Hbr Review Ghemawat

|Harvard Business Review. Managing Differences. |October 21 |
|Pankaj Ghemawat March 2007 p.59-68 |2010 |
|Jelmer Steenbeek – 1986902 Simon van Gijssel – 1767852 |Introduction International Business |
|Beugelsdijk S |Group 14 |

In the Harvard Business Review article of March 2007, titled Managing Differences, the author Pankaj Ghemawat addresses the central challenge of global strategy and presents CEOs and managers with a framework for approaching global integration concerning his three A’s of global strategy. Ghemawat distinguishes between adaptation, aggregation and arbitrage as the three global strategies and relates them to several international companies to show how the adoption of two or more strategies can lead to managerial difficulties. The article outlines the possibilities and limitations of adopting one, to all three of the strategies and goes on to relate them to economies of scale and integration.

The article serves to solve the problem of false assumptions and create a new framework using the author’s approach to cross-border integration.
In the introduction, the author states that assumptions are made about balancing different aspects of global strategy and how these assumptions are problematic.
The introduction of the article clearly states the problem, with various short explanations and examples, it then states definitions of the key terms used in the framework and summarizes the limitations of the use of it. The article’s direction of approach is clearly explained in the introduction and is added to later on, in the section titled Broader Lessons with extra points for managers to keep in mind.

Much of the author’s information, especially in examples, came from interviews with CEOs and other executives of the companies. The author is also a professor of Global Strategy at IESE Business School in Barcelona.
Ghemawat uses case studies of various multinational companies in the article as examples for his solution. He gives sufficient background information about the company’s strategies however less about their operational background which makes it harder for the reader to picture and understand elements of the author’s theory.
Evidence of his argumentation is shown in the various company examples. He talks about constraints and benefits affecting companies based on their strategies.

The author has developed the AAA Triangle which acts to help oversee the effectiveness of companies at the different levels of adaptation, aggregation and arbitrage. This is an effective model for practically showing relationships between companies and divisions within one company, relating to the three A’s. It works by calculating the three types of expenses as percentages of sales. This lets the company see which possible strategy is best suited to its way of doing business. The diagram also helps readers less informed about global strategy to understand the concepts, as it renames the three A’s as Advertising-to-sales for Adaptation, R&D-to-sales for Aggregation and Labor-to-sales for Arbitrage. This gave us a simple alternative for understanding these strategies.
The author goes from listing and defining the three A’s with the concepts and advantages surrounding them, to a section titled from A to AA where examples are given of companies who were able to adopt a strategy focused on two of the three A’s, listing advantages and the various disadvantages this could cause. He then goes on to a section titled the Elusive Trifecta. The title relates to what was told in the introduction, that following a path of strategy with all three A’s will be problematic. He states that “there are serious constraints on the ability of any one organization to use all three A 's simultaneously with great effectiveness.”(64)

The article is presented in a clear structure, with diagrams and tables to emphasize and summarize key points that the author has made. These diagrams help to show theories and examples in a more practical sense and significantly enhance the effectiveness of the article.
The author seems very confident that his ideas take into account the problems of previous solutions or frameworks and does not mention limitations except for improper use. His research seems adequate as not much is told about his research methods, but he provides enough information from various companies to back up the arguments. He does however state that he went only into specifics about the integration challenges because of the way the topic is theoretical.

We feel that a weakness of the article is that it is strictly focused on people with a larger general knowledge base of international business. As students it proves difficult to follow and place these theories without definite analysis of the article.

We have learned of the limitations of adopting certain global strategies. While a common belief would be to take into consideration as many possible strategic approaches to maximize effectiveness, the article shows us through the use of researched examples of modern day companies, how more than one approach can create problems for a company.

The article is focused on globalization strategies and the benefits or limitations of different strategies possibly used together. This relates to international business through the issues of cross border effectiveness with its possible strategies and integration of economies of scale. Companies seek effectiveness on an international scale, to be able to do this a strategy must be adopted. This could be done by making the firm as relevant as possible locally through adaptation. A firm can enhance its effectiveness through aggregation by creating economies of scale and using the power of size to influence consumers. Arbitrage is the exploitation of differences between national or regional markets, this strategy takes advantage of lower costs and other factors of production that are different internationally. The article is a good example of a study of international business and gives a clear idea of the many possibilities in international business strategy.

References are given at the end of the article and are not included within the text. The references seem sufficient and up to date relating to the date of the article.

To conclude, we would like to state that overall the article’s structure was understandable and even though the level of writing was quite advanced, it was not too hard to follow. We were presented with the problem of wrong assumptions about global strategy and a new classification of three separate strategic fields of integration. We feel that the author successfully addressed and attempted to solve the problem for CEOs and managers, who will have a better understanding of the issue after reading this article. We feel that the author over used examples in the text which became quite distracting to the main idea as new terms and individual company based concepts were introduced, however they did help to make the article more practical. We know now that while strategies all seem effective in theory, strategies can be conflicting in practice and can cause managerial problems in the long run.

Questions

• Do these three A’s encompass all global strategies or are there other general fields of strategy that should be taken into consideration?

• If a company is successful with an AA strategy, would it be a benefit for them to change it to an A strategy, what are the benefits or disadvantages?

• Did any of your interviewees not approve or agree with your framework and why? Are there any critics of the AAA triangle or the framework?

References: are given at the end of the article and are not included within the text. The references seem sufficient and up to date relating to the date of the article. To conclude, we would like to state that overall the article’s structure was understandable and even though the level of writing was quite advanced, it was not too hard to follow. We were presented with the problem of wrong assumptions about global strategy and a new classification of three separate strategic fields of integration. We feel that the author successfully addressed and attempted to solve the problem for CEOs and managers, who will have a better understanding of the issue after reading this article. We feel that the author over used examples in the text which became quite distracting to the main idea as new terms and individual company based concepts were introduced, however they did help to make the article more practical. We know now that while strategies all seem effective in theory, strategies can be conflicting in practice and can cause managerial problems in the long run. Questions • Do these three A’s encompass all global strategies or are there other general fields of strategy that should be taken into consideration? • If a company is successful with an AA strategy, would it be a benefit for them to change it to an A strategy, what are the benefits or disadvantages? • Did any of your interviewees not approve or agree with your framework and why? Are there any critics of the AAA triangle or the framework?