Global Firms vs Multidomestic Firms

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Global firm

A global firm is an organization which has operations across geographies and where operations in one country affects or has strategic impact on the company or its operations in other areas.

There are several factors that have helped the emergance of global firms:

The falling of international trade barriers have facilitated the emerging of global firms. It has made it easier and less expensive to integrate activities and coordinate resources across international borders. The falling of this barriers and the globalization has also homogenized customers. In a globalized world global customers have similar needs and with the same product firms are able to reach all customers in different markets.

The globalizazion has occured in the post industrial era. In this era there is furious competition between companies, and only those firms able to lower their cost have a chance to survive. A global strategy enables firms to reduce costs by economes of scale or by having operations in third world countries.

Apart frm the economies of scale, global firms are also capable to reduce their costs by carrying out different parts of the value chain in different places. This ability will derive in cost reduction and stretegic advantage. A very high world wide coordination of the supply chain is required. Tis is the reason for IT and networking beeing core to successful global company operations today.

Global strategy vs Multidomestic strategy

There are two different ways a firm can approach an international stretegy: Global Strategy or Multidoemstic Stretegy.

With a Multidomestic strategy the control is generaly decentralized and the decision making is done on a local level. If a firm follows a Global strategy it will have a centralized control with little decision making authority left in the local level.

Multidomestic firms formulate single-country strategies which focus strictly on their home-market while for global firms the world is a...
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