Through globalisation

The growth strategy of globalization involves a company expanding into various geographical markets. This strategy must address several key questions: How extensive should a company’s presence be in crucial international markets? How can the organization establish the necessary international presence? What are the optimal locations worldwide for its various value chain activities? And, how can the company transform a global presence into a global competitive advantage?

A global growth strategy should be implemented when:

Cost Containment

Globalization may be appropriate in industries where companies face significant pressure to reduce costs but little pressure to respond locally. Going global allows these companies to sell standardized products in other countries, expanding their customer base and leveraging economies of scale and learning curve effects from mass-producing a standard product that can be exported (as long as demand exceeds the involved costs).

Market Expansion

Globalization is not limited to cost containment. Differentiation strategies can also facilitate economies of scale, either by catering to different needs in various markets with a similar set of products or by developing new products based on the needs and consumption patterns of new markets. Differentiation as part of a global strategy often necessitates localization, as companies must adapt to consumer tastes to better compete in the new country. For instance, Coca-Cola’s taste varies across countries due to differences in local preferences.

Sourcing

Classic strategic reasons for globalization include building relationships with suppliers, improving access to raw materials specific to a region, and reducing costs by leveraging specializations from other areas. Starbucks sources coffee beans globally, as climate significantly affects bean type and quality. Starbucks’ globalization strategy relies heavily on global sourcing, and strategic managers must carefully monitor this process to assess costs and benefits.

Global strategies through globalization demand companies closely coordinate their product and pricing strategies across international markets and locations. As a result, companies pursuing a global strategy are typically highly centralized.