Professor Pankaj Ghemawat states the world is not “flat”, which is semiglobalized. There are differences between countries, so companies should not have one strategy for global subsidies. I agree with his view of global strategy. As stated in Mr. Ghemawat’s book, it can be analyzed from four categories, namely cultural, geographic, political and economic.
Different cultures influence people’s way of communication, taste preferences as well as lifestyles. When fast-food franchisers from North America open restaurant in Asia, they modify the menu to adapt Asian’s taste. Otherwise, they are not able to compete with others in same industry. Americans have learned to change from low-context to high-context communication to win businesses with the Chinese. Therefore, global strategies can be totally different when cross-border cultures are not similar.
Outsourcing to countries with lower labour costs are frequently used by the manufacturing industry. However, with the multiple-fold increase in oil prices over the past decade, transportation costs became higher, effectively increasing the distances between nations and offsetting the benefits of low labour costs. A down jacket store will be popular in Ontario, but not in Hawaii. Besides, call centers on the west coast may have to start working at 7am to match up the working time zone in east coast.
Governments put restrictions on foreign ownership of strategic assets, such as natural resources, technologies, and wireless spectrums. It slows down the pace of innovation and potentially increases the cost of doing business. Countries without diplomatic relationships cannot trade with one another, e.g. US and Cuba. Also, local regulations and bureaucracies can be difficult or even impossible for foreigners to navigate.
With the difference in income level, people in developed countries will take advantage of low labour cost in emerging countries. People in emerging...
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