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Harvard Business Review

Ghemawat, Pankaj.
"Managing Differences: The Central Challenge of Global  Strategy."
Harvard Business Review 85, no. 3 (March 2007).
The main goal of any international strategy should be to manage the large differences that arise at the borders of markets. Yet executives often fail to exploit market and production discrepancies, focusing instead on the tensions between standardization and localization. The AAA Triangle stand for the three distinct types of international strategy. Through Adaptation, companies seek to boost revenues and market share by maximizing their local relevance. Through Aggregation, they attempt to deliver economies of scale by creating regional, or sometimes global, operations. And through Arbitrage, they exploit disparities between national or regional markets, often by locating different parts of the supply chain in different places--for instance, call centers in India, factories in China, and retail shops in Western Europe. Examples illustrate how organizations use and balance these strategies as well as the trade-offs they make as they do so. Because most enterprises should draw from all three As to some extent, the framework can be used to develop a summary scorecard indicating how well the company is globalizing. Given the tensions among the strategies, the strategic choice requires some degree of prioritization--and the framework can help with that as well. While it is possible to make progress on all three strategies, companies usually must focus on one or two when trying to build competitive advantage.

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