Business Strategies in a Global Economy
Business strategies in a global environment become complex because of the increased number of variables to consider. Global markets differ in specific ways, but for simplicity's sake, developed and underdeveloped worlds provide very different forms of context and hence, create different strategies.
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Types
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Global strategy experts such as Jeff Garten generally typify strategies based on the institutional context of the target state. For developed states such as the U.S. or western Europe, corruption is low, education is high and one can generally count on courts to enforce contracts. This is a very different environment compared with the third world, where talent is scarce, corruption is rampant and the state generally does little to enforce contracts.
Function
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The different institutional environments create different sets of priorities. One can hold that the developing world presents completely different problems. Strategies there might be highly defensive, hiring risk managers and doing whatever is necessary to maintain good relations with the state to continue to operate. Within the developed world, strategies can be more offensive because of the more stable and predictable business and legal climate.
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Significance
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Any business model must develop strategies based on legal and institutional contexts. In Japan, for example, there are few business schools. This is because most basic training is done at the corporate level and customized to the needs of the firm, to which the worker is attached often for life. Therefore, in terms of labor markets, foreign firms must be committed to long-term employment and on-the-job training. In the developing world, the state becomes the most difficult variable in business operations and is often the place where talent goes to find steady work. In such places, importing talent from the host country might be necessary until an internal labor pool can be identified and mobilized.
Considerations
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The basic strategic consideration derives from the nature of risk. In the developing world, political risk is often very high. This can include risks coming from rebel groups and revolutionaries, but it can also derive from unsympathetic courts, corruption and currency issues. Risk managers must be an important element of any third world business strategy to deal with all levels of political unpredictability. In addition, weak states in the developing world are often unable to control rapacious bureaucrats or police/military leaders. Business strategy there must take into consideration the fact that oversight over business law and practice is often very indirect and weak.
Effects
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Strategies must be flexible. Approaches to information about a new product, for example, are far easier in highly literate states with advanced media and advertising. This is far from the case in the third world. Using the information example, firms investing in, say, Bhutan, must do much of their advertising and consumer education themselves. It should be kept in mind that in states like these, the line between bribery and gift-giving is very thin. What might be considered a bribe in the U.S. might be considered a show or respect elsewhere.
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References
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