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Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter

By Pankaj Ghemawat
Harvard Business School Press, 2007, 272 pages

Conceptual frameworks for managers function like maps for travelers; they work well when they cover the right territory, capture features of interest, and are at the right scale to serve immediate purposes. Maps fail to help when they don’t capture the right features or when they are at the wrong scale. Typically, business maps come with too coarse a grain, as their cartographers attempt to develop generic concepts that fit all situations. The result is a profusion of clichés that become pernicious if used as strategic mantras to drive business decisions.

In Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter, Pankaj Ghemawat, the Anselmo Rubiralta Professor of Global Strategy at IESE Business School (where he is teaching on leave from Harvard Business School), disputes the popular notion that the world is “flat,” that there is a global convergence of markets and production that facilitates universal strategies. He contends, rather, that the world is in a state of semiglobalization and that it will remain this way for decades to come. (See “The Thought Leader Interview: Pankaj Ghemawat,” by Art Kleiner, s+b, Spring 2008.) In Ghemawat’s skeptical view, managers of globalizing companies cannot assume that returns will automatically increase in proportion to the growth in size or scope of the operations. Instead, they will have to analyze differences across countries as well as all the components of economic value.

For understanding differences, Ghemawat offers a “CAGE” framework, which highlights the cultural, administrative, geographic, and economic “distances” among countries. This framework can be applied at either at the country level, or, more revealingly, at the industry level within each country. His acronym for the components of economic value is ADDING — adding volume, decreasing cost, differentiating product offerings, improving industry attractiveness, normalizing risk, and generating knowledge. And Ghemawat’s AAA framework refers to a broad array of strategies for responding to cross-country differences — adaptation strategies adjust to differences, aggregation strategies can overcome them, and arbitrage strategies can be used to exploit them. These three analytical tools are not mutually exclusive, and the author gives practical examples of how some firms have used more than one; he cautions, however, that using all three in combination is extremely challenging.

With its combination of solid data, illuminating case studies, and helpful concepts, this book is an effective antidote to both millennial and apocalyptic visions of globalization. The acronyms may sound like alphabet soup, but the author is one of the leading researchers on international business; his analytical framework is a useful first cut for any organization contemplating going global.