The process of globalization has a significant impact on the development of the global economy. It is evident that, in order to remain highly competitive, multinational corporations (MNCs) are forced to adapt to the conditions and obligations of the worldwide market because otherwise, they would fail to make a profit (Ghemawat, “Evolving Ideas about Business Strategy” 736). Since the global marketplace functions according to a different set of rules, it is important for MNCs to develop their global economic strategies based on the specific aspects of the world market. This paper aims to discuss three articles by Pankaj Ghemawat in order to analyze his views on the development of global strategies. The items will be addressed in the chronological order.
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The first article under consideration was published in 2001, and it was entitled “Distance Still Matters.” The core idea of this article is to provide a more rational approach to business development for multinational companies, which often make expensive mistakes when entering foreign markets. Ghemawat argues that the distance between the two countries has an immense impact on the outcomes of international business. The author proposes the cultural, administrative, geographic, and economic (CAGE) distance framework, which should help managers in identifying and assessing the influence of distance on various industries (Ghemawat, “Distance Still Matters” 140). The implementation of this approach helps in estimating the possible adverse impact that different conditions can have on the performance of multinational companies.
In the second article, the author argues that multinational companies are primarily devoted to exploiting the similarities between countries when establishing their businesses. MNCs try to balance standardization and localization in an attempt to implement their business models. However, Ghemawat observes that these companies “discounted the original global strategy: arbitrage, the strategy of difference” (“The Forgotten Strategy” 78). This strategy’s constituents are cultural, administrative, economic, and geographic arbitrages (it is evident that the author continues to develop his idea of CAGE distance framework). For example, Ghemawat mentions that economic arbitrage refers to the exploitation of varieties in the cost of labor and capital, along with more industry-specific inputs (“The Forgotten Strategy” 81). Further, the author argues that it is essential to exploit both differences and similarities. Despite the fact that such exploitation is not possible to the full extent, he mentions several examples of multinational companies that managed to employ this strategy efficiently.
The last article under consideration is devoted to the development of global strategies in the aftermath of 2008 economic crisis. In brief, the core ideas of the research are the following: (1) the demand will remain low for several years, (2) MNCs will need to integrate into more underserved segments in richer countries, and (3) the organizational power of the local units will eventually grow (Ghemawat, “Finding Your Strategy in the New Landscape” 57). Based on this assumptions, the author proposes the model which comprises four primary aspects: (1) markets and products, (2) operations and innovation, (3) organization and people, (4) identity and reputation (Ghemawat, “Finding Your Strategy in the New Landscape” 59). Each of these constituents is elaborated in the article; for example, Ghemawat suggests that MNCs have to rethink their marketing and targeting. Simplifying supply chains, relocating key management functions, and building a strong corporate identity are among other significantly important implementation of the new global economic strategy (Ghemawat, “Finding Your Strategy in the New Landscape” 59).
In conclusion, it is possible to observe that the implementation of the adaptive global strategy is of vast importance for multinational companies. In his articles, Pankaj Ghemawat proposes several methods of developing economic approaches, which would be efficient in the contemporary international marketplace. His studies are immensely important since they provide solutions for a wide range of business specializations.
Ghemawat, Pankaj. “Distance Still Matters. The Hard Reality of Global Expansion.” Harvard Business Review, vol. 79, no. 8, 2001, pp. 137-147.
“Evolving Ideas about Business Strategy.” Business History Review, vol. 90, no. 4, 2016, pp. 727-749.
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“Finding Your Strategy in the New Landscape.” Harvard Business Review, vol. 88, no. 2, 2010, pp. 54-60.
“The Forgotten Strategy.” Harvard Business Review, vol. 81, no. 11, 2003, pp. 76-87.