Global Markets Can Have a Significant Impact

Global markets can have a significant impact on strategy. With globalization, there are more opportunities than ever before for firms to sell products and services around the world. Whereas in the past strategy might have been developed for local areas or at best regional areas, firms today must take into account the entire world. De Brentani (2010) notes that this can have a significant effect of product development. Global firms now must think about how well a new product idea will translate to foreign markets.

This results in changes to the way companies approach innovation, as they must be careful with their products and branding to ensure the broadest appeal possible. Global markets also mean the opportunity to tap into global resources. International markets are not just a source of revenue but a source of ideas as well. For example, innovation derived from international operations can be applied around over the world (Govindarajan & Ramamurti, 2011).

An example of this might be McCafe, the popular McDonalds store-within-a-store that originated in Australia but has since been applied around the world. At tech companies, innovations can come from suppliers and then be implemented around the world by major brands. So managers must be aware that global markets provide an opportunity to improve their internal capabilities -- international markets are not just for revenue. When thinking about strategy companies now need to consider the market entry strategies for different markets.

For example, a company can take a subsidiary approach to moving internationally, but it can also set up joint ventures or it can export. A firm needs to decide if it wants to have an international structure, a multinational structure or a global structure. In an industry like banking, companies have taken a number of different strategic approaches. Someone like TD or Citigroup has taken an internationalization strategy by buying up regional banks to expand, but using its base as a source of strength.

BNP Paribas partners with local banks to strengthen its global reach, while HSBC has moved towards more of a global model featuring two global headquarters and many strong regional subsidiaries. As trade barriers are reduced, firms must respond strategically not only to opportunities but to threats as well. Competitors can come from anywhere, and sometimes arrive with competitive advantages that are difficult to counter. For companies that are not accustomed to dealing in a global marketplace, this can have a dramatic impact on strategy.

Competing in a global marketplace demands different responses both on the revenue side and on the defensive side. When put together, these factors mean that strategic thinking must incorporate a global mindset from the beginning. It is not enough for a company to enter the global marketplace with regional thinking and then make some ad hoc adjustments; the strategy must be global from the outset. This likely means changes to everything from recruiting to organizational design and culture.

The firm needs to set a mission and determine how it wants to compete on the world stage. There is definitely an effect on strategy because the grounds of competition.