The Central Challenge of Global Strategy Essay

Globalization has grown immensely, and business is finding new markets in different countries of the world. However, the success of globalization for businesses depend on the global strategy or strategies employed. There are three common and important global strategies used by businesses. They include aggregation which is associated with the standardization of regional operations for achieving economies of scale, arbitrage which is characterized by certain offshoring operations to countries where the cost of labor and production is low. Lastly, there is an adaptation which is characterized by the customization of operations to meet local needs. Organizations use different strategies. However, these strategies are not always used in isolation and are therefore blended until they create the perfect balance for a global strategy. Many business people and academics make presuppositions about global strategy. These assumptions are not effective and create problems for businesses. They include the striking of a balance between economies of scale and the receptiveness to local conditions. The second assumption is the companies become more global when they focus on economies of scale. However as explained above these are presuppositions that are problematic and therefore, cause a lot of sustainability in the global strategy. The most important factor for business to consider in their global strategy is the management of differences that come from the border. Companies, therefore, need to focus on local responsiveness and standardization as the main objectives of their global strategies to have success. The application of the three strategies which are an adaptation, arbitrage and aggregation provide more chances of success in global strategies because of their focus on differences at the border. However, how well a company is globalizing depends on the development of a perfect blend of the three.

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Arbitrage, adaptation, and aggregation are the three important global strategies. However, they still have some tension among them but can still use to establish the level a company is globalizing. There are three distinct and therefore, different approaches. One factor that causes a difference in the three strategies is the organizational types of the companies that apply them. For example, for adaptation, a company is more likely to be country centered. Arbitrage, on the other hand, focuses on the need to balance between demands and supply across as well as within organizational boundaries which is usually pursued by a functional or a vertical organization. Lastly, aggregation is associated with various aspects of border groupings and organization. It includes factors such as global business, global accounts, regional structures, and many others. These approaches are therefore very solid in the manner in which they are implemented within organizations, and it is impossible to have them working at the same time because they are specific to the manner in which the company is organized. However, some approaches can manage to combine various elements from the three approaches, but it comes with great complexity when it comes to the process of management and it is also associated with a lot of costs. Many companies usually emphasize on the use of a different approach at a different time within their evolution as a business trying to operate globally and this means that at one point that the business will have employed all the three approaches.

From the discussion above it is clear that globalization is a very complex process for businesses. It is associated with various approaches that highlight different needs of the global market. Understanding these approaches is, however, paramount to the success of businesses.

Reference

Ghemawat, P. (2018). Managing Differences: The Central Challenge of Global Strategy. Harvard Business Review.