Unit 5: International Strategy, Institutions and Operations
Introduction to Global Business Strategy
A global business strategy is the plan companies use to expand and compete internationally.
It involves deciding how to enter foreign markets, how much to adapt to local needs, and how to coordinate operations globally.
Standardization vs. Localization
| Aspect | Standardization Strategy | Localization (Adaptation) Strategy |
|---|---|---|
| Meaning | Same product, brand, and marketing strategy worldwide. | Modifies products and marketing to suit local tastes, culture, and laws. |
| Goal | Achieve efficiency, consistency, and global brand image. | Meet local customer needs and preferences. |
| Advantages | Cost efficiency, strong brand identity, easier management. | Better customer satisfaction, local acceptance, competitive edge. |
| Disadvantages | May ignore local needs and cultural differences. | Higher costs, complex operations. |
| Examples | Apple’s iPhone design and global marketing campaigns. | McDonald’s offers McAloo Tikki in India and Teriyaki Burger in Japan. |
Key Insight: Most companies use a “Glocal” approach — combining global efficiency (standardization) with local responsiveness (localization).
International Expansion Strategies
Companies can expand globally through different entry modes depending on cost, control, and risk.
| Mode of Entry | Explanation | Control | Risk | Example |
|---|---|---|---|---|
| Exporting | Selling home-made products abroad. | Low | Low | Indian textile firms exporting garments to Europe. |
| Licensing | Giving rights to a local firm to produce and sell your product. | Low | Low | Disney licenses characters for toys. |
| Franchising | Allowing a local operator to use brand & business model. | Medium | Medium | Domino’s, KFC franchises in multiple countries. |
| Joint Venture (Alliance) | Partnering with a local firm to share resources and risks. | Medium | Medium | Suzuki’s joint venture with Maruti in India. |
| Wholly Owned Subsidiary (FDI) | Full ownership of operations abroad. | High | High | Toyota manufacturing plants in India. |
| Mergers & Acquisitions (M&A) | Buying or merging with a foreign company. | High | High | Tata Motors acquiring Jaguar Land Rover (UK). |
Tip for MBA exams: Always mention control vs risk trade-off when explaining international entry strategies.
International Marketing Strategy
When operating globally, firms must plan product, price, place, and promotion for international markets.
| Element | Global Strategy Considerations |
|---|---|
| Product | Adapt to local preferences (flavors, packaging, design). |
| Price | Consider currency rates, local income, and taxes. |
| Place (Distribution) | Choose between local distributors, e-commerce, or direct channels. |
| Promotion | Adapt advertising messages to suit local culture and media habits. |
Example:
Coca-Cola maintains a consistent brand image globally but tailors advertising and packaging for local tastes (different flavors in Japan and India).
Global Supply Chain and Logistics Management
Efficient global operations depend on a well-managed supply chain — the flow of goods, information, and finances across borders.
A. Key Components
- Global Sourcing: Procuring materials or services from the most cost-efficient countries.
- Production & Assembly: Locating manufacturing where labor and logistics are cheaper.
- Distribution: Ensuring timely delivery through ports, warehouses, and retailers.
- Reverse Logistics: Handling returns, recycling, and waste management.
B. Challenges
- Political instability and tariffs (e.g., trade wars)
- Exchange rate fluctuations
- Cultural and regulatory differences
- Transportation delays and global crises (e.g., COVID-19, Suez Canal blockage)
C. Solutions
- Digitization & AI for predictive logistics.
- Sustainability focus: Green logistics and carbon reduction.
- Diversified sourcing: Avoid dependence on a single country.
Example: Apple’s supply chain spans multiple countries — design in the USA, assembly in China, and component sourcing from Japan, Korea, and India.
Integration of Global Marketing & Supply Chain
A successful global business aligns marketing goals with supply chain efficiency:
| Marketing Decision | Supply Chain Impact |
|---|---|
| Product variety | Increases complexity of logistics and inventory. |
| Pricing strategy | Affected by import duties, transport, and exchange rates. |
| Promotion timing | Requires coordination with product availability. |
| Market expansion | Needs local warehousing and last-mile delivery support. |
Latest Global Trends (2024–2025)
| Trend | Impact on Global Strategy |
|---|---|
| Nearshoring | Firms shifting production closer to markets (e.g., Mexico for US market). |
| Sustainability in logistics | Focus on green packaging, electric transport, waste reduction. |
| AI in supply chain | Predictive analytics improving demand forecasting. |
| Digital transformation | Growth of e-commerce and omni-channel models. |
| Strategic alliances | More collaborations in renewable energy, tech, and healthcare sectors. |
Summary Table
| Strategy Area | Objective | Key Example |
|---|---|---|
| Standardization | Global efficiency & brand consistency | Apple, Coca-Cola |
| Localization | Cultural adaptation & market fit | McDonald’s, Unilever |
| M&A & Alliances | Rapid market access & resource sharing | Tata–Jaguar, Starbucks–Tata |
| Licensing & Franchising | Low-cost expansion | Disney, KFC |
| International Marketing | 4Ps adapted globally | Coca-Cola campaigns |
| Global Supply Chain | Cost reduction & efficiency | Apple, Toyota |
In Short
Global business success depends on balancing global standardization and local adaptation, choosing the right market entry strategy, and building a resilient supply chain.
The best companies think globally but act locally — a true “Glocal” mindset.
Use of Incoterms (International Commercial Terms)
Incoterms are standardized trade terms published by the International Chamber of Commerce (ICC) that define the responsibilities of buyers and sellers in international trade — mainly related to delivery, transportation, risk, and insurance.
They help avoid confusion in global trade by clarifying who handles what, and when the risk transfers.
Common Incoterms (2020 Version)
| Incoterm | Full Form / Meaning | Responsibility of Seller | Responsibility of Buyer | Example Use |
|---|---|---|---|---|
| EXW | Ex-Works | Makes goods available at seller’s factory. | All costs & risks after pickup. | Used when buyer arranges all shipping. |
| FOB | Free on Board | Delivers goods on board ship. | Pays for shipping, insurance after goods on ship. | Common in sea trade. |
| CIF | Cost, Insurance & Freight | Pays cost, insurance & freight to destination port. | Takes risk after shipment. | Seller covers shipping and insurance. |
| CFR | Cost & Freight | Pays freight cost to destination. | Risk transfers once shipped. | Used in bulk commodities. |
| DDP | Delivered Duty Paid | Seller delivers goods to buyer’s premises with all taxes paid. | None until delivery. | Seller bears all risks and costs. |
| DAP | Delivered at Place | Seller delivers goods ready for unloading at destination. | Buyer handles import duties. | Used in road/air shipments. |
Example: If an exporter in India sells machinery to Germany on CIF Hamburg terms, the Indian seller pays shipping and insurance till Hamburg, but the German buyer bears risk after shipment.
Role of Trade Promotion Bodies in India
(a) EXIM Bank (Export-Import Bank of India)
| Aspect | Details |
|---|---|
| Established | 1982, under Export-Import Bank of India Act |
| Objective | Promote India’s international trade by providing financial assistance to exporters and importers. |
| Functions | - Provides export credit and overseas investment finance. - Supports export-oriented industries. - Promotes Buyer’s Credit (foreign buyers purchase Indian goods on credit). |
| Example | EXIM Bank financed Indian firms setting up projects in Africa (e.g., power plants). |
(b) ECGC (Export Credit Guarantee Corporation of India)
| Aspect | Details |
|---|---|
| Established | 1957 |
| Objective | Protect Indian exporters from losses due to non-payment by foreign buyers. |
| Functions | - Provides export credit insurance. - Covers risks from buyer default, political risks, or currency issues. - Encourages banks to give loans to exporters. |
| Example | ECGC compensates an exporter if a buyer in another country fails to pay due to war or bankruptcy. |
Global Institutions and Trade Agreements
(a) WTO – World Trade Organization
| Aspect | Details |
|---|---|
| Established | 1995 (replacing GATT) |
| Headquarters | Geneva, Switzerland |
| Members | 160+ countries including India |
| Objective | Promote free and fair trade among nations. |
| Functions | - Reduces trade barriers (tariffs, quotas). - Settles trade disputes. - Frames global trade rules. |
| Example | WTO settled trade disputes between India and the US on solar energy policies. |
(b) GATT – General Agreement on Tariffs and Trade
| Aspect | Details |
|---|---|
| Formed | 1947 (before WTO) |
| Purpose | Reduce tariffs and promote free trade after World War II. |
| Outcome | Paved the way for the establishment of WTO in 1995. |
(c) IMF – International Monetary Fund
| Aspect | Details |
|---|---|
| Founded | 1944 (Bretton Woods Conference) |
| Main Role | Ensure global financial stability and monetary cooperation. |
| Functions | - Provides short-term loans to countries in financial crisis. - Monitors exchange rates and global economy. |
| Example | IMF financial aid to Sri Lanka (2023) to stabilize its economy. |
(d) World Bank (IBRD + IDA)
| Aspect | Details |
|---|---|
| Founded | 1944 (along with IMF) |
| Components | - IBRD (International Bank for Reconstruction and Development) - IDA (International Development Association) |
| Main Role | Provide long-term loans and grants for development projects. |
| Focus Areas | Infrastructure, education, poverty reduction, healthcare. |
| Example | World Bank funding for India’s Smart Cities Mission. |
Key WTO-Related Agreements
| Agreement | Full Form | Purpose / Focus Area |
|---|---|---|
| TRIPS | Trade-Related Aspects of Intellectual Property Rights | Protects patents, trademarks, copyrights, and IP across borders. Example: Indian pharma companies must follow TRIPS when exporting medicines. |
| TRIMS | Trade-Related Investment Measures | Regulates foreign investment measures that may affect trade. Example: Prevents countries from imposing local content requirements. |
| GATS | General Agreement on Trade in Services | Promotes liberalization of international trade in services (banking, telecom, tourism). Example: Indian IT firms like Infosys benefit under GATS to provide global services. |
Latest Updates (2024–2025)
| Topic | Recent Development |
|---|---|
| India-WTO disputes | India actively involved in digital trade and agriculture subsidy negotiations. |
| EXIM Bank | Funding India–Africa partnership projects. |
| ECGC | Introduced new short-term export credit insurance for MSMEs. |
| IMF & World Bank | Focus on debt relief for developing nations and climate financing. |
| TRIPS Flexibility | Extended waiver for COVID-related medicines and vaccines for developing countries. |
Summary Table
| Component | Main Focus | Key Example |
|---|---|---|
| Incoterms | Define buyer-seller responsibility in trade. | CIF, FOB, DDP |
| EXIM Bank | Financial support for export-import. | Buyer’s Credit Scheme |
| ECGC | Insurance for export risks. | Non-payment protection |
| WTO | Free global trade rules. | Dispute resolution |
| GATT | Pre-WTO tariff reduction framework. | Post-WWII trade liberalization |
| IMF | Financial stability & short-term lending. | Sri Lanka aid |
| World Bank | Long-term development financing. | India Smart Cities project |
| TRIPS / TRIMS / GATS | Trade rules on IP, investment, services. | Pharma patents, IT services |
In Short
Global trade success depends on clear trade terms (Incoterms), strong institutional support (EXIM & ECGC), and global cooperation (WTO, IMF, World Bank) to ensure smooth, fair, and risk-free international business.
Regional Economic Blocs
A regional economic bloc is a group of countries in a specific region that come together to promote trade, investment, and economic cooperation through agreements like free trade areas, customs unions, or common markets.
Objectives
- To reduce trade barriers among member nations
- To increase regional integration and economic growth
- To enhance global competitiveness
- To promote peace and political cooperation
Major Regional Economic Blocs
(a) European Union (EU)
| Aspect | Details |
|---|---|
| Formed | 1993 (Maastricht Treaty) |
| Members | 27 European countries |
| Headquarters | Brussels, Belgium |
| Objectives | - Establish a single market with free movement of goods, services, people, and capital. - Adopt a common currency (Euro) for economic stability. |
| Key Institutions | European Commission, European Parliament, European Central Bank |
| Example of Integration | A company in France can trade freely with Germany without customs duty. |
| India–EU Relation | Ongoing Free Trade Agreement (FTA) negotiations; EU is one of India’s largest trading partners. |
(b) ASEAN – Association of Southeast Asian Nations
| Aspect | Details |
|---|---|
| Formed | 1967 (Bangkok Declaration) |
| Members | 10 countries (e.g., Indonesia, Malaysia, Thailand, Singapore, Vietnam, Philippines, etc.) |
| Headquarters | Jakarta, Indonesia |
| Objectives | - Promote regional peace, stability, and economic cooperation. - Establish ASEAN Free Trade Area (AFTA). |
| ASEAN + 6 Members | India, China, Japan, South Korea, Australia, New Zealand (Regional Comprehensive Economic Partnership – RCEP). |
| India–ASEAN Relations | India has a Free Trade Agreement (FTA) in goods and services with ASEAN (since 2010). |
(c) NAFTA – North American Free Trade Agreement
| Aspect | Details |
|---|---|
| Formed | 1994 |
| Members | USA, Canada, Mexico |
| Renamed | USMCA (United States–Mexico–Canada Agreement) in 2020 |
| Objective | - Remove tariffs and promote free trade among North American nations. - Facilitate labor mobility and intellectual property protection. |
| Impact | Boosted cross-border investment and supply chains in automobiles, electronics, and agriculture. |
(d) SAARC – South Asian Association for Regional Cooperation
| Aspect | Details |
|---|---|
| Formed | 1985 |
| Members | 8 countries – India, Pakistan, Nepal, Bhutan, Bangladesh, Sri Lanka, Maldives, Afghanistan |
| Headquarters | Kathmandu, Nepal |
| Objectives | - Promote welfare and economic cooperation in South Asia. - Encourage regional trade through SAFTA (South Asian Free Trade Area). |
| Challenges | Political tensions and low intra-regional trade. |
| India’s Role | Major contributor to SAARC development projects, trade, and education initiatives. |
Emergence and Strategies of Multinational Firms (MNCs)
A Multinational Corporation (MNC) is a company that operates in more than one country with a global business strategy, but local operations.
Reasons for Emergence of MNCs
- Globalization and liberalization policies
- Technological advancements
- Search for cheaper labor and raw materials
- Market expansion opportunities
Strategies of MNCs
| Strategy Type | Description | Example |
|---|---|---|
| Global Strategy | Centralized control; same products worldwide. | Apple – same iPhone globally. |
| Multi-Domestic Strategy | Products customized for each country. | McDonald’s India (Veg menu). |
| Transnational Strategy | Combines global efficiency with local responsiveness. | Unilever – global brand, local adaptation. |
| International Strategy | Exports from home country; limited local presence. | Boeing exporting aircraft globally. |
Indian Export Promotion Schemes
To encourage exports, increase foreign exchange earnings, and make Indian products competitive in global markets.
| Scheme | Full Form / Description | Benefit to Exporters |
|---|---|---|
| MEIS | Merchandise Exports from India Scheme (now replaced) | Incentives for exporting goods. |
| RoDTEP | Remission of Duties and Taxes on Exported Products | Refunds taxes/duties not rebated elsewhere. |
| RoSCTL | Rebate of State and Central Taxes and Levies | Focused on textile and apparel exports. |
| Advance Authorization Scheme | Allows duty-free import of inputs used for export. | Reduces production cost. |
| EPCG | Export Promotion Capital Goods Scheme | Import capital goods at zero customs duty for export production. |
| Duty Drawback Scheme | Refunds customs duties paid on imported inputs. | Improves cost competitiveness. |
Example: A textile exporter can use RoSCTL to claim tax rebates and EPCG to import machinery duty-free, lowering production costs.
Special Economic Zones (SEZ) Policies in India
SEZs are specially demarcated areas with relaxed economic laws designed to promote exports, investment, and employment.
Objectives of SEZ Policy (2005)
- Promote export-oriented growth
- Attract FDI (Foreign Direct Investment)
- Create employment opportunities
- Facilitate world-class infrastructure
Benefits to SEZ Units
| Category | Incentives / Benefits |
|---|---|
| Tax Benefits | 100% income tax exemption for first 5 years, then partial exemptions. |
| Customs & Excise | Duty-free import/domestic procurement of goods for SEZ use. |
| Single-Window Clearance | Simplified approval process. |
| Infrastructure | World-class facilities, power, telecom, and logistics support. |
| Repatriation | Freedom to repatriate profits without restrictions. |
Examples of Major SEZs in India
- Mundra SEZ (Gujarat) – largest multi-product SEZ
- Sri City SEZ (Andhra Pradesh) – hub for electronics and FMCG
- Noida SEZ – IT and manufacturing zone
- Kandla SEZ – first SEZ in India (1965)
Summary Table
| Topic | Key Points |
|---|---|
| EU | Single market, Euro currency, strong political integration. |
| ASEAN | 10 Southeast Asian nations; FTA with India. |
| NAFTA / USMCA | North American trade liberalization. |
| SAARC | South Asian cooperation; limited trade success. |
| MNC Strategies | Global, transnational, multi-domestic, international. |
| Export Schemes | RoDTEP, RoSCTL, EPCG, Duty Drawback. |
| SEZ Policies | Tax exemptions, world-class infrastructure, export focus. |
Summary
Regional blocs encourage cooperation, MNCs drive globalization through diverse strategies, and India’s export and SEZ policies support its integration into the world economy — creating a strong base for international business growth and competitiveness.