MGMT30004 · Managing Globally
Developing Global Strategy
Once the environment is scanned, the firm formulates a global strategy — and this chapter walks the three questions that drive it. Why go international (proactive pulls like scale, growth and resources versus reactive pushes from competitors, barriers and clients)? How globally should the firm act — standardise for efficiency or localise for responsiveness? That trade-off is the Integration–Responsiveness framework (Bartlett & Ghoshal), whose four quadrants — international, global, multidomestic, transnational — are the spine of the topic. And how does it get in — the market-entry ladder from exporting to wholly-owned, distance-checked with Ghemawat's CAGE framework. The five-step strategic-management process ties it together. In the exam this is a classic Part B: name the I–R quadrant, pick an entry mode, and justify both from the firm's internal factors and the CAGE distance to that country.
What this chapter covers
- 01Reasons to go international: proactive (scale, growth, resources, incentives) vs reactive (competitors, barriers, customers)
- 02The Integration–Responsiveness framework (Bartlett & Ghoshal): the four quadrants
- 03Liability of foreignness and why transnational is not the default 'best' answer
- 04The CAGE distance framework (Ghemawat): Cultural, Administrative, Geographic, Economic
- 05The five-step strategic-management process
- 06Market-entry modes on the commitment ladder: export → licensing → franchising → JV → wholly-owned
Worked example: choosing posture and entry mode
- +2(a) Plot it on the I–R grid. A globally consistent product under high integration pressure that must now flex to local tastes faces rising responsiveness pressure — the pull toward transnational ('going glocal'). Name the quadrant and the two pressures.
- +2(b) Run CAGE. Flag the dimensions that bite: cultural distance in tastes and trust; administrative distance in rules; geographic in logistics; economic in income and willingness to pay. High distance raises the liability of foreignness.
- +2(c) Pick a mode and justify. Entering digital-first / direct-to-consumer and then via a wholly-owned operation keeps control of the brand and captures revenue — justified because control matters and the firm accepts higher cost and full liability of foreignness.
Key terms
- Integration–Responsiveness framework
- Bartlett & Ghoshal's grid mapping a firm on global-integration pressure (efficiency, scale, central control) against local-responsiveness pressure (adapting to local tastes and rules). The four quadrants are international, global, multidomestic and transnational.
- Transnational strategy
- The high-integration, high-responsiveness quadrant — global efficiency and local adaptation at once, with learning shared network-wide. It is the most complex and costly to coordinate, so it is chosen because the pressures demand it, not as a default best answer.
- CAGE distance framework
- Ghemawat's tool for measuring how distant a target country is across Cultural, Administrative, Geographic and Economic dimensions. High relevant distance raises the liability of foreignness and favours a lower-commitment or partnered entry mode.
- Liability of foreignness
- The cost of being an outsider — unfamiliar rules, weaker local networks, low brand awareness — highest under high cultural distance and in emerging markets. A local partner or staged commitment reduces it.
- Market-entry mode
- The route into a foreign market on a ladder of rising commitment, control and risk — exporting, licensing, franchising, joint venture, and wholly-owned (greenfield or acquisition). Each step trades flexibility and low cost for control and upside.
Developing Global Strategy FAQ
What's the difference between proactive and reactive reasons to go global?
Proactive (aggressive) firms are pulled outward by opportunity — economies of scale and scope, growth beyond a saturated home market, cheaper resources, or host-government incentives. Reactive (defensive) firms are pushed — by competitors going global, by trade barriers that make exporting unviable, or by key customers demanding a local presence. Most real expansions mix both; say so, then weight the dominant motive.
Is the transnational strategy always the best choice?
No — this is the most common trap. Students pick transnational because it 'does both', but it is the most complex and costly to coordinate. Choose the quadrant the pressures demand: a commodity with global tastes points to global standardisation; a taste- or regulation-heavy product points to multidomestic. Justify from the actual integration and responsiveness pressures.
How does CAGE connect to the entry-mode choice?
Let CAGE drive the mode. High CAGE distance points to lower-commitment, partnered modes (export, franchising, JV) that share risk and reduce the liability of foreignness. Low CAGE distance plus validated demand lets you justify a higher-control wholly-owned move. Naming CAGE and the entry mode in one chain reads as A-grade application.
What is the five-step strategic-management process?
Define mission and objectives → assess the external environment (PESTLE/PELT + CAGE) → analyse internal factors (resources and capabilities) → choose the global strategic approach (the I–R quadrant) → choose the market-entry mode, then implement, evaluate and evolve. The subject threads this spine through every topic.
Exam move
Memorise the four I–R quadrants and the CAGE letters by name — they are the backbone of every Topic-2 Part B. Practise the chain: read the firm's integration and responsiveness pressures → name the quadrant → run CAGE to the target country → let the distance pick the entry mode → justify from internal factors. Resist the reflex to answer 'transnational' or 'wholly-owned' by default; the marks are in justifying the choice from the actual pressures and distances. Keep the entry-mode ladder (export → licensing → franchising → JV → wholly-owned) ready as a menu you can trade up or down.
