Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
One of the strengths of this article is the fact that the author provides several different ways to successfully expand one's companies across international borders. His case studies, which pertain to companies such as IBM, Procter & Gamble, TCS and other reputed organizations explain the various factors that influenced which particular strategy or strategies was necessary for these companies to succeed. In that sense, he has effectively produced a blueprint for success that other organizations in similar industries to those discussed in the article can follow.
As such, it is difficult to argue with the Ghemawat's claim that AAA Triangle is required for international expansion, since he offers so many real life examples that follow this model. That is why it is all the more interesting to note the degree of difficulty the author states is involved in attempting to utilize all three strategies simultaneously....
It appears that this limitation really seems to reflect the finite amount of resources that an organization has at its disposal. Still, it seems as though if using two strategies at the same time is effective, using all three would be as well. But the author's in-depth analysis of the difficulties that PMS encountered while attempting to utilize all three strategies as once is extremely convincing as a warning that mastering two simultaneously is much more preferable. Regardless, there is a fair amount of wisdom in this article, and it certainly would benefit organizations with global ambition to utilize the AAA Triangle.
Endnotes
Pankaj Ghemawat, "Managing Differences: The Central Challenge of Global Strategy," Harvard Business Review, (2007): 3.
Bibliography
Ghemawat, Pankaj. "Managing Differences: The Central Challenge of Global Strategy." Harvard Business Review, (2007): 1-14.
Bibliography
Ghemawat, Pankaj. "Managing Differences: The Central Challenge of Global Strategy." Harvard Business Review, (2007): 1-14.
(Ghemawat, 2001) Ghemawat states that administrative distance in relation to 'preferential trading agreements' involves gold, electricity, coffee, tea, cocoa spices, textiles fibers as well as sugar, sugar preparations and honey. Also included are gas and travel goods such as handbags as well as footwear and sanitary, plumbing, heating and lighting fixtures and furniture parts. Geographic distance factors impact products such as electricity current transfer over long distances, gas transfer, paper,
Ghemawat believes that this strategy is wrong. Instead of attempting to import pre-existing business models into areas where a company is expanding, Ghemawat believes that companies need to embrace what he refers to as arbitrage, the ability to exploit differences rather than similarities. Ghemawat believes that there are four dimensions of difference: cultural, administrative, economic, and geographic. Furthermore, he suggests that arbitrage, alone is not a sufficient global strategy; he
global strategy ought to be to manage the extensive dissimilarities that come about at the borders of markets. Considering this, Professor Pankaj Ghemawat offers a new strategic framework for taking into account the challenges of globalization. The AAA global framework consists of three effective strategic approaches, which include adaptation, aggregation and arbitrage (IESE, 2007). Adaptation is the approach employed by firms when they try to increase proceeds and market
Administrative and political distance risk is most seen from the standpoint of legal and financial institutions, the monetary systems and political associations and the role of foreign governments in defining the barriers to entry for foreign businesses. Geographic distance risks have more to do with the physical distance and varying climates. The geographic distance set of risks also capture the lack of potential infrastructure due to remoteness. The economic distance risk assessments include the different information or