Executive Summary of Companies
The report explores the three generic strategies used by organizations and all industries to create value when operation in an international business environment. These strategies include the adaptation, arbitrage, and aggregation with the focus being the manufacturing and service industries. Pankaj Ghemawat introduced the conceptualization of these strategies in his book entitled Redefining Global Strategy (Ghemawat, 2013). The framework formulated by Ghemawat is mostly integrated with the generic strategies with an objective of altering the firm’s business model and attain a competitive edge over their rivals. In the AAA framework, Adaptation strategies are employed by the organization to increase the market share and the revenues by tailoring one of the strategies used to respond to the local requirements. Aggregation emphasis on the market is on achieving the economies of scale through ensuring the standardization of the value proposition and other processes. Arbitrage strategy in the framework is driven by the aspiration and the desires the differences seen in the national or regional markets. Such companies locate their supply chain in various places (Motohashi, 2015; Jha, Dhanaraj, & Krishnan, 2014). The company explores the above strategies as used by McDonald’s, Coca-Cola, Tiger Airways Airline and JPMorgan Chase.
MacDonald’s is a food retailer company that operates franchised hotels across the world. The corporation began in 1964, and since its inception, the firm has operations in more than 100 countries namely China, UK, Germany, Japan and others across the globe. The corporation has experienced high growth in many countries due to their efficient delivery of products and services, use of digital solutions, interesting menu and promotions. The company is famous for many products some of them including hamburgers and cheeseburgers, Filet-O-Fish, various chicken sandwiches, oatmeal, soft drinks, McCafe beverages and other types of food and beverages introduced through promotions (Reuters, 2015).
Tiger Air Airlines is a subsidiary of Singapore Airlines Limited and began operations more than a decade ago in 2004; the firm is a leading airline in Singapore by no-frills and provision of affordable services and excellent customer services and experience. The company operates in more than 40 countries such as Singapore, China, Indonesia, Malaysia, Myanmar, Taiwan, and Vietnam. The company aim is to provide services of the highest standards, incredible security, and utmost reliability (TigerAir, 2016).
Coca-Cola is an American multinational beverage company that deals with the manufacturing of beverages for the global market. The companies are the biggest beverage company and offer more than 500 brands in more than 200 countries. Some of the drinks offered include Ayataka green tea, Dasani waters, Fanta, Minute Maid juices, Sprite, Coca-Cola, and others (Coca-Cola, 2017).
JPMorgan Chase & Co. is a leading global financial institution and one of the largest and the oldest in the world. The company can be traced from 1799 in New York, and since then it has established many branches across the world. Some of the services offered by the incorporation include financial services and transactions, asset management, investment banking and commercial banking (Reuters, 2015).
The Adaptation strategy in the creation of global value is done by strategically altering one or more elements of the firm offer in a bid to respond to the local preferences and requirements. The strategy is widely adopted by many companies especially the international global companies because adaptation in the organizations is core and central for many products in different parts of the globe. Ghemawat subdivides the strategy into five categories namely variation, externalization, focus, innovation and design (Berry, 2017; Ghemawat, 2013).
Ghemawat AAA Framework
Aggregation revolves around the company creating the economies of scale to account for differences. The objective of the strategy is to exploit the variation among different regions as opposed to adapting to them. The focus of the company is standardization of the products across areas where it has operations and to bring new products without bringing compromise to the enterprise (Ghemawat & Hout, 2014).
A third generic strategy used by the organizations to encourage global advantage is known as arbitrage. The strategy focuses on the differences as opposed to bridging and adapting them or them. For instance, the company can decide to buy at lower prices in one market and make a profit by selling the same product at a much higher price in another region. The contemporary strategy is characterized by offshoring and outsourcing which are modern day equivalents of strategy. For example, companies like Wal-Mart saves significant amount of revenues amounting to billions of dollars annually from outsourcing their products from countries like China and reselling them in the U.S. (Ghemawat & Hout, 2014; Ghemawat, 2013).
MacDonald’s brand has restaurants in about ten countries, and their services benefit millions of customers every day. The chain is best known across the world for burgers and other products. This is where their adaptation strategy applies because their burgers are adapted based on the country’s culture and preferences. Further, to adjust to the changing consumer preferences, the menu has other products to meet the consumer tastes and preferences. For example, they have salads, fish, smoothies and seasoned fries. Therefore, the adaptation strategy makes it possible for them to have different menus based on the region’s food and other references. For example, in India, the religious beliefs prohibit the consumption of beef meet and therefore no such products in the menu. In other parts such as Singapore, Japan, Germany the company provides meat pie and beer because of the population culture (Ghemawat & Hout, 2014). The company is also a beneficiary of arbitrary occasioned by globalization. For example, the company leveraged its reputation as an excellent company to open branches in other countries such as India, Germany, Japan, and others. Further, it has positioned itself as a high-quality food chain in these countries and has used contract with farmers to produce their raw materials. This strategy ensures the presence of a constant supply of their high-quality food (Stead & Stead, 2013).
Coca-Cola is a multinational company which produces beverages and sell them in more than 200 hundred companies. The company is a beneficiary of adaptation, and this makes the tastes of their beverages different depending on the region. Coca-Cola beverages taken in Europe are different to that of Africa and the U.S. Besides the packaging and the marketing strategies used in the various countries are adapted to the local situations and other environmental factors unique to the area. The company also uses aggregation strategies because it uses the economies of scale and has more than 300 brands that produce the different suit regions. The company uses the arbitrage strategy in many countries such as Kenya; China because it has bottling rights to reduce the cost of production and supply (Stead & Stead, 2013).
AAA Strategy used by MacDonald
JP Morgan Chase is one of the largest financial services providing firm in the world, and the main competitors in the industry are the Bank of America and other such as Merill Lynch. The bank management uses the adoption strategies as evidenced by their globalization strategy after the Second World War to different cities such as Tokyo, London among others means it had to offer modified services across various regions where it operates. The bank has different policies across the world, and this makes it possible for the company to provide services that are accustomed to that regions. The strategy is based on the external environment and difference in difference countries such as the level of income, religion, age and the country’s or region’s culture. Besides, the company uses aggregation strategies, and example is identified through administrative aggregation where they have central hubs across the globe that meet the regulatory requirements. Arbitrage strategy is utilized by the bank because the taxes paid in the foreign country get credit in the United States (Zeissler & Metrick, 2014).
Tiger Airways Airline which has an operation in Australia also employees the AAA framework to substantively expand and grow their strategy all over the world. Virtually all the countries have their airline firms that satisfy both domestic and international activities in conjunction with foreign companies. The company uses low fare strategy to capture and seize a huge share of the market, and this is one of their aggregation strategies (Chiu, Liu, & Tu, 2016). The firm also uses adaptation strategy, and this is realized through effective adjusting to the new environment where it operates and providing wider choices to customers such as allowing them to choose the service that fits their budget. Thus, Tiger-airways adaptation strategy has led to the overwhelming demand for their services and maintenance of their market. Therefore, the company combines the aggregation and adaptation strategy to increase their market share and boost their competitive advantage in the competitive market (Homsombat, Lei, & Fu, 2014).
All organizations use the SWOT analysis tool to understand the market as it helps it maintain their current position and further address the concerns revealed in the analysis. The SWOT Analysis framework is defined as a strategic tool utilized by companies to make decisions on the internal and external strategic factors present in the business environment where it operates. The factors include the strength, weakness, opportunities and threats in the firm. The analysis of AAA framework about the four companies reveals that they utilize the aggregation and adaptation strategy to remain competitive, capture and maintain the market share in the environment where it operates (Carter-Silk, 2016). The section analyses the strength, weaknesses, opportunities and threats of AAA marketing strategy (Berry, 2017; Ghemawat & Hout, 2014).
- The strategies applied by the companies are very essential, and this boosts the organizations capability to produce creative and unique products, and this helps them meet the customer needs and wants.
- The firms have developed a strong supply chain that helps in mobilizing the resources and enhance the delivery of services and product to the market promptly.
- When the company can produce the unique products, it makes it the company distinguish from the market rivals
- The companies are able to employ a superior technology that can help them satisfy the client’s needs and wants in a way that the competitors cannot be able imitate.
- The advent of technology means that the companies must ensure a strong online presence to display the information about their products and services.
- The business environment is always, inefficient and this means that the company may experience difficulties reaching the market.
- Creativity and innovation can help the companies serve the consumer preferences.
- New products are essential for the expansion of the diversity and the consumer base.
- International markets provide many opportunities for the companies to expand their business and boost their sales.
- The international environment is very unpredictable and this can hurt the business performance.
- Volatile revenue delays the firm’s investments
- The clients and consumers preference and tastes on the products and services can change very fast.
Multinational companies carry their activities in a volatile international markets and this makes them apply strategies that meet the local and international standards. These include the language, legal, culture and other requirements such as the distribution channels used. These companies’ explored uses adaptation, aggregation and arbitrage strategies and this makes them assume that all the consumers have the same preferences and taste (McFarlin & Sweeney, 2014). The Adaptation strategy in the market is used by the companies to enable and improve the chances of companies succeeding and having a deep understanding of the market preferences and tastes. Both approaches analyzed in the report are very rational, coherent and logical and there are various benefits that are gained for using the approaches in the market. However, when these companies direct all their efforts in one position they become unfeasible, inconsistent and incoherent in relation to environment changes and unique developments. Marketing for multinationals companies cannot rely on the two or three approaches even when they coexist and there is a need to consider other factors to enable them compete effectively in a multicultural environment (Leeflang, Verhoef, Dahlström, & Freundt, 2014).
AAA strategies used by Coca-Cola
Recommendation and Conclusion
Various challenges are caused by the inability of the company to use three generic strategies together efficiently. Therefore many companies face severe constraints of combining the three strategies simultaneously with high effectiveness due to various environmental challenges. The companies are forced to operate with managerial bandwidth and in multiple corporate cultures which can sometimes make it hard for it to compete. This means the company even after compiling the strategy can be affected by the cultural factors and provide their rivals with opportunities to steal their market share. Therefore the report recommends that companies.
The companies need to incorporate a high level of creativity in the AAA strategies applied to maintain and sustain the market shares. The companies should not stick to the same policies because there will be decreased flexibility and high resistance to change and this could lead to an inability to compete in the market.
There is need to embrace ambiguity when operating in the international environment even when the AAA strategies used are active in the market. The organization need a high level of innovation even in the midst of uncertainty and ensure a positive mind-set and develop new and incredible ways of achieving success.
For the company to be adapted to the changes in the environment, there is a need to have the intelligence of the market forces. When the strategy is incorporated, it uses less effort to and quickly to adapt to the changes in the environment to work efficiently. In the environment, there is a changing priority by the consumers, and this happens unpredictably. Therefore the management should have a system where they can maintain and the focus to respond to the changing priorities of the market which should be merged with the operational goals.
Conclusion
In conclusion, multinational organizations use AAA strategies namely adaptation, arbitrage, and aggregation. Some of these companies include Tiger Airways Airline, JPMorgan chase, MacDonald’s and Coca-Cola. The reason why these companies use the strategies is to enable the economies of scale, maintain competitive ability, and respond to localized needs and wants in the market. Coca-Cola uses adaptation strategy to respond to the cultural differences, and market preferences across the regions. MacDonald’s uses adaptation strategy to come up different and innovative menu which is different in the regions. Tiger Airways Airline is a low-cost airline operating in many countries, and this help attracts consumers. JPMorgan Chase uses aggregation strategy to establish their services in different regions and use administrative hubs in japan, London and other. This helps it significantly reduce the price and boost its competitive edge.
References
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