Adaptation, aggregation, and arbitrage strategy are used to create value globally. Adaption strategy is the most used global strategy. Adaptation strategy refers to a company meeting local requirements or preferences. Considering the variety of all parts of the world, adaptation is essential globally (De Kluyver & Pearce, 2012). Variation is the most typical means of adaptation, but adaptation in effectiveness may also complement variation. Variation is most likely in product offering, but variation may also be within policies, positioning, or metrics. Interestingly, even when products are standardized, they may vary in practice (Ghemawat, n.d.-a). “Product focus is a potentially powerful sub-lever for dealing with adaptation challenges because there are often tremendous differences within broad product categories in the degree of variation required to compete in local markets” (Ghemawat, n.d.-a, p.3). An example of adaptation is McDonald’s international menu, which is tailor-made to the specific location. A specific example is in Germany where McDonald’s sells beer. The local German culture is much different than the United States and McDonald’s must respond to that cultural difference (admin, 2009 ). In Germany, the legal drinking age is 14. In addition, drinking beer is viewed similar to any other beverage; it is not a right of passage that has attached a social deviance as well as a cool social acceptance (EuroKulture, 2009). In Germany, it would be strange if McDonald’s did not sell beer and therefore a clear example of adaptation.
Aggregation as a global strategy takes the opposite approach. Aggregation sets out to “exploit similarities among geographies rather than adapt to differences” (De Kluyver & Pearce, 2012, p.143). Aggregation strategy does not mean complete standardization, but usually is more of a regional approach (De Kluyver & Pearce, 2012). Toyota is an excellent example of aggregation strategy taking the form of regionalization. Toyota began with one production base in Japan and then built a second in the United States. With growth, Toyota moved to more of a common car that could satisfy customers across regional differences and consolidate product platforms. The regional approach is not just with product design, but also with focus, portfolio, hubs, platforms, mandates, and networks (Ghemawat, n.d.-b). Toyota’s initiative is the Toyota New Global Architecture. Toyota plans to make each production plant a plant for a common vehicle; for example, the manufacturing facility in Guanajuato, Mexico will create Corollas while the Cambridge, Ontario plant will create mid-sized higher value vehicles. The efficiency and flexibility gained in the restructuring is a regionalization to help meet the needs of the North American customer. The manufacturing facility in Guanajuato is new and is the first manufacturing facility to be built completely under the New Global Architecture (Toyota Motor Sales, 2015). New standards of excellence in regional aggregation strategy will result.
Arbitrage global advantage strategy exploits differences rather than similarities (De Kluyver & Pearce, 2012). Arbitrage is the original global advantage strategy as the earliest traders traded luxuries that had vast differences in price and availability from country to country (Ghemawat, n.d.-c). One modern day arbitrage strategy is outsourcing and off-shoring. Differentiation can also be achieved through such things as bargaining power with suppliers, reduced supply chain, and sharing of knowledge (De Kluyver & Pearce, 2012). Walmart’s sourcing from China is a clear cut example of arbitrage. While there are many types of arbitrage ranging from cultural to economic, the Walmart example is simply buying products from emerging markets and selling those goods in developed markets (Ghemawat, n.d.-c). Walmart has nearly 20,000 Chinese suppliers and purchases 27 billion dollars worth of Chinese manufactured goods a year. Buying at a low price from Chinese suppliers and selling at a high price in the United States market has resulted in Walmart being one of the most profitable companies in the world and the nation’s largest employer. Unfortunately, as many publications have written, Walmart’s arbitration has come at a high price of eliminating over 130,000 U.S. manufacturing jobs, this loss happened within a 5 year time span asn was completely the result of Walmart’s trade with China. On the same token, as the largest U.S. employer, Walmart has not shown to pay a good wage or offer benefits that are sustainable in a middle class U.S. lifestyle (Traub, 2012).
De Kluyver, C. & Pearce, J. (2012). Strategy: A View From the Top (4th ed.). Boston: Prentice Hall.
EuroKulture. (2009, October 28). McDonald’s Serves Beer! Retrieved October 5, 2015, from http://eurokulture.missouri.edu/mcdonalds-serves-beer/.
Ghemawat, P. (n.d.-a). Adaptation Strategies. Retrieved October 5, 2015, from http://www.aacsb.edu/~/media/AACSB/Publications/CDs%20and%20DVDs/GLOBE/readings/adaptation-strategies.ashx.
Ghemawat, P. (n.d.-b). Aggregation Strategies. Retrieved October 5, 2015, from http://www.aacsb.edu/~/media/AACSB/Publications/CDs%20and%20DVDs/GLOBE/readings/aggregation.ashx.
Ghemawat, P. (n.d.-c). Arbitrage Strategies. Retrieved October 5, 2015, from http://www.ghemawat.com/management/files/academicresources/arbitragrefeb2012.pdf.