What is Global Strategy
The global strategy is a strategy that views the world as a single market. A company using global strategy centralized decision making and control by the parent company over worldwide subsidiaries’ operations, typically adopted by a global company that focused on cost advantage.
A company that adopts the global strategy tends to use a global scale manufacturing in a few selected advantage locations, by using centralized manufacturing the company can realize economies of scale by spreading the fixed costs of the manufacturing. Because most activities are centralized, subsidiaries in each country usually are limited to marketing and services functions.
As you can see in the matrix below, a global strategy is concerned about global integration to achieve the manufacturing cost advantages but less concerned about the local responsiveness, opposite to the multinational strategy.
Thus a global strategy is good for the company the produce a product or service that has no tangible differences among countries with consumer preferences. This allows the company to increase in sales while the global strategy of standardization lowers costs, especially the cost of manufacturing.
A good example of a company using a global strategy is Procter & Gamble (P&G) which approached the entire market with a unified whole.
Disadvantages of Global Strategy
On the downside, because a company that adopted a global approach tries to standardize the product and lower costs through a global product, this may be less concerned with customer preferences in different locals. It’s may result in a product that fails to meet any customer satisfaction.
Although a company like P&G has been successful in Europe with a global strategy, but it’s impossible to be successful around the globe. P&G experienced problems with laundry detergent in Japan because the Japanese use a great deal of fabric softener, and washing is done in cold water which is irrelevant to the claim that P&G claims it worked in all water termperatures.
The global strategy is a strategy that views the world as a single market, centralized decision making, and control over worldwide operations.
The company can realize economies of scale because most activities are centralized.
The company using a global strategy may be less concerned with customer preferences in different locals, which may result in a product that fails to meet any customer satisfaction.