Global Strategy 3 Types of Global Strategies

Summary

This video explores the strategies firms use to expand geographically, highlighting key decisions in entering new markets. It outlines four primary strategies: global standardization, international, localization, and transnational, based on the balance of cost reduction and local responsiveness. The video emphasizes the importance of aligning a firm's core competencies with its international strategy. Additionally, it discusses the various entry methods, from exporting to subsidiaries, explaining how firms gradually expand their presence by choosing entry methods that best match their strategic goals and market knowledge.

Takeaways

• 😀 Geographic expansion strategy and method of entry are a joint decision and must align with the firm's core competencies.
• 😀 Firms should enter foreign markets from a position of strength, not weakness, leveraging their existing competitive advantages.
• 😀 Local responsiveness and cost reduction are the two key dimensions firms must consider when expanding globally.
• 😀 Local responsiveness involves adapting products or services to local preferences and cultures, which increases costs.
• 😀 Cost reduction focuses on offering lower-cost products to reduce prices, often by obtaining cheaper resources or reducing operating costs.
• 😀 The four global strategies are global standardization, international strategy, localization strategy, and transnational strategy.
• 😀 The global standardization strategy is about offering standardized products across markets with low local responsiveness and cost reduction focus.
• 😀 The international strategy allows firms to sell the same product at a higher price point globally, relying on brand recognition and strength.
• 😀 The localization strategy requires adapting products to fit local cultures and preferences, with higher costs but less need for cost reduction.
• 😀 The transnational strategy seeks to balance both local responsiveness and cost reduction, aiming to adapt products while minimizing costs.
• 😀 Entry methods vary in terms of control and investment: exporting is the cheapest but offers the least control, while subsidiaries provide full control at a higher cost and risk.

Q & A

What is the primary focus of global strategy for firms expanding across geographic markets?

The primary focus of global strategy is to determine how firms expand internationally by assessing motivations, selecting target countries, and implementing strategies to leverage their core competencies for success in new markets.

How do local responsiveness and cost reduction impact a firm's global strategy?

Local responsiveness involves adapting products and services to meet the preferences and cultural differences of local markets, which can increase costs. Cost reduction focuses on lowering operational costs across global markets, allowing firms to offer competitive prices, but may limit customization of products and services.

What are the four main global strategies discussed in the video?

The four main global strategies are: 1) Global Standardization Strategy, 2) International Strategy, 3) Localization Strategy, and 4) Transnational Strategy.

What characterizes a Global Standardization Strategy?

A Global Standardization Strategy involves offering standardized products or services across different markets with minimal customization, primarily focusing on cost reduction to maintain competitive pricing, especially in emerging economies.

What is the key feature of the International Strategy?

The International Strategy involves offering a standardized product or service across various markets without significant alterations, often at a higher price point, leveraging the brand's global recognition and luxury appeal.

How does the Localization Strategy differ from the other strategies?

The Localization Strategy focuses on adapting products and services to fit local market preferences and cultural norms, often involving higher costs for customization, but allowing the firm to charge higher prices in response to local demand.

What does the Transnational Strategy aim to achieve?

The Transnational Strategy aims to balance local responsiveness with cost reduction. It allows firms to tailor their products to local needs while keeping costs manageable, often by modifying only certain aspects of the product that are easier or more cost-effective to change.

How does the method of market entry relate to a firm’s global strategy?

The method of market entry, such as exporting, licensing, franchising, joint ventures, or establishing subsidiaries, should align with the firm’s overall global strategy. It involves decisions about the level of investment, control, and risk the firm is willing to take in a new market.

What are the key differences between exporting and establishing subsidiaries as market entry methods?

Exporting is the least costly entry method, with low control over operations in the target market. In contrast, establishing subsidiaries involves higher investment and greater control, but also higher risks, as the firm owns and fully manages the operation.

Why might a firm choose a joint venture or licensing as a market entry method?

A firm might choose joint ventures or licensing because these methods involve partnerships with local entities, allowing the firm to share risks, reduce investment costs, and gain local market knowledge, while still maintaining some control over the operation.