UNIT VI STUDY GUIDE

Global Strategy: Competing

Around the World

Course Learning Outcomes for Unit VI

At the end of this unit, you should be able to:

4. Explain methodologies in the overall evaluation of business strategies.

4.2 Recognize opportunities and problems of competing globally.

5. Assess ethical parameters related to global strategic business models.

5.1 Compare and contrast options that multinational enterprises have for entering foreign markets.
5.2 Apply the cost-responsive framework to evaluate strategies multinational enterprises (MNEs)
can pursue when competing globally.

Required Unit Resources

Chapter 10: Global Strategy: Competing Around the World (ULOs 4.2, 5.1, and 5.2)
This chapter examines stages and states of globalization. It also examines the advantages and
disadvantages of competing globally and various strategies focused on cost reductions versus
local responsiveness. These include international, multidomestic, global-standardization, and
transnational strategies.

Unit Lesson
Lesson: Global Strategy: Competing Around the World (ULOs 4.2, 5.1, and 5.2)

This unit focuses on global strategy and competition around the world. According to Rothaermel (2024),
“Globalization is a process of closer integration and exchange between different countries, businesses, and
peoples worldwide, made possible by falling trade and investment barriers, advances in telecommunications,
and reductions in transportation costs” (p. 377). The World Trade Organizer (WTO, n.d.) is the voluntary
organization of nations that develops and applies the rules related to global trade. The World Bank (2021)
notes that international trade has substantially changed the global economy and contributed to a major
reduction in poverty across the globe.

Competing Globally—Why?

In the course textbook, Exhibit 10.5: Advantages and Disadvantages of Competing Globally highlights the
rewards and difficulties of global trade. Key advantages include access to larger markets, access to low-cost
input factors, and the development of new skills. Key disadvantages include the liability that may be created
by a sense of foreignness, loss of reputation, and risks associated with the retention of intellectual property
(Rothaermel, 2024).

One of the most public issues related to competing globally is related to the growth of China. The World Bank
(2023) reports that China, with a population of more than 2 billion people, started an economic reform
program in 1978 that included a more open regulatory system that supported global trade; the new system
has been cited as responsible for annual GDP growth of more than 10% per year and societal improvements
such as health care, education, and poverty reduction. Many firms have taken advantage of the size of the
Chinese market to grow their business (Rothaermel, 2024).

Competing Globally—Where and How?

As firms consider going global, it is useful to consider the advantages and disadvantages in detail. One
method used to assess the location and process of a global expansion is the cultural, administrative, and

BUS 6320, Global Strategic Management 1

political, geographic, and economic (CAGE) framework outlined in Exhibit 10.6:
UNIT
ThexCAGE
STUDY GUIDE
Distance
Framework. The factors in this model are designed to provide a comparison between
Title countries on each of the
identified dimensions.

There are different modes of foreign market entry. There are a range of options from simply exporting
products to another country to physically establishing a presence in another country. Each firm must carefully
consider which mode of entry meets its needs at a point in time.

In assessing a mode of entry, a firm must consider two factors that are critical in determining its global
strategy: (1) a global standardization strategy versus (2) a localization strategy. The global standardization
strategy (an international strategy) means that the same product is used across the globe which has the
benefit of lower costs. However, there is increasing recognition of the importance of the local consumer
preferences (multidomestic strategy). A firm looking to go global must balance these competing forces. Firms
may also select a global standardization strategy that looks to economies of scale by having a standardized
product produced in a low-cost economy. Finally, a transnational strategy attempts to combine the benefits of
both standardization and local responsiveness. Refer to Exhibit 10.9: International, Multidomestic, Global-
Standardization, and Transnational Strategies: Characteristics, Benefits, and Risks for an overview of these
different options available to firms.

One element of going global is related to the concern about fairness and equity in business practices.
Transparency International (n.d.) is a nongovernmental organization with a mission that includes promoting a
level playing field for businesses operating in the global environment.

Summary

In conclusion, many firms have seen advantages in pursuing a global presence. There are different risks and
rewards in going global and several options that can be used to consider the mode of entry. Recent advances
in communication have driven the death-of-distance hypothesis. However, events including the global
pandemic and war in Ukraine and the middle east have confirmed the need for robust supply chains that
reflect an understanding of the unique risks faced by global firms.

References

Rawpixel. (n.d.). Character illustration of people with global network concept [Image]. Freepik.
[Link]
concept_3585190.htm#query=strategy%20global%20business%20planning&position=2&from_view=
search&track=ais&uuid=eab5dd3f-267d-4ae8-9a3a-5381e987b5ac

Rothaermel, F. T. (2024). Strategic management (6th ed.). McGraw Hill.

[Link]

Transparency International. (n.d.). About. [Link]

The World Bank. (2023, April 20). The World Bank in China.
[Link]

Vector4stock. (n.d.). Business process illustration infographic of business structure from idea to successful
business project [Image]. Freepik.
[Link]
idea-successful-business-
project_26195295.htm#query=strategy%20global%20business%20planning&position=34&from_view
=search&track=ais&uuid=eab5dd3f-267d-4ae8-9a3a-5381e987b5ac

World Bank Live. (2021, May 24). Spreading the gains from trade more widely: Making trade work better for
the poor [Video]. [Link]

BUS 6320, Global Strategic Management 2

World Trade Organization. (n.d.). What is the WTO? UNIT x STUDY GUIDE
[Link] Title

Learning Activities (Nongraded)

Nongraded Learning Activities are provided to aid you in your course of study. You do not have to submit
them. If you have questions, contact your instructor for further guidance and information.

Activity: Explore the World Economic Forum (Optional)

Conduct an internet search for the World Economic Forum website. Explore the website as it relates to the
fourth industrial revolution and the trends that are shaping the future of business. You may also review the
website for videos that highlight the forum’s work as it relates to post-pandemic supply chain issues and
global business.

Activity: Case Study (Optional)

Read Chapter Case 10 Part I: IKEA: The World’s Most Profitable Retailer in your textbook. In a personal
journal, note your thoughts about the case.

BUS 6320, Global Strategic Management 3