Global Business Strategy - Essay Example

 Global business strategy is concerned with the important long – term policy decisions of international firms operating across frontiers in the world economy. In a global business strategy, a firm sells the same product in essentially the same manner throughout the world. Many companies simply modify their domestic business strategies by translating promotional brochures and product – use instructions in to the language of the host nations. A global marketing perspective can be appropriate for some goods and services and certain market segments that are common to may nations. Globalization of firms of all sizes and from a variety of industries is a watch word which must be reckoned with in today’s competitive world markets. To be successful a company should have a, a consumer – oriented approach and should understand customer needs worldwide, along with a comprehensive global business strategy As the world becomes smaller and smaller, it is becoming more and more evident that business firms will increasingly face stronger competition. The purpose of utilizing different types of business strategies on a global scale is to increase the firm’s ability to produce a higher quality product at a lower cost on a world scale. A global business strategy usually comprises of a global product and a brand name, presence throughout the world market. The production activities of the business also will be located worldwide so as to gain maximum advantages, co – ordination of strategies and activities.The global business strategy must be based on standardization of product, branding and advertising. Globalization and business From the perspective of business, interest in globalization centers on two major facts; globalization of markets and globalization of supply chain. The globalization of markets suggested that technological change, social, political and economical development have, in recent decades driven the world towards a ‘global village’ or ‘converging commonality’ – a homogenized unified global market in terms of consumer taste and product preferences. While there is strong evidence that many markets are becoming increasingly global in certain aspects, an approach to strategy that concentrates almost exclusively on standardization and costs represent an oversimplification of the situation. The global environment is becoming increasingly complex and requires more sophisticated approach to strategy.” As per (Ali, 2000, pg.8) “Global corporations should treat globalization as a view and outlook that broadens and energizes human mind and perspectives” As the market become global, consumers are becoming more sophisticated, demanding products that are differentiated rather than standardized. A further complexity is that globalization is not confined to simply to consumer markets but also relates to the global scope of all of organizations’ business operations and its ability to compete on a global scale. Global business strategy is an approach to strategy that embraces the worldwide scope of organizations activities, a view that the whole world is a potential market. Globalization has given business the opportunity to configure its activities so as to take account of vocational and other advantages arising from difference in resources, skills and economic conditions in different parts of the world. The Concept of Strategy with Relate to Business Strategy concerns organizational learning about the business and its environment and the development of knowledge that produces core competences which position the organization favorably with regard to the variable in the environment. Strategic management is comparatively young discipline and, in consequences, there is considerable debate over which approach manager should adopt in devising their strategies. Strategic management is the ongoing process companies use to form a vision, analyze their external environment and their internal organization, and select one or more strategies to use the creative value for customers and other stake holders, especially share holders. An effective vision informs the selection of the firm’s strategy. Developing and implementing a strategy strengthens a business in many ways. The firm’s mission which flows from the vision is focused on the markets the firms serve and the products it provides. Indeed a success of a business is strongly influenced by how well a firm uses it’s the strategic management process. According to (Harvard Business, 2005, pg.11) ‘In the original sense, strategy is the military term used to describe the art of a general”. Business strategy is the plan, choices and decisions used to guide a company to greater profitability and success. Strategy indicates where resources should be focused. The process of developing and implementing strategy enable mangers to understand their customers and competitions. Specifically, a sound strategy is grounded in understanding of a business’s customers. Some of the strategies pursued by the market - leading firms such as Microsoft and Apple involve anticipating what their potential customers will like. Formulation of Global Business Strategy Strategy formulation and implementation are normally treated as separated stages in the strategic management process... Strategy formulation refers to the development of long – term strategies and policies for the effective management of business. Strategy formulation process included scanning the environment for opportunities and threats and taking an inventory and assessment of the current resources of the business. In his article (Anand, 2011) writes that “In the domain of strategic management,the foundation for formulating a strategy lies in identifying the stakeholders. Stakeholders may have direct and indirect benefits from the firm”. The formulation of global business strategy has the following stages. i) Performing a business risk analysis: Business risk assessments are frequently aimed at addressing major business events. The business risk analysis in an organization is driven by decision makers at senior management and board level, who will use the result to make strategic decisions. Prior to performance of risk analysis, it is usually possible to establish only preliminary criteria against which risk will be valued. A business risk analysis involves identifying risk, understand the likelihood and significance of their occurrence, determining the likelihood or occurrence can be controlled by corporate measures and deciding whether residual risk is acceptable. ii) Analyzing various methods of entry in to market: Regarding market entry strategies, a firm’s unique characteristics may have some impact on entry mode choice. Most analyses attempt to compare the advantages and potential disadvantages of a particular entry mode with supposedly superior or optimum modes, for example joint ventures or licensing versus wholly owned subsidiaries. It is analyzing the firm’s choice of conducting business abroad – whether through exporting, licensing, franchising, industrial counter trade, joint ventures, strategic alliances or wholly owned subsidiaries. iii) Detailing the process of global strategy plan: Developing a global strategy is complex than developing a domestic strategy because global business strategy involves travelling across the borders and integrate various subsidiaries and headquarters senior management opinion. Senior managers are from various countries or region and their opinions and suggestions are critical in the process of global business strategy development. The global strategic plan should be detailed to and accepted by all the employees of the organization. Implementation of Global Business Strategy In implementing the global business strategy can be with regard to global business operation and in marketing and finance field. A) Implementation strategy in Global Business Operations The strategy implementation issue in global business operations can be: how to use organizational design and combine organizational structure, control, and culture to allow a company to pursue its business model and strategic successfully. Once a company decides to compete across industries and companies, however, it confronts new sets of problems. As a result it has to make a new series of organizational design decisions to successfully implement its new multibusiness model. Strategic managers need to invest more resources to develop a more complex structure – one that can meet the needs of its multi – business model and strategies. A)Implementation Strategy with relate to finance and marketing i) Evaluating global financing and mechanism of exchange rate In terms of global financing management, the sources of fund necessary to finance trade and foreign investment are evaluated. The funds can come from internal or external sources. Internal sources of fund such as earnings and depreciation are major sources of funds for MNCs. But external source of funds, such as bank loans and Euro dollars, are important as well. The currency value of different countries varies significantly and hence a firm indulging in international business should evaluate well in advance the exchange rate mechanism of the host countries. ii) Identifying regional institution that aid global business It is the role of the MNCs to identifying different institution in regional territory which aid the global business to flourish. This can be financial institutions like World Bank, Asian development bank, International monetary fund and African Development Bank. iii) Global operation financing identification In this process different payment and finance methods are identified which can assist the firm in global business. Payment methods vary by situation and range from cash in advance to open account or consignment selling. The single best method is for the business is a confirmed, irrevocable letter of credit.The finance methods can be bank acceptance, countertrade, forfeiting and working capital financing. iv) Conduct a product or service market analysis on global level The product and services market analysis is the process in which the demand for a certain product or service is identified. This is conducted by using the marketing mix where price, product, promotion, place, promotion and people are analyzed in a market segment. However, the cultural diversity of a country also impact on the global business strategy of a company. Impact of Cultural Diversity on Global Business Strategy When a firm adopt global business strategies, the impact of cultural diversity becomes extremely important. In the journal (Palich,1999,pg.587-606)writes that “Expanding internationally requires managerial adaptation due to differences between national cultures”. Global firms must understand cultural dynamics to formulate their business strategies, to locate production facilities and manage worldwide supply chain, and to design and market culturally appropriate products and services, all while managing cross cultural – interactions throughout the organizations, from the most senior executive committees to the shop floor. As more firms move from domestic, multi domestic, and multinational strategies to operating as truly global companies and alliances, thee importance and impact of cultural diversity increase markedly. In global firms, the effective management of cultural diversity is imperative for its business success. In global business, which focuses primarily on exporting and producing abroad, cultural diversity strongly affects relationship external to organizations, given that it has both clients and employees in other countries. In global business, the cultural diversity strongly affects the internal organizational culture, many more employees and managers need cross - cultural management skills. Global firms must continually mange cultural diversity both within the company and between the company and its external environment. All in all when global business managers take cultural diversity in business environment seriously, it messages to employees and customers that their interests are valued. Conclusion Many executives are convinced that going global is an imperative in today’s business environment. In order to be successful in today’s global market, formulating and implementing global business strategy is highly needed. Global business strategy implementation is the process of working towards strategic goals by using the organizational structure to execute the agreed- upon strategy. There are many decisions that are made in the process, including location, ownership decisions, and functional area implementations. An international firm can only be successful if it formulates and implements a global business strategy which is efficient and feasible. The strategic policy highly depends upon the vision and competency of the strategic managers. A comprehensive global business strategy enables an organization to earn profit and reputation. A global business strategy should aim at enhancing the attractiveness of their products in the eyes of its global customers. In the current global business market, competition is extremely high and businesses are in a rat race to rival each other. A strategic leader should look at all the aspects of business before formulating and implementing global business strategies. On a global level, international business face two pressures; one is cost reduction and the other is to response in local market. According to (Moon,2011,pg .346) “In reality, many businesses find it necessary to pursue multifocal strategies or transnational solutions, responding simultaneously to pressure for global integration and local responsiveness”. An efficient global business strategy needs to emphasis on customer needs and market value of the product and the good will of a company. References Anand, M. (2011, July 5). International Business Strategy Formulation : A Study on the Role and Impact of Socio-Political, Regional, Economic and Legal Institutions. In Anand Space. Retrieved December 2, 2011 Ali, A. (2000). Globalization of business: practice and theory (p. 8). Binghamton: Routledge. Harvard Business School.Strategy: create and implement the best strategy for your business. (2005). Boston: Harvard Business Press. Moon, H. C. (2010). Global Business Strategy: Asian Perspective (p.346). Danvers: World Scientific. Palich, L. E. (2011, July 5). A Theory of Global Strategy and Firm Efficiencies: Considering the Effects of Cultural Diversity. Journal of Management, 25(4), 587-606. Read More