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pankaj ghemawat > articles
Harvard Business Review

Ghemawat, Pankaj.
"The Forgotten Strategy."
Harvard Business Review
81, no. 11 (November 2003): 76-84.
Most multinationals see globalization as a matter of replication--spreading a single business model as widely as possible to maximize economies of scale. From this perspective, the key strategic challenge is choosing how much of the model to keep standard and how much to grudgingly adapt to local tastes. This choice blinds companies to the very real opportunities they can still gain from arbitrage--from exploiting differences as opposed to similarities. Indeed, the scope for arbitrage is as wide as the differences that remain among countries, and those differences continue to be broad and deep. They can be divided into four main categories: cultural, administrative, economic, and geographic. Consider the continued cachet of French culture in its wines and haute couture or how swiftly the Finns have become known for their expertise in wireless communications. Clearly, legal and other administrative differences, particularly in tax laws and the cost of capital, remain large. So do purely economic wage differentials. Both the differences that make arbitrage valuable and the similarities that make replication important will remain with us for the foreseeable future, and combining the two, while necessary, is tricky.

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