic strategies’. These are useful and can be explored in their context. However, the three strategies outlined above cover the main possibilities.
Do we really have (or even want) a ‘global’ strategy?
Companies talk about ‘going global’ when what they really mean is that they are moving internationally, outside their home countries. It is important to clarify precisely what is meant by such wording because the strategic implications are completely different.
The business resources needed to sell internationally might typically include a sales team, brochures of products in various languages and an office team to handle sales orders back in the home country.
The business resources in going global are much greater. Typically, companies need manufacturing plant in various low labour cost countries, global branding and advertising, sales teams in every major country, expensive patent and intellectual property registration in many countries, etc.
So, why ‘go global’ if the required resources are much greater and, incidentally, more complex to manage? Because the business rewards are supposed to be much greater for a global strategy. And so are the risks!
Hence, many companies do not have a ‘global strategy’ in the way that it is defined in international business literature. Even some major multinationals do not have a true global strategy in the sense of completely integrated production, no localized brands, etc.
Pepsico acquires Walkers Crisps
For example, the highly successful multinational company PepsiCo dominates savoury snack products around the world. However, it still has local brands like Walkers Crisps in the UK. It does not use its Lays brand name in the UK, but employs Lays in much of the rest of the world. Why? Historical reasons that began with the PepsiCo acquisition of Walkers, which was already UK market leader.
Even if companies have a global strategy, this takes years to develop and requires substantial resources. It needs many millions of US$ and substantial management time and expertise. For example, Coca Cola took many years to develop its current position in the world soft drinks market.
Hence for many companies, especially smaller companies with limited resources, it is more realistic to develop an international or multinational strategy.
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