Integrated Global Strategy in Context - Literature review Example

GLOBALISATION OF LOGISTICS AND SUPPLY CHAIN Introduction As early as the 1950s, the concept of globalisation was starting to hit both academic and business literature. By early 1990s, it was already clear to most scholars that globalisation was affecting businesses, especially Multi National enterprises (MNEs), both positively and negatively. It is in this light that Frear, Metcalf and Alguire argued in their paper in 1992 that today’s businesses operate in a more interconnected world which makes them to perceive competition as a global factor leading them to have to develop common products that can be marketed differently in various parts of the world. The need to have a common platform based on which products and services will be developed for the global market is what prompted Frear, Metcalf and Alguire (1992) to make reference to the use of integrated worldwide strategy as a requisite for globalisation. Even though the claims of Frear, Metcalf and Alguire (1992) were made more than 20 years ago, this paper will argue that indeed in today’s world, it is possible for MNEs to operate an integrated global strategy in a diverse range of countries across the globe and succeed in the global competition in which they are currently faced with. Globalisation must be seen as a creature undergoing constant evolution with the end goal being to be a perfect system. In this regard, how much the world is globalised today is different to how must it was globalised 10 or 20 years ago. The 19th century was the dawn of globalisation and has ever since been evolving slowly with the development of technology and other external factors (James & Steger, 2014). The development of technology and the other external factors will be a basis for arguing out in support of Frear, Metcalf and Alguire (1992) that even in 2014/15, MNEs require an integrated global strategy to succeed. Integrated global strategy in context An integrated global strategy involves a uniform marketing method that is used by the firm in all its geographical locations (Albaum & Duerr, 2011). Consequently, neither home nor foreign factors are considered when determining the firm’s marketing strategy. This method is usually used by firms whose products and markets strategies do not have to be changed. For instance, a computer manufacturer may not need to have a different marketing or product strategy for each market in the global arena. However, a mobile phone manufacturer may need to have an individual marketing strategy for each country or region because the customer dynamics have an effect on the ways in which customers in different regions buy this kind of product. Even firms that use the same marketing strategies for each region or country may still need to change the four Ps of marketing according to the country or region (Shaw, 2012). However, the fact that a fir is using the global strategy does not necessarily mean that it is not being affected by globalisation as prescribed by Frear, Metcalf and Alguire (1992). Another form of integrated global strategic can be expressed in the form of multi-ethnocentric strategy. In this strategy for globalisation, each market is considered and approached differently, and a marketing strategy for a particular market is developed based on the specific needs of that market (Laermer & Simmons, 2007). In such a situation, the local managers in the foreign markets are always given precedence over the expatriates with regard to the development of strategies that meet the needs of the local market. This can be difficult for businesses; however, it helps to make them ready them for successful within the local market. This concept is known as “think global act local” or “glocalisation”, which refers to the fact that the firm’s strategy developers must consider that they are operating in a global market but must also remember that each individual market that makes up the global market has its preferences, which must be met individually (Hong & Song, 2010). Effect of integrated market participation on the use of integrated global strategy Market participation refers to the ways in which firms are able to participate in strategic markets around the world (Mintzberg et al., 2010). The world consists of more than 200 countries, and even the most globalised firms have been unable to reach all these countries. However, the modern trend with globalisation where technology now plays a central role makes it no longer relevant for a firm to be in all markets at the same time to engage in active market participation (Samimi & Jenatabadi, 2014). Rather, on the wings of electronic commerce (e-commerce), a company can be in just one location and actually be hosted across the globe through the power of the internet (Delone & Mclean, 2004). One other situation that highlights the concept of integrated market participation is that for modern firms, globalisation is not a matter of having operations in each and every nation in the world but of having operations in the geographical regions that matter most. The concept of integrated market participation has affected the use of global strategies, where the need to have a much integrated global strategy has become more relevant today than ever. This point is argued through the next two subsections. The global significance of competition Because firms across the globe are now engaged in integrated market participation, a new form of competition has been created, having an equally globalised significance. Using the example of transaction cost market entry, Brouthers (2013) explained that a firm may decide to set up operations in a country not because the country is strategically important in its own right but rather because it is the home country of a major competitor. In this regard, a firm may want to camp in that country in an effort to counter its competitor. This implies that competition has become so significant that firms must look for every way possible to thwart the growth agenda of their competitors. But because such competitions are entered with the aim of limiting the global dominance of one firm to the advantage of the other, doing so as part of an integrated global strategy is highly necessary (Sharma, 2009). This is so because it is logical that any firm has to have the right strategy to deal effectively with its competitors (Porter, 2008). Market development Using Ansoff’s matrix model makes it possible to under the applicability of an integrated global strategy in today’s globalised market. This is because according to Ansoff (1957), firms have the option of using market development strategy to expand into new markets with the use of existing offerings. Because the offering are not new, it is expected that the very strategy that was used in marketing in the old market will be used in the new market and hence the applicability of the integrated global strategy. In today’s business environment, this strategy can be applicable only because the existing offering being introduced to the new market already has a form of recognition that makes it easier for buyers in the new market to embrace them (Hollensen, Boyd & Ulrich, 2011). In the last 10 years, several firms from the United States (US) can be used as a case study to explain the applicability of integrated global strategies in the context of integrated market participation. Firms such as Wal-Mart, BMW, and Best Buy have encroached on the lucrative Asian market. These firms do not merely move to Asia to compete with the businesses that are headquartered there; rather, they also want to have access to the market, which is a major part of the Brazil Russia India China and South Africa (BRICS). At the same time, some businesses in Asia and the Middle East have also ventured into Western markets due to the suitability of their global strategies, which are so integrated that they can perfectly fit into the Asian, Middle East and Western markets (Laird, et al. (2013). Another good example is Huawei and Samsung, which have used an integrated global strategy to successfully undertake new market development for its telecommunications and computer networking equipment in the US even though the company is originally based in China (Ahrens, 2013 and Yang, 2011). Product Offerings and integrated global strategies One important aspect of globalisation that was predicted by Frear, Metcalf and Alguire (1992) is the issue of product offering. Once the firm has identified the geographical location to which it wants to expand its business, it has to determine how best to offer its products. Several strategies can be employed in this regard. Fortunately, there is a growing insurgence of social-identity theory across the globe, which has created a phenomenon, whereby consumers now identify themselves with what a particular product stands for or represent to them, rather than the origin of the product (Turner & Reynolds, 2001). Because of this, and in line with what Frear, Metcalf and Alguire (1992) advocated, it has become possible for firms to use a single integrate global strategy to undertake product offerings across different geographic locations. However, when implementing strategies for product offerings, MNEs use various product strategies some of which have been discussed below; Product standardisation Product standardisation means that the firm will have standardised products for all its markets (Bloomberg, LeMay & Hanna, 2002). This can indeed be seen as part of the characteristics of an integrated global strategy where a single strategy applies to different markets (Ranft & Marsh, 2008). The advantage with product standardisation is that the firm will benefit from cost reduction. As noted by Quer and Claver (2007), this is so because producing standardised products is easier and less resource demanding than producing customised products for each market. But to succeed with this strategy, the firms has to be sure that all targeted markets have relatively same consumer needs (Ranft & Marsh, 2008). But it has already been stressed that through the social-identity theory, it is now easier to find consumers from different parts of the world, all of who share the same line of consumer needs. Product customisation Whereas product standardisation may apply to different markets with the same consumer needs, product customisation can be applied in different markets where consumers with the same kinds of needs can be identified. That is, product customisation involves customising products to serve the needs of targeted customer base (Hvam, Mortensen & Riis, 2008). This is related to the use of the focus strategic option by Porter (Porter, 2008). Even though this may sound like using different decentralised global strategies, looking at from the perspective of focus strategic option gives a different understanding. This is because it is still possible to engage in product customisation while using integrated global strategy. This is because when the focused customers are identified across different global markets, the same line of customised products can serve their collective needs. Hence, a single integrated global strategy can still be applied for all these customers (Bell, Crick & Young, 2004). A typical example of this is a footwear company which specialises in the manufacturing of customised football boots for artificial pitches. Even though such customised foots may be needed by only a limited number of customers, such customers can be found all across the globe in the name of footballers. Using integrated global strategies through Location of Value-Added Activities Reorganisation of the value chain According to Samuelson and Nordhaus (2004), in their bid to ensuring that there is a common line of value-added activities that consumers across the globe can receive, firms resort to the use of integrated global strategies. Most firms have deemed it necessary to distribute their value-added activities so that each activity can be situated in the global location that is most effective. But indeed to ensure that there can be a standardised value chain that can be reorganised for most deserving parts of the global market, it is only important that other value chain strategies that have been tried and tested in other markets will be introduced (Kaplinsky & Morris, 2001). Western multinationals have relocated their manufacturing activities to Asia, where they are able to access high-quality cheap labour, thereby helping them to save on costs. This way, it can be seen that even though the core global strategy is maintained, some additional location related benefits are gained (Hillbrand, 2006). This need to outsource labour to Asia was caused by the previous global recession, which left many firms with few resources and the need to save every possible penny (Weele, 2009). At the same time, the competition among the firms led them to source cheaper labour in Asia. To do this, a firm can use one of the following two strategies. Divisions or strategic business units (SBUs) With this strategy, each division is within the corporate structure is given the autonomy to create their own operating as long their strategy fits with the corporate strategy (Johnson, Scholes, & Whittington, 2010). Each division can be located in a different country where there is the greatest ability to meet its strategic needs. The relation that this strategy has to the use of an integrated global strategy is that it helps the business to meet the individual needs of each market or region without affecting the corporate strategy or structure (Moen, Gavlen & Endresen, 2004). Because of the integrated nature of the global strategy therefore, it is always possible to carry its strategic business units across different geographic locations without having to border about whether or not these will fit. Strategic outsourcing One other premise of integrated global strategy can be seen with the use of strategic outsourcing by global firms. With strategic outsourcing, the business sustains its core functions and outsources its support functions (Espino-Rodríguez & Padrón-Robaina, 2006). Certainly, this is permissible because of the ease with which newly outsourced components of the business can be deemed to fit in the wake of the use of an integrated global strategy. This can be done in such a way that all regions outsource functions to meet the specific needs of the firms within it. Retaining competiveness with the use of integrated global strategies Firms in today’s globalised world are able to operate based on integrated global strategies. Almost any major multinational today uses a certain type of integrated global strategy to ensure that it remains competitive (Hollensen, 2007). Coca-Cola, for instance, has used outsourcing to ensure that it is able to focus on its core functions. It consequently outsources functions such as the bottling of its soft drinks. The firm has been doing this for a long time even before the debate about globalisation and its effects on modern business and economics was ignited. Another firm that can be said to have an integrated global strategy is Apple. Apple was one of the first big US firms to start outsourcing its manufacturing functions to enable it to remain competitive not only in the home market but also in the global market (Kotler & Pfoertsch, 2007). As a result, its manufacturing, especially in regard to smart phones, has been outsourced to Asia. Different parts of the product are manufactured in various locations in Asia and then assembled into one product before being sent to the market. This not only enables Apple to save on labour cost but also helps the firm to be globally strategic (Linzmayer, 2004). While thinking about its global strategy, a firm must know how competitive decisions are made and how they can be countered by its competitors. This is because taking advantage of the integrated global strategy is not the sole reserve of a single company and that other competitors may use it to the disadvantage of a given firm (Bell, Crick & Young, 2004). To stay globally competitive, a firm may decide to launch its product in the home market of the competitor, rather than within the home market, to help it to deal with the competitor in the global market. However, firms must know that this can be easily countered by their competitors in a number of ways. For instance, if the competitor was not already in the home market, it can lead to them also deciding to bring in their business in the home market of the competitor through the use of a reverse market entry strategy (Lymbersky, 2008). At the same time, the competitor can choose to respond in other markets where itself or the attacker is not a home market. These factors have to be considered for every move that the firm does with regard to the globalisation. The aforementioned examples of how businesses are having to operate based on an integrated global strategy are many and varied. It is clear that a firm that failure to employ a global strategy will encounter problems in the long run, while firms that have a solid global strategy are more likely to benefit from globalisation. Those who view globalisation as a menace are, to some extent, mistaken. But in doing so, companies do not have to forget that others can easily outrun them with the use of more innovative global strategies (Lymbersky, 2008). In a globalised world, it has become possible for people in industrially underdeveloped regions to access and benefit from products manufactured in the developed world (Zucchella, 2006). A good example of this is Africa, where there are no industries that manufacture products such as cars, computers, and mobile phones. Yet, due to the fact that many of the firms which produce these goods are globalised, their strategies enable them to enter the African market, thereby allowing consumers there to access their products .But this also sends a strong warning to larger global firms on how they can easily loss their places to smaller and newer firms who take maximum advantage of globalisation. Conclusion The effects of globalisation cannot be ignored, nor should its power be underestimated. In the last century, the slow process of globalisation has shifted the ways in which businesses around the globe operate. Within the last decade, the process of globalisation has intensified, accompanied by the proliferation of communication technology. The future is expected to lead to an even more globalised world commercially, politically and even culturally. This will continue to affect the ways in which businesses whether big or small access markets. 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