Types of Pressure
In global marketplace, there are two types of pressures for firms that include pressure for cost reduction and pressure for being locally responsive. Pressure for cost reduction is to force a firm to reduce its cost. This pressure is most evident in global marketplaces. Apart from that pressure to be locally responsive is the requirement for a firm to adapt to the local scenario or to adaptability of the firm for the domestic culture of the country in which a firm is operating. However, adopting this strategy can result in an increased cost by a firm.
Four Main Strategies
Global Standardization strategy
The main aim of this strategy is to enable a low cost strategy on a global level (Peng, pp. 297). In simpler words, it is to distribute a standardized product for the global market. This strategy can be best adopted when pressure for cost reduction is significantly high whereas pressure for local responsiveness is limited.
The strategy involves in firms operations in different global markets having different type of consumers. However, the firm adopts location economies and economies of scale to achieve low cost and to be locally responsive altogether. Adaptability to this type of a strategy will require learning of organizational effectiveness and performance improvements, which can lead to cost reduction and business adaptability to local markets (Peng et.al, pp. 920-36). This kind of strategy is best utilized when both types of pressure are intense.
This strategy is to develop products initially for domestic markets and then selling them to international markets by altering the product slightly in accordance to the international market. This strategy works best when both local responsiveness and cost reduction pressures are low.
Evolving Strategy at IBM
- When IBM first entered in the foreign market, it adopted international strategy. In the initial phase, IBM used to conduct major business activities at home and had sales offices on international locations that used to sale IBM’s products in other markets.
- In 1970’s IBM shifted to localization strategy. This was due to the reason that there were high barriers for cross border trades that led to segmentation of different markets with each other. Furthermore, there were considerable differences on national grounds, which required considerable localization.
- In 1990’s the pressure that IBM faced specifically in the Indian market was that of cost reduction. Indian domestic companies started to take IBM’s share away due to their inexpensive engineers and other domestic factors on which they had command.
- Most recent strategy that IBM is utilizing is transnational. They are moving on to become a globally integrated firm by capturing a quality human capital, which is adaptable to different locations. More specifically, they are looking for highly skilled Indian individuals who can move to international locations. Their hiring will be cost effective and they will be able to dwell well with the changing environment due to the familiarity of a common language i.e. English.
The three websites selected are from United States, India, and U.A.E. the reason for choosing these three areas was because of the difference in culture among all three countries. After going through these websites in detail, it can be stated that all three websites of a single company differ with each other. The major and most significant difference is in the menu. In American menu, we can find Burgers and Premium McWrap in Bacon and different other items of Beef. Whereas in Indian menu both these items are missing, instead vegetable, burgers are available. Bacon is not even available in U.A.E’s menu, but Beef items are available.
Apart from the menu, all three websites differ in appearance. Indian websites are more graphic in terms of colors. The promotional offers include local menu items. For placing an order on the Indian website, a user will have to login and probably then place an order, whereas for the American website, a cart menu is available which will add a selected product to the cart for placing an order. American website is simpler with less color scheming. On the other hand, U.A.E McDonald’s website does not have an order placement feature. In appearance, it is somehow similar to that of the U.S with less color scheming. While opting for a meal, instead of order form or login page, nutrition calculator appears. This shows that McDonalds is dealing adequately with pressure of localization. They are doing it by approaching consumers in different nations in accordance to their tastes and preferences.
Peng, M, W. “Global Strategy”. 2nd Edition. South Western Cengage Learning. (2009) pp. 297 Print
Peng, Mike W., Denis Y. L. Wang, and Yi Jiang. "An Institution-Based View of International Business Strategy: A Focus on Emerging Economies." Journal of International Business Studies 39.5 (2008): 920-36.