When a company develops a strategy that links its product divisions around the world, it takes a risk. Linking assumes that markets in Asia, for example, will benefit from the same strategy as markets in North America. It works best if a strategy includes both international and national strategies.
International Branding Advantage
The international appeal of the McDonald's brand exemplifies the advantages of globally linked strategy. One advantage is that customers in other parts of the world will recognize the McDonald's brand name and buy from McDonald's in their home country. International brand recognition also can provide the initial impetus for opening businesses in overseas markets. This impetus may not be sufficient to sustain those businesses.
International Pricing Advantage
In another example, a transnational company can use a global pricing strategy while getting its national subsidiaries to set local prices within global pricing guidelines. A subsidiary in France must achieve the same rate of return on a product's price as a subsidiary in the U.S. The advantage is the same rate of return because the company can make the same profit margin from each subsidiary. However, sales levels can be radically different among subsidiaries.
Global Branding Disadvantage
Looking at the way McDonald's implements strategy in different markets, it doesn't use a uniform mix of products. McDonald's diversifies product offerings in every country based on market needs. Therefore, a globally linked strategy would have a disadvantage if a company doesn't diversify. A strategy would fail in some markets that differ from the U.S. market. A company must spend resources to modify an international strategy for the demands of each national economy.
Global Social and Environmental Disadvantage
A company that cuts down lumber in the Amazon rainforest to make wood products for U.S. consumers will cause environmental devastation to Amazon societies. This means a global company takes advantage of sourcing materials in a poorer country to benefit an advanced economy. In terms of cost, this globally linked strategy hurts locally and damages the company's international reputation for social responsibility. An alternative is to link development plans for different countries together in a global, socially responsible business strategy.
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