Globalization AAA Strategies

As already mentioned it is neither recommendable nor feasible for many firms to pursue AA or AAA strategies. This does not mean, however, that it is impossible. Leading edge companies like IBM, Tata Consulting Services or P&G have shown that it is possible to pursuit more than one corner of the triangle, by running a viable AA strategy. Success in these situations was mostly determined by the company’s ability to leverage resources as to achieve organizational and material innovation. That is, they managed to manage tensions between two A’s and integrating them through the correct use of “hard” systematic changes as well as “soft” changes. Latter one would for instance refer to the way changes are communicated to the larger workforce. While an AA strategy is extremely hard to implement, an AAA one is close to being impossible. For starters there won’t be enough managerial resources to handle the resulting complexity, resulting in bottlenecks. In addition pursuing multiple strategies can possibly lead to cultural clashes within the organization (remember: each A “belongs” to a different organizational type). It will also be easier for competitors to focus efforts on one of the three links and gain the upper hand in this dimension. With less resources to focus on each individual dimension the firm implementing the AAA strategy will have less means to defend against such an attack. Lastly, external relations might create additional tensions. Nonetheless, in an environment where the tensions between the dimensions are naturally low or can be overridden an implementation along all three branches is possible as it has been proven by GEH (General Electric Healthcare). GEH’s sales & service force were larger than those of its rivals, yet the company managed to effectively profit from economies of scale and reaching aggregation by centralizing around relatively few major production sites and a low R&D-to-Sales ratio. Economies of scope were another success factor that helped to pursuit arbitrage through the “pitcher-catcher” concept. Both aggregation & arbitrage were further enhanced by the GEH’s strong acquisition capabilities. Lastly, by heavily investing in country-specific marketing organizations and the provision of services like equipment training adaption was successfully reached. Some the efforts mentioned above were rather loosely coupled and – in fact – most of them were separated, yet this clear division allowed GEH enough focus on each aspect to beat to make its global strategy a success. Concluding lessons In a short review Ghamawat (2007) presents 5 key takeaways that should be considered by every firm considering a global strategy. First, a focus on one or two of the A’s is the most appropriate step when trying to build competitive advantage. Second, strategy should be a good organizational fit. Existing organizational elements – if not considered – might create unnecessary tensions within the enterprise. Third, a firm should never rely on a single integrating mechanism, but on multiple ones. A good mix of “hard” and “soft” measures is crucial for success. Fourth, integration can be externalized through constructs such as joint ventures. Lastly, there are – as GEH has proven – instances where it is better to integrate loosely or not at all. It is therefore essential to decide when it is necessary and when it carries more long-term costs than actual value.