Table of Contents
The tenet of a global strategy in a business rests in establishing a single strategy that can be applied across the world while at the same possessing a characteristic flexibility to be adaptable to the local environment. Global strategy differs from the international strategy in that in an internal strategy, subsidiaries of a business act independently from the parent firm in the local business environment, with minimal control from the parent company. In fact business venturing into a global strategy, there is significant coordination of the business activities of the subsidiaries by the parent company. Product standardisation across the countries is the main characteristic of a global strategy. A business operating under a global strategy competes as a collection of an integrated single firm taking an integrated approach across different countries. The study seeks to understand the motivations of business going global. This study will implicate the various backing the need for globalisation with theories the product life cycle theory and Porter’s competitive advantage theory. Entry strategies commonly applied by business when going global include licensing to entities in the target countries, franchising, through import and exports, strategic alliances, direct investments and joint ventures.
There are various motivations that push business to select a global strategy with the main goal being to ensure company growth through expansion of operation and market share. Hiring international staff and expanding to new markets abroad ensures the company is able to diversify and expand its business. It grants the business a competitive advantage in that it can rapidly adapt to the local environment by utilising its diversified human capital and experiences it acquires in new markets. Overseas operations are advantageous to a business since it grants a business firm an attractive area of operation with reduced budgets and expands its profit margin. For instance, a business firm that adapts a global strategy has the advantage of cutting overhead costs in countries abroad by taking advantage of the deflated currencies and reduced cost of living in these countries. An expanded market for a business adopting a global strategy brings the benefits of expanding demand from a shrinking demand in the home country market and reducing the business risks from reliance on the national market alone. Expanded markets confer the business the potential for developing new markets or restructuring new markets and thereby avoiding a financial crisis in the business. Essentially, a successful global strategy confers a competitive advantage to a business.
Aims of the study
To investigate the motivation for entrepreneurs adopting global strategy in business firms
The study adopts a case study research design which is a qualitative approach that allows for the exploration and understanding of a complex phenomenon such the global strategy adopted by a firm. Case study research design is considered when seeking to undertake a holistic and in-depth investigation of a research problem. The case study research design avoids the limitations of quantitative research designs such as the lack of a holistic and in-depth explanation to understand the perspective of the research subject. The case study includes both quantitative and qualitative data in understanding the process and the outcome of a phenomenon of intense through complete observation, reconstruction, and analysis of the case in question.
Global strategy for business emerged from the need to extend the oligopolistic rivalry of business across the international borders. This view discusses mostly the rise of multinational firms and includes theories such as the product cycle theory. According to the product cycle theory, the patterns of international strategy originate from the emergence, growth, and maturation of new technologies and industries. As a technology evolves through the phases of introduction, innovation, and maturation, these changes are accompanied by a significant advantage in the production of a product. Countries with the advanced phase of the cycle tend to have a monopolistic position due to possession of the advanced technology which leads to the creation of demand at the foreign demand, leading to the rise of multinational of a firm. This is characteristic of the second stage of the product cycle, innovation. In the third phase of the product cycle, maturation of a technology implies that the manufacturing process of a product is standardised and firms are forced to adopt a global strategy where they move to countries with lower production costs such that they can reduce production costs and increase their competitiveness. The less developed countries act as export platforms for the finished products.
There are several advantages that prompt a company to adopt a global strategy; these perspectives are divided into the positional view and the managerial view. From the positional perspective, firms consider their situational analysis of their present situation relative to the competition they face and other factors of the external environment before venturing into the global market. The global strategy, from a positional perspective, is reasoned as a pattern of resource generation and allocation in a planned sequence over time to achieve the explicit defined desired objective in the firm. The managerial perspective, on the other hand, is focused on the development of goals of a firm with a focus on the process of management rather than the overall direction of a firm. In the global strategy, a firm organises its operations in a worldwide integration characterised by centralised operations that guarantee high economies of scale. The firm benefits from exploitation of extra-national scale economies that transcend national borders of a single national market. In addition, a firm is motivated to adopt a global strategy of the need to gain from the coordination of technology transfer across different national markets.
The presence of unrestricted trade and investment policies across regions and compatible technical standards spur the need for companies to adopt global strategies. This is in addition to a common market regulatory regime. As the number of countries that have mutually recognised technical standards grows the tendencies of firms to transit from a local to a global strategy increases. Competitive globalisation factors leading to the adoption of global strategy including the increases in interdependence among countries and high two-way trade. Global strategy in firm ensures that a multinational corporation can leverage its reputations with customers by providing predictable and standardised products across different national markets. A company adopting a global strategy seeks to standardise its products while adopting local differences in the local business without sacrificing the production costs. Ultimately, the global strategic position of a firm strengthens the position in other markets. A firm uses its distribution advantage or production cost as a competitive advantage factor against its competitors. The global strategy ensures that a firm has a preemptive position in the market through large investment such that it is ahead of its competitors.
Nissan Motor Co. is a company with its roots in Japan, having been established in Yokohama city in 1933. Currently, the company has spread its manufacturing in over 20 countries across the globe and is also responsible for spreading is product and services in over 160 countries. In the highly competitive automobile industry and with growing debts to the tune of US$ 21 billion, Nissan ventured into a global strategy through strategic alliances in the late 1990s., The alliance was beneficial in providing a long-term sustainable growth with companies such as Renault, a French automobile maker, acquiring a 36.8% stake in Nissan Motor Co.
The global strategy adopted by Nissan Motor Co. through the strategic alliances with Renault sought to exploit the potential synergies in the joint product development, manufacturing and combine the complementary firm in order to create a firm with significant economies of scale to compete in the global automobile industry. The strategic alliance Renault-Nissan has been successful, leading to the growth of Nissan Motor Co. from a multi-regional firm to a global firm with a considerable competitive advantage on the global market scale. The Renault-Nissan alliance has grown through partnerships with other automakers such as Avtovaz from Russian and Ashok Leyland from India among others to become a world leader in all automobile market segments. The global strategy adopted by Nissan Motor Co. in the late 1990s has enabled the company to reduce the cost of production while increasingly localising its products for maximum market share increase.
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From the case study on the global strategy adopted by Nissan motor Co. through its strategic alliance with Renault, it underlines the motivation for business firms seeking a global strategy in order to guarantee rapid expansion in a globalised world economy. The global strategy ensures a company benefits from resources at the disposal of transnational corporations which increases access to markets for its products and reduces the costs of production. A global strategy allows for the strategic integration across markets in order to leverage sustainable competitive advantage over rivals. In the end, a business is able to overcome ferocious competition and survive.
The dramatic changes in the past 50 years in business, implies that localisation and stable business have become create due to advancements in transportation and communication that facilitate the acceleration of business towards global acceleration plans. This has inevitable benefits of reducing competition and fostering economic growth. As observed from the global strategy adopted by Nissan Motor Co. economic and political interdependencies have increased leading to the growth of a network economy that increases the competitiveness of multi-regional companies in the global arena through reduced cost of production and increases in the economies of scale as evident from the merger of Nissan and Renault. There are various drivers of adopting a global strategy including the comparative advantage gained; extending the scale of the market, market similarities and regulation factors. These factors emanate from the worldwide changes in the business environment that prompt companies towards local autonomy to the adaptation of global integration and uniformity.
The commonality of customer needs spurs the adoption of a global strategy in a firm. This may provide the rationale for going global in order to have a competitive advantage through the economies of scale in the production of goods. The global strategy can be viewed as a multidimensional approach to market participation through the conduct of business in amassing the market share. Global strategy phenomenon is driven by the need to standardise products where a firm is offering the same or different products to different countries. In addition, as observed in the strategic alliances between Nissan and Renault, activity location drives the need to adopt a global strategy in a firm. The choice of locating value-added activities is usually geographically concentrated rather than dispersed. Companies also choose a global strategy out of the need to have uniform marketing where essentially the same brand names and advertising and marketing strategies are used in different countries. This saves the operating costs of a firm and helps in having a centralised control of a firm business activity. A global strategy ensures the firm has an integrated competitive strategy as opposed to having an uncoordinated pattern of competitive strategy across different countries. A global strategy can be viewed as a matter of extent since a global firm must also be locally responsive to the specific needs of a country of operation. Government factors related to regulations and a favourable regulatory regime may spur the adoption of a global strategy in a firm. In addition, a firm may adopt a global strategy out of the need to take advantage of favourable logistics that can only benefit the business if a globally integrated strategy is adopted.
Implication of the Study
Macro factors are the main drivers of globalisation as the decline of trade barriers demarcated by national boundaries decrease due to the free flow of capital, services, and inputs. From the study, it is evident that market factors such as access to distribution channels and markets are the main drivers of the global strategy by Nissan Motors Co. Convenience and the need to overcome competition resulted in the global strategy at Nissan Motor Co. through the formation of a strategic alliance with Renault (France). Nissan Motor Co needed to access the global market and needed a company with a global portfolio to reduce the risk of diversification and cater for the demand for its product through the merger of the market in the strategic alliance. From the study, the drivers of globalisation include the need to boosts profits and achieve a firm’s goals such as access to new markets. Shifting a strategy from local to the global strategy may also mitigate the risk that may be located in the home country. In addition, to reduce the costs of transportation and ease logistics management in a firm, a business adopts a global strategy. Global strategy from the study shows that a company is able to leverage its competence through acquisitions of the latest technology that benefits the company through production of high-quality products at relatively low costs. Strategic alliances such as Nissan and Renault alliance leads to technological facilitate collaborations. Ultimately, the case study shows there are the significant advantages of adopting a global strategy over staying local. These benefits include the reduction of costs of products, acquisition of new technologies through collaboration and expansion of the market reach for business products.
Limitations of the Study
The study is limited by the characteristic lack of robustness in case study research design as a research tool. The study has adopted in the analysis of one case study and may be limited towards the single case bias on the research problem. The case study lacks the ability to provide a generalised conclusion on the research problem, the motivation for global strategy in a business since it is based on a single case. This limitation can be overcome through triangulation of the study with other methods such as interviews to confirm the validity of the observation made in a case study research design.
In the global strategy is driven by several factors that emanate from market instigated factors, cost drivers, government-led drivers and competitive drivers. Market factors that promote the adoption of a global strategy in a business firm include the need to satisfy common customer needs, the growth of global customers, the availability of global market channels and the need to transfer marketing strategies to other markets. As sophistication and value of a product increases market drivers tend to shift a business firm to a global strategy. The effect of the global strategy on cost-reduction strategy also prompts business to go global as evident from the global scale economies, the sourcing efficiencies in the global arena and the rapid growth of technology government regulations such as common standards for products and merged markets increases the tendency for companies to grow global. Ultimately, a business adopting a global strategy is in pursuit of global market share such that it strives to have increased participation in the global market. It is also in need of standardising its marketing across the globe, thereby mitigating costs and also adopting interrelated competitive moves.
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