Globalisation

Multinational corporations often create additional values by identifying and leveraging competitive advantage in global operations as they respond to localization and standardisation pressures. This can be done through globalisation of markets and globalisation of products.

Globalisation of markets

This refers to the merging of separate and distinct national markets into one global market. In this case, tastes and preferences of consumers in various markets converge and create a market for some products. Firms such as McDonalds which has utilized the convergence of preferences for hamburgers in markets across the world benefit from globalisation of markets and promote it by providing standardized products across the world. However, standardisation cannot be achieved in all markets. National markets still differ in terms of such factors as consumer tastes and preferences, cultural differences and distribution channels. Due to these differences, it is necessary for firms to develop marketing strategies operating activities and product features that are customized match the needs of each national market. Therefore, it is important to balance between the push of globalisation and pull of localization.

Globalisation of production

This refers to the process of sourcing goods and services from various locations of the world in order to take advantage of low-cost labour markets (Ariño et al, 2004). It includes the transfer of production to low-cost unskilled labour countries. Corporations make use of low-cost labor markets by reducing their resource profiles that were previously of high-cost labour markets by outsourcing activities and resources that were previously done in-house. This also achieves the balance between globalisation push and localization pull.

Strategic evolution of firms

In order to gain competitive advantage from expansion, a company seeks strategies that enable it to evolve from international to localized, to globalised, and to transnational strategies. First, a multinational corporation is faced by two pressures. On one hand, the firm is faced by the pressure of reducing costs while on the other hand it is faced with the pressure to adapt local market (Dess and Eisner, 2010). In this case, an evolution from international to localized strategies is necessary. Furthermore, movement from localized to globalised strategies is also necessary.

Multi-domestic strategy is necessary for a firm to move from international to localised strategies. This involves high pressure to adapt to local markets. The competitive strategy in this case is differentiation. Activities are decentralized to the local level in order to respond to the local demand. Products are also customized to meet the local tastes of customers. Global strategy is necessary for a firm to evolve from localised to global strategy. In this case, the firms adapts to the global economy by reducing costs (Dess and Eisner, 2010). The competitive strategy used to move from localised to globalised strategy is standardisation of the product. Corporate office is centralized to enhance coordination and integration of various activities.

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