Advantages & Disadvantages of a Global Strategy
Clarke Ricks School of Business,
Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
May 7, 2022
Advantages & Disadvantages of a Global Strategy
The digital revolution has made it possible for small businesses to expand their reach
beyond the domestic market and to tap into a segment of the international audience that is
interested in their products and services. In fact, a global strategy can extend the long-term
success of your company, but there are benefits and drawbacks to adopting an international
strategy for your business.
Advantage: Expand Your Target Customer
The U.S. economy is big enough to accommodate thousands of small businesses, but that
does not mean that you should not be looking for ways to extend your reach to a new group of
consumers. If you have targeted your customers properly, your ideal consumer won’t change
when you decide to promote your products and services to the international market. More
importantly, you can market to your overseas customers using social media platforms and your
website content, which cuts down on marketing expenses. When you access the international
market, you have new branding opportunities that can help your products and services attract
new customers and prospects.
Disadvantage: Challenges of Foreign Culture
Although a global strategy can help your company attract a new customer base, the
drawback of this strategy is that cultural differences in other countries can derail your
marketing efforts. For example, some Arabic countries do not allow certain types of advertising,
so if you own a fitness company, you may not be able to market your products in any way that
suggests sex appeal. There is also the challenge of language differences that can skew your
marketing message if you do not hire expert translators that live in the country where you are
doing business.
Advantage: Diversifies Your Business
When you tap into an international market, it helps to offset any losses that you might
suffer during an economic downturn on the domestic front. Establishing a thriving business
overseas can sustain your domestic-based business long enough for the economic situation to
correct itself.
Disadvantage: Financial Risk
Although diversification is always beneficial, the disadvantage of setting up your business
on the international front is that it can still be an expensive investment. Setting up your
business overseas requires a significant amount of time, effort, and research of the local
market.
One of the biggest expenses is finding expert, local talent that you must train so that they
understand the vision and culture that your business wants to promote. Then you will also have
to handle foreign employment contracts, compliance regulations, and the nuances of obtaining
approval for any domestic employees that you want to send over to help get your overseas
business up and running.
Ethical & Social Responsibilities of the Management of a Multinational Organization
Corporate ethics take on added dimensions when a company becomes a multinational
organization. While standards for ethical behavior vary from country to country, companies
must weigh the values of their home country against the need to show tolerance and
acceptance of practices in foreign regions where they do business. Business owners may find it
difficult to come up with a single set of universal values, but they can adopt practices that work
in the global marketplace.
Honoring Local Traditions
A company doing business in another nation is not an invader; it is a guest and must strive
to accept traditions that may not be familiar. This can create ethical dilemmas. For example, an
American company must offer the same wages for the same work regardless of the ethnicity or
gender of the worker. If this goes against a tradition in a foreign country, the company has a
responsibility to make it clear that it will honor its home value while accepting the host
country's differences. In short, a multinational company has a responsibility to accept, but not
to embrace foreign customs.
Respecting Human Rights
American companies have a responsibility to ensure the safety, health and well-being of
their workers, no matter where their workers are employed. While a U.S. company may
contract with a foreign company that has different practices, all employees doing work for the
American company have the same basic rights as its American personnel. The company can pay
lower wages in another country if the prevailing cost of living is lower, but taking advantage of
foreign workers by offering lower-than-subsistence wages goes against the company's
responsibilities.
Protecting Environments
Many companies may find U.S. environmental restrictions burdensome, but that doesn't
mean they can willfully destroy the environment in another country. American companies have
a responsibility to honor the host nation's environment to the greatest extent possible, even
when local laws don't require them to do so. Multinational companies may not suffer fines for
ignoring the environment abroad, but they could face a public relations crisis if word gets out.
Giving Back
Many companies engage in philanthropic activities, and some multinational companies
elect to take on the responsibility of spreading their social initiatives to host countries where
they do business. For example, multinationals may fund initiatives to supply vaccines in
countries with poor health care, or they may create task forces to teach locals how to maintain
a clean water supply. In more developed countries, a multinational corporation may contribute
to neighborhood beautification projects or purchase supplies for local schools. This kind of
charity can be good business. Positive public relations are just as important in a host country as
they are in a home country.
Being able to promote a product or service regardless of the country, culture, or market
can help a company increase revenue, enhance its productivity, and become more competitive.
There are a few marketing strategies a company can use to achieve these goals, but
implementing them might depend on its business goals, production capacity, and existing
resources. Learning more about global standardization and the ways you can implement this
strategy within a company can help you improve your management and business skills.
A global standardization strategy is a business method that aims to produce, promote, and
distribute products and services based on global standards. This strategy considers the market's
geographic location, culture, traditions, needs, and customer expectations to create messages
and marketing plans for potential clients. Implementing this strategy enables a business to sell
its items in different countries, regions, and continents, providing it with access to a wider
customer base.
This might require making changes to the company's products and services, producing
them in different countries, and complying with local laws and regulations. Global
standardization strategies might imply increasing the company's marketing power and
expanding its market share.
Pros and cons of implementing a global standardization strategy
Here are the pros and cons of implementing global standardization strategies in a
company:
Pros
Here are the benefits of using these strategies within an organization:
Better brand awareness
Companies that sell their product or services in globally competitive markets might require
implementing global-scale marketing plans to reach various types of audiences. These
marketing efforts can increase their brand awareness and visibility, as customers from different
countries and regions can recognize the products advertised and offered by the companies.
Businesses can also use local media channels and social media to reach audiences throughout
different countries and create global awareness for their brand. They can do this by studying
social trends, economic conditions, political events, and cultural developments in the target
countries.
More financial control
It's necessary for companies that market their products and services in various countries to
comply with different and sometimes dissimilar legal requirements. This means adhering to
municipal, regional, and national laws and regulations in each country where they want to
operate and sell their products. This involves tax laws, which might vary from country to
country. To do this, it's crucial for them to establish strict controls over their corporate
structure, operations, sales, expenses, marketing, and financial activities in each country.
By doing this, they can guarantee that they're following all the legal guidelines and
regulations, which can help them avoid potential legal risks, such as lawsuits against them or
fines. This financial control can also help them minimize losses and overpayments, which can
help them better use their resources. To do this, they can perform audits of their marketing and
sales efforts across all their facilities in each country and use the results to create accurate
budgets.
Enhanced quality standards
Selling in global markets can encourage the company to enhance its quality standards to
compete with other businesses that are operating globally. This means updating its
manufacturing processes, product lines, machinery, and management systems to meet
international standards and best practices. It also implies preparing its personnel for a global
market, which means helping them acquire knowledge and skills that can assist the company in
meeting its business objectives. To do this, a company can create in-company training programs
and subscribe its employees to seminars and training sessions conducted outside the company.
Companies can also work alongside international organizations that can help them earn
quality certifications regarding their processes and products. These credentials might benefit
them in entering new markets, promoting their products, and establishing more business-to-
business (B2B) relationships. This is because other companies might prefer to work with
companies that received a quality certification from a reputable third-party entity.
Reduced costs
As global marketing campaigns can help a company create more brand awareness, it can
reduce its marketing efforts over time because the company can use its market position to
promote more products. This means that the company can reduce its marketing budget and still
achieve a higher market share. By doing this, the company can reallocate resources to
manufacturing, product research, and development. Companies that implement global
standardization strategies can also reduce their expenses by using economic agreements set
between different countries to reduce trade tariffs.
These types of economic instruments can help a company send its products or
commercialize its services in different countries with preferred tariffs that might encourage it to
increase its operations. The hosting country can then negotiate lower tariffs with businesses to
keep their investments and products in the country. Here, the company can access a wider
market and lower costs, which might help it increase its profits over time.
Homogenized customer needs
To reduce marketing costs without losing brand awareness and visibility, companies can
look for common factors among their customers. This means identifying customer needs that
are common to all their customers regardless of their location, age, culture, gender, income, or
economic background. They can focus on these factors to create homogenized marketing
campaigns and target various audiences simultaneously. Social media is one of the most
relevant platforms to use to identify common customer interests and target them accordingly.
This is possible because customers from different countries can use the same social media
platform to access similar information.
Cons
Here are the potential disadvantages of using these strategies within an organization:
Less attractive products
Sometimes, companies that implement global standards to produce, promote, and sell
their products might not fulfil customer expectations and needs. This is because some
customers might have preferences for local products and services, as they can feel that buying
these products support the local economy. In addition, some companies might not consider all
the customers' cultural traditions and needs, which might affect their sales and revenue.
This is because some countries might have several traditions or ethnic groups and
satisfying each one might imply increasing the company's operation and marketing costs. To
overcome these obstacles, companies can launch campaigns explaining how their investments
have helped the local economy and how they've adapted their products and services to local
needs.
More production costs
Producing goods and services for different markets might increase the company's costs, as
they might need more facilities, personnel, and marketing campaigns. This means more fixed
costs, such as leasing and utilities, and more operational costs, such as labour, transportation,
research, and development. It might also involve paying more taxes according to the country
where they want to operate.
To overcome this issue, companies can make alliances with local businesses or other
international companies that already have facilities in the desired market. For instance, they
can ask a manufacturer to produce their product in a different country and focus their efforts
on marketing and selling the product there.
More regulations
Manufacturing, marketing, and selling products in different countries imply getting more
permits and licences and following different business best practices. This might require more
legal effort, hiring more legal consultants and international tax experts. Here, it's important for
companies to work alongside local authorities to get a clear understanding of the local
regulations and business environment. To overcome this challenge, companies can work with
allies and ask for their advice and guidance, as they might be local businesses or international
companies with several years of experience in the market.
When to use global standardization strategies
Herre are some situations when global standardization might benefit a company:
When the company wants to increase its legitimacy
Companies that operate globally might benefit from international recognition and more
brand awareness, which might help them increase their legitimacy. This can help them obtain
more business opportunities, get preferred access to markets, and attract more qualified
talents. Legitimacy can also help them negotiate with local authorities, get permits and licences
faster, and raise more capital for their expansions.
When the company wants to enhance productivity
As global standards require following strict guidelines and producing better quality
products, it's important for companies to increase their employees' productivity. They can do
this by providing better tools and equipment, helping them stay up-to-date with the latest
technology, and learning international regulations. They can also implement management
software across the organization to track milestones, remind employees about deadlines, and
encourage them to work as a team.
When the company wants to expand its business
Global standardization can also help a company expand its business and open more
facilities in different countries. This can help it increase its customer base and enhance its
profits over time. This strategy can also help it develop new products and find new business
opportunities in other countries.
