Through globalisation

The strategy of growth by globalization implies for a company the conquest of various geographical markets.

This strategy by globalization must answer the following questions: How extensive should a company’s presence be in key international markets? How can the organization establish the necessary international presence? What are the optimal locations in the world for its various value chain activities? How can the company turn a global presence into a global competitive advantage?

When should a global growth strategy be implemented?

Cost containment

A globalization growth strategy may be appropriate in industries where companies are under strong pressure to reduce costs but little pressure to respond locally; thus, going global allows these companies to sell a standardized product in other countries. By expanding their customer base, these firms can take advantage of economies of scale (cost advantages that a firm gains from expansion) and learning curve effects because they are able to mass-produce a standard product that can be exported (provided that demand exceeds the costs involved).

Market expansion

However, globalization is not limited to cost containment. Differentiation strategies also allow for economies of scale, either by meeting different needs in different markets with a similar set of products, or by developing new products based on the needs and consumption patterns of a new market. Differentiation as part of a global strategy will often require localization, as companies must adapt to consumer tastes to better compete in the new country. For example, Coca-Cola tastes different in different countries because of differences in local preferences.

Sourcing

Other classic and key strategic reasons for globalization include building relationships with suppliers, improving access to raw materials (specific to a given region), and reducing costs by using specializations from other regions. Starbucks sources coffee beans from around the world, as climate significantly affects the type and quality of the beans. Starbucks’ globalization strategy of selling in many countries relies heavily on global sourcing, and strategic managers must carefully monitor this process to assess the costs and benefits.

Global strategies through globalization require companies to closely coordinate their product and pricing strategies across international markets and locations; therefore, companies pursuing a global strategy are typically highly centralized.