Welcome to Global and Digital Strategy!
In this chapter, we explore how businesses expand beyond their home borders and how they use technology to transform their operations. In a world where you can order a product from another continent with a single tap on a smartphone, understanding global strategy and digital strategy is essential for any business student. We will look at why businesses go global, how they do it, and how "going digital" changes everything from marketing to HR.
Part 1: Global Strategy
A global strategy is a plan for a business to expand its operations into international markets. This isn't just for giants like Apple or Nike; many small businesses use the internet to reach customers worldwide.
1. Why Go Global? Opportunities and Threats
Going global offers huge rewards, but it also comes with significant risks.
Opportunities:
- Increased Sales: Access to millions of new customers in growing economies.
- Economies of Scale: By producing more for a global market, the unit cost of each item usually falls.
- Risk Spreading: If sales are down in the UK, they might be booming in Brazil or India.
- Access to Resources: Being closer to raw materials or specialized labor.
Threats:
- Exchange Rate Risk: If the pound \( (£) \) gets stronger, exports become more expensive for foreign customers.
Quick Math: If the exchange rate moves from \( £1 = \$1.20 \) to \( £1 = \$1.30 \), a product costing \( £100 \) goes from costing the US customer \( \$120 \) to \( \$130 \). - Cultural Differences: Products that work in London might not work in Tokyo due to different tastes or traditions.
- Protectionism: Foreign governments might use tariffs (taxes on imports) or quotas (limits on quantity) to protect their own businesses.
2. Where to Go? Market and Production Attractiveness
Businesses have to decide if they are going abroad to sell (market) or to make (production).
Market Attractiveness: Is this a good place to sell?
Look for: High GDP (economic growth), growing population, and consumer values that match the brand.
Production Base Attractiveness: Is this a good place to manufacture?
Look for: Low labor costs, high skill levels, good infrastructure (roads/ports), and government incentives.
3. How to Enter: Entry Methods
Don't worry if these terms seem technical—think of them as a "ladder" from low risk to high risk:
- Exporting: Making goods at home and shipping them abroad. (Low risk, but transport costs are high).
- Licensing: Letting a foreign company use your brand or recipes for a fee. (Low cost, but you lose some control).
- Joint Ventures: Partnering with a local business in the new country. (Shared risk and local knowledge).
- Direct Investment (FDI): Setting up your own factories or shops in the foreign country. (High cost and risk, but total control and all the profit).
4. Glocalisation
This is a "mash-up" of the words Global and Local. It describes the strategy of: "Think Global, Act Local."
Example: McDonald’s is a global brand, but they sell the "McSpicy Paneer" in India because many customers there don't eat beef. They keep the global brand image but adapt the product to local tastes.
Key Takeaway: Global strategy involves balancing the desire for massive growth with the risks of operating in unfamiliar territories.
Part 2: Digital Strategy
A digital strategy is not just "having a website." It is a plan to use digital technologies—like Artificial Intelligence (AI), data analytics, and e-commerce—to meet business objectives.
The Impact on Functional Areas
Digital strategy changes every department in a business:
Marketing
Digital marketing allows for "laser-targeted" advertising.
AI and algorithms can predict what you want to buy before you even know it. Businesses use Search Engine Optimisation (SEO) and Pay Per Click (PPC) to ensure they appear at the top of your search results. They also use data analytics to measure exactly how many people clicked on an ad and bought something.
Operations
Digital tech makes production faster and cheaper.
AI can manage inventory (stock) levels automatically, ordering more parts just as they are needed. Automation and robotics can work 24/7 without getting tired, improving productivity.
Formula Check: \( \text{Employee Productivity} = \frac{\text{Output}}{\text{Number of Employees}} \). Digital tech often increases this by helping staff work faster.
Human Resources (HR)
Digital strategy affects how people are managed.
It allows for remote and hybrid working, which can improve employee wellbeing. However, it also means employees might need retraining to use new tech, which can be expensive and met with resistance.
Finance
Digital systems allow for real-time tracking of cash flow and budgets. Businesses can see variances (the difference between planned and actual spending) instantly, allowing them to react faster to financial problems.
Quick Review Box:
- Global: Exporting, Licensing, JVs, FDI, Glocalisation.
- Digital: AI, Data Analytics, SEO, Automation.
- Impact: Lower costs, higher efficiency, but requires investment and training.
Common Mistakes to Avoid
1. Confusing Market vs. Production: Don't assume a business goes to China just to sell. Often, they go there as a production base to take advantage of lower costs, even if they sell the products back in the UK.
2. Overlooking Culture: Students often forget that a great product can fail if it offends local customs or ignores local laws. This is why glocalisation is so important.
3. Thinking Digital is "Extra": In the modern curriculum, digital strategy is core. It’s not an "add-on"; it’s how modern businesses survive and compete.
Summary Checklist
- Can you explain the difference between a Joint Venture and Direct Investment?
- Can you calculate the impact of an exchange rate change on export prices?
- Do you understand how AI impacts both marketing (targeting) and operations (inventory)?
- Can you define "Glocalisation" and give an example?
Note: For more on how these strategies are planned and monitored, see the "Strategy and Planning" chapter. For information on the risks involved, such as cybersecurity, see the "Risk and Uncertainty" chapter.