In light of difficult economic times, it seems appropriate to discuss corporate strategy. Companies have a lot to prepare for, rather than look forward to, in the coming decade. Some will react to weak growth and rising capital by retreating to the home market, using the word “global” to reference “economic slowdown” rather than true globalization. This reaction, however, could be a poor decision for firms that are based outside of the developed world. With low per capita incomes in developing countries, there is room for significant growth. Regardless of company location, it is imperative for managers to reevaluate strategy if they are to pursue a global strategy.
SIX ELEMENTS TO GLOBAL STRATEGY
The first element of the global strategy described by Ghemawhat (2010). While views on global strategies have centered around an idea of integrating markets, a shift to managing differences and adapting to local conditions is key. Resource allocation processes must change; companies cannot afford to invest in long-term payoffs on investments, and need to be more selective in making investments.
The second element is markets and products. A shift in customer targeting would allow companies to reach a broader market, and move to an economy that was previously unreached (e.g., moving a company that typically markets to the suburbs into urban areas could prove successful in expanding customer base). Companies must consider lowering prices to meet a customer shift from “excess to frugality,” and work on developing new, different, and price-friendly products.
The third element of Ghemawhat’s global strategy is operations and innovation. Companies need to keep in mind that, at least in the near future, off-shoring will continue at a significant level; supply chains, however, will require significant change to become efficient in the recovering market. Outlooks on the environment, energy prices, and process innovation are all changing. Companies used to simply transfer less-automated plants to less-developed countries, though those plants did little to contribute to innovation; a higher wage bill is worth advances in technology and innovation.
The fourth element is the organization and people. Prior to the economic crash, companies were approaching a more global structure; now, organizations may begin to flow back to country managers as companies try to adapt to local conditions. A significant plus here is the development of a broader diversity base.
Lastly, the fifth element is identity. As companies broaden diversity, they will need to form and promote a stronger corporate identity. Companies with strong and well- understood values will have a competitive advantage.
THE BOTTOM LINE
In all, a looser, more fluid approach is needed; Companies in the developed world will need to become more global in their views of the world, yet still more discerning in their decisions.
Ghemawat, P. (2010). Finding your strategy in the New Landscape. Harvard Business Review, 88, 54 – 60.