Managing Differences: The Central

Challenge of Global Strategy

Presented by:
Chetan Chaudhary
 Road Map
• Three distinct types of global strategy – AAA
Triangle

• Understanding the AAA triangle

• A to AA

• Developing a AAA Strategy

• Conclusion
 Why need of AAA aroused?
• Two wrong assumptions about global strategies:
▫ Managing differences that arise at borders
▫ Balance economies of scale and responsiveness to
local conditions

• To solve the above problems – AAA triangle

• AAA framework – scorecard to indicate how well

the company is globalizing
 AAA triangle

Adjust to local Standardization of

conditions product

ion
Remodel the

Ag
Horizontal

at

gre
firm DNA relationship for

pt

ga
a
cross border
Ad

tio
Country centric economies of

n
structure scale
Arbitrage

Vertical
relationship

Exploit economic
differences
between markets
 Three types of global strategy

• Adaption : Boost revenues and market share by

maximizing firm’s local relevance

• Aggregation : Deliver economies of scale by

creating regional / global operations

• Arbitrage : Exploit differences between regional

or national markets
 IBM’s strategies
• Adaptation : Serving overseas market by setting
up mini-IBM in each target country

• Aggregation : aggregated countries into regions

to generate more scale economies

• Arbitrage : Exploit wage differentials by

increasing no. of employees in India
 A to AA
• Companies are now going in for AA strategies
instead of A strategy

• As some companies win as they beat their

competitors along both dimensions at once
Adaption and Aggregation
Aggregation and Arbitrage
Arbitrage and Adaptation
 THE ELUSIVE TRIFECTA
The complexity of doing so collides with limited
managerial bandwidth

• People
“Is think an organization
it possible to implement should
AAAhave only one
culture
simultaneously & in which order?”
Capable competitors can force a company to
choose which dimension which it is going to try
beat them
 Medical diagnostic industries

75 %
30 %
25%

20%
 GEH….& AAA
Aggregation
Economy of scale - Higher total R&D Arbitrage –
•Pitcher-catcher
spending than PMS/SMS, greater total
sales and larger service force concept
•50% raw material &
60% manufacturing in
Acquisition capabilities - very
low cost countries
capable in acquisition(100
acquisitions)
Adaptation - country
focused MDO
Economies of scope - integrate its Bundle offering
Biochemistry skills with its traditional goods + services
base of physics and engineering skills.
 PMS-AAA developing strategy
• Originally adaptation emphasize

• Transfer to Aggregation
- less R & D investment
- Acquisitions

• Arbitrage
- Outsource in low cost countries
 Broader lessons
• Focus on one or two A’s –
It is possible to make progress on all three A’s, companies
usually have to focus on one or at the most two A’s in trying to
build competitive advantage

• Make sure the new elements of a strategy are a good fit

organizationally -
The new elements should be brought in accordance with
already present elements of the strategic grid, otherwise the result
will be a big failure

• Employ multiple integrations mechanisms-

Progress of more than one of the A’s requires creativity and
breadth in thinking about integration mechanisms
• Think about externalizing integration -
▫ Not all the integration required to add value need to occur
within a single organization
▫ IMB see some externalization is the key part of global
strategy
a) Joint ventures in advanced semiconductor research
b) Relationship with Lenovo in PC’s

• Know when not to integrate –

▫ All the time integration is not a very good idea. Because:
a) Very tightly coupled system are not particularly flexible
b) Knowing what not to do as well as what to do
c) Proper matrix of all the activities
 Conclusion
• Globalization is concerned not only with just availing of
Production Opportunities across the borders

• Only 1% of managers think about globalization strategically

• The AAA framework provides a basis for considering global

strategies that cover all the three effective responses to the
large differences that arises at national borders. Clear
thinking should broader the perceived opportunities, sharpen
strategic choices & enhance global performance
Thank You