Designing a global

strategy

Framework for Global

Strategy
A global strategy is the way a company defines its
long-term objectives for the world market
Selects its value proposition for the world market
Builds, integrates and co-ordinates its business
system to gain and sustain a global competitive
advantage
Puts in place an organisation to manage its
operations worldwide
Four major components:
A
A
A
A

global
global
global
global

strategic ambition
strategic positioning
business system
organisation.

Global strategy framework

Global ambition
Expresses the role a company wants to play in
the world marketplace
How it views the future distribution of its sales
and assets in the key regional clusters of the
world
Firms can play five types of role:

Global player
Regional player
Regional dominant global player
Global exporter
Global operator.

Global ambition
Global player aspires to establish a sustainable
competitive position in the key markets of the world
and to build an integrated business system of designs
spread over those key markets
Example: Sony, Unilever, Ericsson, Alcatel, Motorola, Shell,
Xerox, Canon, Procter & Gamble, Citibank, etc.

Regional player defines its role as to capture a strong

competitive advantage in one of the key regions of the
world
Example: Peugeot, NEC, Barclays

A Regional dominant global player is a company

whose role is more than regional player but it is not yet
selling across the key markets of the world.

Global ambition
A Global exporter is company whose role is to sell across
the key markets of the world products manufactured or
services operated in its home country
They build foreign operations only to support the export
drive
Examples: Major aerospace or defense companies like Boeing,
Airbus, Raytheon, etc.

A Global operator is a company that procures a large

fraction of its product components in factories located
outside its base market and which concentrates its sales in
its domestic market
Many managerial issues of integration and co-ordination of
activities,
both
in-house
factories
or
long-term
subcontracting
Firms distribution of sales, assets and personnel, should be
looked at in order to assess the degree of global ambition,

Global ambition
The extent to which a company has followed a global
ambition, one can usefully utilise two globalisation indices:
Global Revenue Index (GRI): the ratio of the company
distribution of sales in the major world regions to the industry
distribution of demand in the same regions
A company whose sales distribution matches the exact
distribution of its industry market would have a GRI of 100 per
cent.
Global Capability Index (GCI): the ratio of the company
distribution of assets for capital intensive industries or personnel
in the major world regions to the industry distribution of demand
in the same regions
Capability described here is in-house capability, not capability
which a firm can acquire through external sourcing like
outsourcing, sub-contracting or strategic alliances
Companies which rely heavily on external sourcing will have a
low GCI score

Mapping of global ambition

Mapping of the consumer

electronics industry

Global positioning
Consists of two types of choices:
The choice of countries in which the
company wants to compete and the role
that those countries have to play in the
global country portfolio
The definition of the various value
propositions for the product or services
of the company, corresponding to the
type of segments and countries in which
the company wants to compete

Global positioning
Key countries:
Depending on the industries, countries differ in the
opportunities they offer to companies for their strategic
development
Some countries, given their size, growth or the quality of
their human, natural or locational resources, are critical
for companies long-term competitiveness
In the automobile sectors, Japan, Korea and, in the future,
China can be considered as key
In the pulp and paper industry, in which natural resources
are a key component of competitive advantage, countries
like Indonesia can be considered as key
California (Silicon Valley) is a key area for Internet players

Global positioning
Emerging countries:
Countries that exhibit a high growth rate, making them
strategically attractive in the near future
They depend on opportunities which are industry-specific
China, India, Brazil, East European countries, some African
nations

Platform countries:
Countries with locational advantage, good logistical, financial,
regulatory and legal infrastructure or qualified personnel, can
serve as a hub for setting up regional centres, global
factories, etc
Singapore, Hong Kong, Ireland or Taiwan present these
characteristics (Carrefour used Taiwan as a platform for its
strategic development in Asia)

Global positioning
Marketing countries:
The attractiveness of the market is good, without being as
strategically critical as for the key countries
Such countries should be assessed on its own merits,
depending on the political, economic and business context
India, China with huge middle class population for mass
market products

Sourcing countries:
Countries with a strong resource base but limited market
prospects
Malaysia for rubber or Saudi Arabia for petroleum

A global company will control a portfolio of operations

in these different categories of country

Global positioning
Value
Proposition:
Defined
as
customers value attributes that the
company is offering to the market
Choice of value attributes
Choice of customer segments
Choice
of
degree
of
world
standardisation of the product/service
offering.

Global positioning
Value attributes are the elements of the products
or services that customers value when making their
purchasing decision
product design, functionality, performance, quality,
customisation and price, the brand, the availability and
other features
Differentiated: proposition based on value-enhancing
attributes such as performance, quality, service,
customisation
Cost leadership: proposition based on price for
standardised products or services

Company can either position itself as a Global

differentiator or a Global cost leader

Global positioning
Customer segments are the groups
customers that have similar value curves

of

Customer groups can be identified by income level,

geographical
location,
age,
socio-psychometric
attributes in consumer goods and service industries
Identified by industry, size, purchasing behaviour in
B2B industries

Strategic choice at this level is whether firm

concentrates on one or two customer groups
(Focused)
Whether firm attempts to embrace many or all
customer segments (Broad)

Global positioning
Standard vs. Adaptive (value proposition)
Firm adopts a similar or standardised value
attribute to the same type of customer
segments across the globe (Standard)
Firm tries to differentiate value attributes and
segments according to the country or regions
Coca Cola, Swatch or SONY have a standard
value proposition across the globe
Unilever and Procter & Gamble adjust their
value proposition and their segmentation in
different countries

Global positioning
Sustainability of competitive advantage (3 ways)
Customer loyalty

Unique products or services

Strong brand (Coca Cola, Apple)
High switching costs (Microsoft)
Locked-in.

Positive feedbacks
success brings success and produce increasing returns

Pre-emption of capabilities.

Key resources or assets in control of the firm that

competitors will find difficult to access, or to the
development of competencies that are time incompressible

Global business system

Business
system
design
consists
of
decomposing the company value chain into
elements that are spread and integrated
across the world (depends on type of industry)
3 major generic components of a value chain
Innovative activities: R&D, knowledge, creation,
design
Productive activities: procurement, manufacturing,
back office, operations, logistics
Customer relationship activities: marketing, sales,
distribution, customer services.

Global business system

Globalisation of Value Chain

Global business system

Role of partnership and strategic alliances in
building global capabilities
Firms need to acquire and complement their
capabilities by setting up partnerships
Global alliances: Role is to pool complementing
capabilities to reach world markets, or to achieve a
critical mass in R&D (Start Alliance, One World, etc;
Frequently seen in aerospace, life sciences,
oil
exploration etc.)
Partnerships for market entry: Joint ventures,
franchises, licensing, or may be to comply with local
government requirements (Hero Honda)

Global organisation
Design
of
an
organisational
architecture which is able to support
and implement the global ambition,
global
positioning
and
global
business system
Various types of global structures
according
to
the
competitive
requirements of global integration
and local responsiveness

Global organisation