Business Policy and Strategy

1
Global Strategy and International Issues

Module 013
Global Strategy and International Issues
Trying to expand the business, many entrepreneurs open themselves to the
many possibilities in the global market. There is a big possibility that a firm
grow nevertheless it has risks too. Learning more about global strategy and
common international issues allow the firm to decide wisely before entering
the global market
At the end of this module, you will be able to:
1. Define global strategy;
2. Understand the potential benefits and the risks faced of competing in
international markets;
3. Identify how language becomes an issue in global business.

Global Strategy
Global Strategy is defined in business as a strategic guide to globalization in which an
organization employs a global business in a worldwide market.
Academic research on global strategy came during the 1980s, including work by Michael
Porter and Christopher Bartlett & Sumantra Ghoshal. Among the forces perceived to bring
about the globalization of competition were convergences in economic systems and
technological change, especially in information technology, that facilitated and required the
coordination of a multinational firm's strategy on a worldwide scale.
This strategy involves several aspects of business from suppliers, production site,
competition and markets. This strictly follows international market standards in products,
designs and costing.
There are several advantages and disadvantages in entering the global market.

Advantages of Entering Global Market

1. Access to new customers

One of the most important advantages in global market is gaining access to
the world and new customers. Through expansion in other areas build a
company’s reputation and worldwide identity. Selling goods and services to
different people sounds very appealing.

2. Lowering Costs

The hope to gain cost advantage increases the sales by volume for it may
attain economies of scale, therefore lessen its production cost. This leaves an
Course Module
 implication that the business has a stronger leverage when negotiating prices
with suppliers.
Offshoring is one way to reduce cost for it involves relocating a business
activity in another country where labor cost is much cheaper. This is what
most American companies did when they transferred call centers in Asia.
3. Diversification of Business Risks
Business risk refers to the potential that an operation might fail. If a firm is
completely dependent on one country, negative events in that country could
ruin the firm. This is what has been done by Toyota which mother company
is in Japan. When Japan was hit by tsunami , the company was not paralyzed
for they have other firms in other countries.
4. Life Cycle
According to O’Farrell in Chron online magazine global strategy is useful with
regard to product life cycle. A company can phase its release of products,
introducing older products into newer markets and saving the launch of a
product's most recent version for well-developed markets.
Disadvantages of Entering Global Market
1. Political Risk
Political risk refers to the potential for government upheaval or interference
with business to harm an operation within a country. There are possible
constraints in business if the government in a particular country is not too
open for foreign investors.
This can also be described if employment laws or corporation laws change in
the country where a company manufactures its global product, then that
could ruin everything. Likewise, if a war breaks out, employees go on strike
or a natural disaster occurs where a company manufactures its global
product, then it may not be able to fulfill its obligations.
2. Economic Risk
Economic risk refers to the potential for a country’s economic conditions and
policies, property rights protections, and currency exchange rates to harm a
firm’s operations within a country. Executives who lead companies that do
business in many different countries have to take stock of these various
dimensions and try to anticipate how the dimensions will affect their
companies. Because economies are unpredictable, economic risk presents
executives with tremendous challenges.
3. Cultural Risk
Every country has diverse culture and beliefs so with this a company may not
be very welcomed in a company. Cultural risk refers to the potential for a
company’s operations in a country to struggle because of differences in
language, customs, norms, and customer preferences.
The table below is a concrete example how communication and language
become a dilemma in some companies in different countries.
 Business Policy and Strategy
3
Global Strategy and International Issues

Cultural differences rooted in language—even across English-speaking

countries—can affect how firms do business internationally. Below are
provided as few examples.

Book and movie titles are often changed in different markets to appeal
to different cultural sensibilities. For example, British author J.K.
Rowling’s Harry Potter and the Philosopher’s Stone was changed
to Harry Potter and the Sorcerer’s Stone in the United States because of
the belief that American children would find a philosopher to be boring.

Moms in the states can be seen walking with strollers in their

neighborhood, while “mums” in Ireland and the United Kingdom keep
their children moving in a buggy.

In India, you are more likely to hear “no problem” than “no” as Indian
nationals avoid the disappointment associated with using the word no.

The area called a trunk in America is known as the boot in England.

Wondering what it means when a British friend asks, “What’s under

your bonnet?” Open the hood of your car to offer an answer.

While Americans look for a flashlight when power goes out, a torch is
the preferred term for those outside of North America.

Urban legend says that the Chevrolet Nova did not do well in Spanish
speaking countries because the name translates as “no go.” The truth is
that the car sold well in both Mexico and Venezuela.

Course Module
Glossary
Anticipate: To offset losses against future or unrealized earnings
Dimension: One of the aspects, attributes, elements, or factors that make up an entity,
item, phenomenon, or situation
Diversification: Practice under which a firm enters an industry or market different from
its core business
Globalization: The worldwide movement toward economic, financial, trade, and
communications integration
Multinational: An enterprise operating in several countries but managed from one (home)
country.

References and Supplementary Materials

Books and Journals

Thomas L. Wheelen and David Hunger; 2010; Philippines; Prentice Hall

Online Supplementary Reading Materials

http://www.businessdictionary.com/definition/
Advantages and disadvantages of international market.
http://open.lib.umn.edu/strategicmanagement/chapter/7-2-advantages-and-
disadvantages-of-competing-in-international-markets/ Retrieved March 30, 2018
Advantages and disadvantages of global strategy.
http://smallbusiness.chron.com/advantages-disadvantages-global-strategy-11664.html
Retrieved March 30, 2018
Business Ethics. https://study.com/academy/lesson/business-ethics-social-
responsibility-definition-differences.html Retrieved March 30, 2018
Business Ethics. https://managementhelp.org/businessethics/index.html Retrieved
March 30, 2018
Business Ethics. http://www.wisegeek.org/what-is-business-ethics.htm#didyouknowout
Retrieved March 30, 2018
Transparency. https://managementhelp.org/blogs/business-
ethics/2011/03/14/transparency-is-a-key-to-performance/ Retrieved March 30, 2018
Online Instructional Videos
International Strategy https://www.youtube.com/watch?v=wnOj3hP4hlE. Retrieved
March 30, 2018