Although the process of globalization has affected the operations of numerous companies worldwide, these are not uniform principles that allow firms to attract the attention of local populations. Quite on the contrary, an in-depth analysis of local cultures and their unique characteristics is what helps create a perfect selling point. Therefore, most MNCs nowadays formulate their arbitrage strategies from the perspective that allows taking the cultural needs of local communities into account.
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According to a recent report, four key types of arbitrage can be distinguished when appealing to local communities’ culture-specific needs. These are cultural, administrative, geographic, and economic arbitrages (Ghemawat “The Forgotten Strategy”). Though seemingly unrelated, the specified components of the arbitrate system are inseparable because of their link to the nature and origin of a particular community. Thus, they must be incorporated into the corporate strategy to manage corporate resources efficiently. Ghemawat also stresses the importance of recognizing and respecting distance between different cultures as an essential part of a successful business strategy (Ghemawat “Distance Still Matters”). By allowing buyers to feel unique and respected for their cultural heritage, a company is likely to cement customer loyalty to its products and brands. Therefore, the idea of distancing customers from a company should not be viewed as negative. Instead, it needs to be embraced as the means of catering to the needs of target demographics and, at the same time, retaining the levels of brand name recognition high (Khan et al. 467).
The process of formulating global strategies used by MNCs to attract target demographics also includes the overview of unique risks that target markets pose to the further economic growth of a firm. For instance, the fact that loss markets are no longer tolerated in the context of the post-bubble economic environment needs to be considered. The specified considerations help MNCs design appropriate risk management techniques and effective exit strategies (Maharjan and Sekiguchi 63).
However, when defining how MNCs define their strategies currently, one must address the issue of innovation. For large companies, operating in the modern global market implies dealing with a vast amount of information. The identification of valuable data, its analysis, and further use as the basis for corporate strategies, particularly marketing and promotion, must be regarded as one of the primary goals of any firm that targets the global market (Andersson et al. 157). The specified approach allows locating the levels of price sensitivity, unique demands, tastes, and other characteristics of local populations. As a result, an MNC can deliver the services that meet the standards set by buyers. Therefore, innovative approaches are essential to an MNC to survive and thrive in the global economy (Ghemawat, “Finding Your Strategy”).
Therefore, formulating a global strategy for an MNC starts with a profound analysis of its target audience, including its cultural background, economic opportunities, and other arbitrage elements that help understand customers better. An MNC must be fully aware of its customers’ culture-specific needs; thus, premises for success are created. Also, innovation, which is linked to not only technological progress but also corporate values, ethical principles, quality standards, communication processes, etc., must be viewed as a priority. With the identified concepts making the foundation for corporate principles and values, an MNC is likely to survive in the global market.
Andersson, Ulf, et al. “Technology, innovation and knowledge: The Importance of Ideas and International Connectivity.” Journal of World Business, vol. 51, no. 1, 2016, pp.153-162.
Ghemawat, Pankaj. “Distance Still Matters.” Harvard Business Review, 2001, Web.
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“Finding Your Strategy in the New Landscape.” Harvard Business Review, 2010, Web.
“The Forgotten Strategy.” Harvard Business Review, Nov. 2013, Web.
Khan, Zaheer, et al. “Institutional Legitimacy and Norms-Based CSR Marketing Practices: Insights from MNCs Operating in a Developing Economy.” International Marketing Review, vol. 32, no. 5, 2015, pp. 463-491.
Maharjan, Mohan Pyari, and Tomoki Sekiguchi. “The Influence and Effectiveness of US-style and Japanese-style HR Practices on Indian Firms: A Conceptual Perspective.” South Asian Journal of Human Resources Management, vol. 3, no. 1, 2016, pp. 58-74.