International Strategy vs Global Strategy: 3 Key Differences

 

Strategic Management in International and Global Industries

Strategic management is the process of strategic decision-making that determines the long-term direction of an organization. The central objective of strategic management is to achieve and sustain a competitive advantage. The strategy process generally consists of three key steps: analysis, development, and implementation.

The terms international strategy and global strategy are sometimes used interchangeably. However, in strategic management, global strategy represents a distinct approach that goes beyond international expansion. The evolution of a firm's strategy from a domestic to a global orientation can be broadly classified into four main phases:

1. Single-Country Strategy

Most firms operating around the world initially operated within a single country. Many firms that are now household names globally began as small ventures in their home countries.

Firms operating strictly within the boundaries of their home country use a single-country strategy to compete in their domestic market. Such firms primarily face one set of business factors, regulatory conditions, competitors, and customers. When the home market continues to grow and remains profitable, there may be little immediate need to expand into foreign markets.

International expansion is often considered when the firm's domestic market becomes less profitable, growth opportunities begin to diminish, or attractive opportunities emerge in foreign markets. However, even firms that operate exclusively within their home country cannot assume that focusing only on local competitors and customers will guarantee long-term strategic competitiveness. Global economic trends, technological developments, and international competitors may influence the domestic market as well.

2. Export Strategy

Before establishing subsidiaries outside its home market and becoming directly involved in their management, a firm may begin by exporting its products or services to foreign markets.

For most exporting firms, the domestic strategy remains the primary focus. Although the firm makes strategic decisions regarding the selection of appropriate export markets, the extent of product modification required to meet local market conditions, and the establishment and management of export channels, the main thrust of its strategy continues to be the management of operations in the home country.

Therefore, this phase can be viewed as a domestic strategy supplemented by an export strategy. The firm begins to participate in international markets but has not yet developed a fully integrated international organizational structure.

3. International Strategy

When firms establish subsidiaries outside their home markets, they move from the domestic strategy phase to the international strategy phase. Firms that manufacture and market products or services in several countries are commonly referred to as multinational firms.

During this phase, each foreign subsidiary is likely to develop and implement its own strategy, adapting it to the specific requirements of its local market. Consequently, product and strategic adaptation to local market conditions becomes a major concern.

Internationally dispersed subsidiaries may operate with considerable independence and function much like local companies, with relatively limited coordination from the parent organization. This approach allows subsidiaries to respond effectively to differences in customer preferences, culture, regulations, competitive conditions, and other aspects of the local business environment.

However, the result is often a wide variety of business strategies across countries and a relatively high degree of local adaptation, with limited integration among subsidiaries.

4. Global Strategy

As multinational firms mature and progress through the earlier stages, they may recognize the advantages of integrating their activities and developing a coordinated strategy on a global scale.

A global strategy involves a carefully designed, integrated strategy for the firm's entire network of subsidiaries and business partners across multiple countries. Rather than allowing each subsidiary to operate independently, the firm seeks to coordinate its activities and leverage synergies, economies of scale, shared capabilities, knowledge, resources, and competitive advantages across countries.

A global strategy therefore emphasizes global integration and coordination, while still considering important differences among markets. It contrasts with an international strategy, which typically involves a greater variety of country-specific strategies and a higher level of adaptation to local business environments.

Thus, the progression from a single-country strategy to an export strategy, followed by an international strategy and ultimately a global strategy, reflects the increasing international involvement, coordination, and strategic integration of the firm.

International Strategy and Global Strategy: What Is the Difference?

Although the terms international strategy and global strategy are sometimes used interchangeably, they differ in several important respects. There are three key differences:

1. Degree of Involvement and Coordination from the Centre

The first difference relates to the degree of involvement and coordination by the corporate centre.

Coordination of strategic activities refers to the extent to which a firm's strategic activities in different countries are planned and executed interdependently on a global scale to exploit synergies across different countries.

An international strategy does not require strong coordination from the corporate centre. Foreign subsidiaries are generally given considerable autonomy to formulate and implement strategies according to their local market conditions.

A global strategy, on the other hand, requires significant coordination between the corporate centre and its subsidiaries. Strategic activities across different countries are closely coordinated to achieve common objectives and exploit global synergies.

2. Degree of Product Standardization and Responsiveness to the Local Business Environment

The second difference relates to the degree of product standardization and responsiveness to local business conditions.

Product standardization refers to the extent to which a product, service, or process is standardized across different countries.

Under an international strategy, subsidiaries are generally expected to respond to local business needs and market conditions unless there is a strong reason not to do so. Therefore, products, services, and processes may be adapted to meet local customer preferences, regulations, cultural factors, and competitive conditions.

In contrast, a global strategy assumes that the corporate centre should standardize its operations, products, and processes across different countries unless there is a compelling reason for local adaptation.

Thus, an international strategy emphasizes local responsiveness, whereas a global strategy emphasizes standardization and global integration.

3. Strategy Integration and Competitive Moves

The third difference relates to strategy integration and competitive moves.

Strategy integration and competitive moves refer to the extent to which a firm's competitive actions in major markets are interdependent across countries.

Under an international strategy, competitive actions in one country are generally less dependent on actions taken in other countries. Each subsidiary may formulate its competitive strategy according to the conditions of its own market.

Under a global strategy, however, competitive moves in different countries are closely interconnected. The firm considers its competitive position across major markets as part of an integrated global strategy.

For example, a multinational firm may subsidize its operations in one country with profits earned in another country in order to strengthen its competitive position globally. Similarly, the firm may reduce prices, increase investment, introduce new products, or expand capacity in one market in response to competitive developments in another market.

Therefore, under a global strategy, competitive actions are coordinated across countries, and a move in one major market may be designed to influence the firm's competitive position in other markets.

Summary of the Three Differences

Basis	International Strategy	Global Strategy
Centre involvement	Limited coordination from the centre	Strong coordination from the centre
Product strategy	Greater local adaptation	Greater standardization
Local responsiveness	High	Relatively lower
Strategy integration	Strategies are largely country-specific	Strategies are integrated across countries
Competitive moves	Mostly independent across countries	Interdependent across countries
Primary emphasis	Local responsiveness	Global integration and synergies

In simple terms: an international strategy gives greater importance to the needs of individual countries, while a global strategy seeks to coordinate and integrate activities across countries to achieve advantages on a worldwide scale.