Competitive Stratergy case studies
This report will give insights by quoting few examples on how industries worldwide are using ‘AAA’ theory by Pankaj Ghem...
Management Summary: The competitive market of today’s business offers lot many challenges on the business owners to successfully run their business worldwide and make profits out of it.To cater needs of these business giants and help them to succeed requires a well defined business strategy without which making global presence is questionable. This report will give insights by quoting few examples on how industries worldwide are using ‘AAA’ theory to take advantage of opportunities presented by globalization. People and well defined policies are crucial for the growth of COMPANY.
Table of Contents
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Management Summary………………………………………1 Table of Contents……………………………………………....2 Introduction………………………………………………….......3 Case Study...........................................................….4 Conclusion....................……………………………………….6
Introduction : Today’s time is called as ‘Globalization Era’ as it has brought people and economies from different countries more closer and thus offers various business opportunity all over the world. While globalization has made positive impact on the lives of people around the globe with minimum negative effects it has also exposed to new unforeseen challenges for businesses which were never faced before
and thus has necessitated the development of a global framework that can help effectively manage the challenges of globalization and result in creating a globally competitive advantage. To manage the challenges and complexities of the global economy Pankaj Ghemawat has developed a theory which is called as “AAA Traingle” theory or we can say simple language multiple variants of individual tailoring. These three strategies when implemented are believed to successfully manage the challenges brought about by globalization. Each A in ‘AAA’ stands for Adaptation, Aggregation and Arbitrage. Adaptation calls for the necessary adjustments and adoptions to be made by a company so that its operation and products can be suitable for local markets and the local people based on their choice and preference. Aggregation assists companies to create economies of scale through the creation of regional or global business operations and at the same time remaining responsive to local markets. Arbitrage enables companies take advantages of cost, price and currency differences and make a decision on which markets to venture into regarding buying and selling so as to realize profits. These strategies help companies face global business environment with more confidence allowing them to successfully access outside markets with varying demands and market prices for their products. Additionally, it enables companies to find good business environments and allow them to dominate in those markets. All these strategies are important but it must be kept in mind that each A of the strategy will have different degree of effectiveness and relevance for different companies and hence every company must decide whether to integrate two or all of the three strategies at the same time or in phases and then draw a staged implementation plan. This AAA theory has helped companies to take advantage of numerous global opportunities and successfully manage the challenges thrown open owing to globalization. It is just that companies have to invest time in prioritizing which strategy to implement to achieve the optimum advantage. Our report will discuss two major industries which are growing exponentially worldwide:
Food industry : McDonald’s and Coca Cola Company Pharmaceutical industry : Sun Pharmaceutical industries and Pfizer Inc.
Fast food and pharmaceuticals are truly global businesses and are relevant in all economies and countries irrespective whether it’s a developed or developing. Both the industries provides numerous employement opportunities and crucial for the population. To make their presence worthwhile and for sustenance, these industries have successfully adopted AAA framework so that they continue growing and gaining competitive advantage.
Case Study : 3
1) Food/Beverage: This industry be it in any country is integral part of nation’s GDP,its contribution is significant.Below explained are two famous examples of the same.
McDonald's restaurants made there presence in 118 countries and serve million’s of customers each day. McDonald’s has a tag line “Modifying the burgers around the world”. Originated in US now it has got its presence worldwide and what helped them a lot is adapting the burger as per the country. Further, in response to changing consumer tastes, the company has modified its menu to include salads, fish, wraps, smoothies, fruit and seasoned fries.
World famous McDonald's Corporation earns revenue by investing in properties, franchising of restaurants, and an operator of restaurants.
McDonald’s is a classic example of clear beneficiary from arbitrage opportunity offered by globalization. Mc Donald’s leverages its US reputation for excellence and high class for doing business in other countries. It is already positioned as a high quality Fast Food chain in the mind of consumer in new economies. In addition, they did ‘Backward integration’ with farmers through Contract farming in agricultural economies to ensure consistent supply of required quantity and quality of their raw material at fixed negotiated price. This ensures consistent quality and taste of the final products.
McDonald’s has used all possible means for revenue maximization and cost minimization. It has also used franchising model as there growth strategy which has minimum risk.
The local deviation from the standard menu is employed either to abide by regional food preferences such as the religious prohibition of beef consumption in India or to make available foods with regional taste such as McRice in Indonesia, or prawn burger in Singapore and Japan. In Germany and Western European countries, McDonald's sells beer and sells meat pies in New Zealand. (Sameer Mathur,2012)
According to the company’s Annual Report, the company sells beverage products in more than 200 countries. Notable here is that Coca cola
Coca Cola implemented aggregation strategy to expand beyond US and to achieve worldwide economies of scale. As a
Coca-cola is a prime example of Economic and Geographic arbitrage. It outsources and produces majorly in China with 39
has not modified the taste of the base product except where it changes due to quality of water and sugar available and it may happen that taste of Coca-Cola in Europe is different from that in the United States. However, coca cola has adapted its packaging, marketing and branding strategies to be successful in various countries. Also, it has used acquisition of major local brands as a key strategy to establish connect with the consumers and to push its base brand along with the popular local brands.
proof, The Coca-Cola Company offers more than 350 brands aside from its Coca-Cola beverage to suit customer preferences. The company has a long history of acquisitions. Coca-Cola acquired Minute Maid in 1960, The Indian cola brand Thums Up in 1993, and Barq's in 1995. In 2001, it acquired the Odwalla brand of fruit juices, smoothies, and bars; and in 2007, it acquired Fuze Beverage.
facilities across the country. Besides this it has manufacturing plants with local bottling rights in most of the countries to reduce its cost of production.
Coca Cola also announced its presence in Burma a new geographical location as soon as they lifted their suspension on Western sanctions. Now its regional portfolio expands all across the globe.
2) Pharmaceuticals: Pharma companies are growing at a rapid rate, primarily because of the advancement in research which enables them to come up with new drugs. Since there is lot of cost involved in the research of a new drug or patent and that it has to undergo the process of patenting, testing, safety, efficacy and its marketing, the company has to ensure it can rightly market the end product to his customers in various countries as the law differs in different parts of the world. With the two examples of pharma companies quoted below we can get glimpse of how these industries are implementing ‘AAA’ strategy to expand their operations.
Pharmaceu tical Sun Pharmaceuti cal industries
Based in India this is the 5th largest Pharmaceutical company in the world. To make its presence worldwide, Sun Pharma has to make changes that suits to the needs of the country. Likewise they adapted their chemical formulae,
Sun Pharma realized the importance of Global presence for its growth and Successfully acquired competing businesses in various countries and geographies. Till date, company has been able to make 19 global
Company has established its research capabilities in developing countries to substantially reduce its cost which has immensely increased its capabilities to provide its products at
ingredients and packaging style which was suitable to the people of that particular country. Company’s strong research strategy and county specific implementation strategy has given the competitive advantage. Over the last 10 years, company has been consistently successful in challenging patents on several high-value products in the US and thus helped introduce cheaper, highquality generic versions of such products to the market to gain market share.
acquisitions to increase its reach to various countries.
Selling anything in different country from where it was originated requires modification .Similar is the case with pharmaceutical companies. This fact is well supported by Pfizer sales stratergy in latin America. To be successful in Latin America, Pfizer has had to learn alternative ways — which take into account cultural, economic, and regulatory differences — to market its products.The steps taken by Pfizer in that regard are: Extensive brand building through community outreach programs. Devoted resources to work with Pharmacist who plays major role in helping patients to choose medications. (Susan Silbermann,2012)
Its an example of administrative aggregation.T o market its drug lets say in Europe it has to meet regulatory requirements of few countries and then they are qualified to sell throughout Europe.
much cheaper price. Further, established majority of its manufacturing facilities in Asian countries with lower cost of production and made exports to developed countries for selling at higher price
It’s a good example of TAX arbitrage: relocation to cut their taxes. Pfizer takes over AstraZeneca of UK.By doing this Pfizer is benefitted as : UK companies don’t pay taxes on overseas earnings Tax Rate is lower Tax rate on UKpatented products is also less And thus making more profit.
This paper focuses on growth of two major industries using ‘AAA’ framework, any organizations must use and balance these strategies but the trade-offs is always there between them . Its all about managing cross border differences,every industry is part of ‘Globalization’ which is restructuring the world and the major factors which contributed for it are:
Technology Relaxed trade policies
Which strategy a company should use depends on factors like:
Globalization history Financial statements
And companies may not require all strategies at single point of time but probably some years down the line. Nothing is simple so ‘Globalization’ too creates challenges for the industries in terms of lengthy supply chains and distribution, security of facilities and information systems. Every industry in the World is adapting the Globalization strategy to position themselves in this competitive world where survival depends upon various factors like quality, policies,placement,need etc. The extent of a company’s capabilities to tailor its offerings around the globe limits or broadens its options to successfully enter new markets or cultures. As everything has its pros and cons so is the case with ‘Globalization’ and few of them are as follows:
Damage to environment Less job security
In short,globalization is a serious issue that is affecting everybody’s life.There is a need of analyzing its negative impact so that steps can be taken for their preventions.This is going to be win-win situation to everyone around the world .
References: Sameer Mathur(2012) , http://www.slideshare.net/ProfessorMathur/9-examples-of-firms-implementingglobal-strategy-by-adaptation
Susan Silbermann(2 012), https://hbr.org/2012/08/how-pfizer-adapts-its-sales-strategy-for-latin-america