Global and Local Strategy, Essay Example

A multicountry strategy is one in which product is customized according to the needs of each individual market and decision-making tasks are delegated to the local divisions. A global strategy is one in which an organization sells the same product in all countries and all decisions are made at the corporate level (QuickMBA). There are numerous benefits to using a global strategy. First of all, a global strategy allows an organization to improve production efficiency and lower costs. Production costs are lowered due to economies of scale as well as bulk-buying from suppliers which could qualify the firm to trade discounts. The organization’s capital investment needs are lower because a single production facility could manufacture products for multiple international markets. Another benefit of using a global strategy is that the organization can develop a consistent quality and brand image throughout the world. The organization may also save in marketing costs since same marketing campaigns could be run in multiple international markets. The customer loyalty increases because they come to expect consistent experience and quality standards from the company no matter where they are and thus, develop a greater trust in the brand. Global strategy works best when there are little or no differences in tastes and preferences for a particular product or its particular features among multiple international markets (Emami). Coca Cola is a great example of a product whose taste has universal appeal and the customers expect a consistent product experience from the company no matter where they are. Another example is Apple’s products.

But if there are significant differences in tastes and preferences or needs of the customers among international markets (Kuzmicki), a better alternative may be multicountry strategies. An organization may also be forced to pursue multicountry strategies if there are significant differences in political, legal, and social factors. Countries often also vary significantly in terms of distribution channels and cultures which makes it difficult to follow a global strategy. One great example is Heinz which sells soy sauce in China because soy sauce is more popular than ketchup among Chinese customers. Heinz also sells small packets of soy sauce for 3 cents apiece in Indonesia because customers do not often have refrigerators or storage places to store large sizes (Johnson, 2011). Heinz strategy may result in higher production and distribution costs but it also allows the company to be competitive in international markets by catering to unique local needs.

As far as differences are concerned, global strategy enables an organization to locate production facility in a single location, create uniform marketing strategy for all international markets, and standardize inventory purchase activities. But a multicountry strategy may force the organization has to build multiple production facilities each of which caters to the local market. In addition, the supply chain network is also more complex due to greater number of suppliers and individual marketing strategies have to be developed for each market. Since the number of decisions involved and effective monitoring of each market are usually beyond the capabilities of the management, decision-making authority is delegated to local divisions who are closer to their specific markets and better understand the external and internal factors that shape the competitive landscape.

Think Global/Act Local can attempt to gain the best of both worlds because it takes advantage of the emerging social values that are gaining acceptance on a global scale. Today, consumers do not only care about products but also the conduct of the companies whose products they buy. Customers are more educated and have higher expectations. This strategy also helps the company build goodwill and customer loyalty which is an increasingly important asset due to intensity of competition as a result of globalization. This strategy improves brand’s perception globally and makes it easier for the company to enter new markets.

References

Emami, A. (n.d.). Strategies for Competing in Globalizing Markets. Retrieved March 28, 2012, from http://odin.lcb.uoregon.edu/aemami/315Fall03/Lecture%20Notes%20Strategic%20Competition/BA%20315%20LN%209D%20STRATEGIES%20%20FOR%20%20COMPETING%20%20IN%20%20GLOBALIZING.pdf

Johnson, B. (2011, October). The CEO of Heinz on Powering Growth in Emerging Markets. Harvard Business Review, pp. 47-50.

Kuzmicki, J. F. (n.d.). Competing in Foreign Markets. Retrieved from http://highered.mcgraw-hill.com/sites/0070600899/student_view0/chapter7/powerpoint_presentations.html

QuickMBA. (n.d.). Global Strategic Management. Retrieved March 29, 2012, from http://www.quickmba.com/strategy/global/