Liquidation means selling off a business unit for the cash value of the assets, thus terminating its existence. An example, is the liquidation of Minnie Pearl Fried Chicken. Divestiture involves the selling of businesses that no longer seem central to the corporation. JC Penney recently sold its Eckerd chain of drugstores to focus on the corporation’s core business of department stores and Internet and catalog sales. Studies show that between 33 per cent and 50 per cent of all acquisitions are later divested. When Figgies International Inc. sold 15 of its 22 business divisions, including Crown Jewel Rawlings Sporting Goods and when Italy’s Fiat sold its aerospace unit both corporations were going through periods of retrenchment also called downsizing.
In addition to the three preceding alternatives – growth, stability and retrenchment – companies may pursue a separate grand strategy with the focus of global business. In today’s global corporations senior executives try to formulate coherent strategies to provide synergy among worldwide operations for the purpose of fulfilling common goals. A systematic strategic planning process for deciding on the appropriate strategic alternatives should be used. The grand strategy of growth is a major motivation for both small and large businesses going international. Each country or region represents a new market with the promise of increased sales and profits.
In the international arena, companies face a strategic dilemma between global integration and national responsiveness. The various global strategies are shown in Exhibit. The first step towards a greater international presence is when companies begin exporting domestically produced products to select countries. Because the organizations are domestically focused with only a few exports, managers have little need to pay attention to issues of either local responsiveness or global integration. Organizations that pursue further international expansion must decide whether they want each global affiliate to act autonomously or whether activities should be standardized and centralized across countries. This choice leads managers to select a basic grand strategy alternative such as globalization versus multi domestic strategy. Some corporations may seek to achieve both integration and national responsiveness by using a transnational strategy.
1) Treats world as a single global market
2) Standardization of global product / advertising strategies.
The standardization of product design and advertising strategies throughout the world:
When an organization choose a strategy of globalization it means that its product design and advertising strategies are standardized throughout the world. This approach is based on the assumption that a single global market exists for many consumers and industrial products. The theory is that people everywhere want to buy the same products and live the same way. People everywhere want to drink Coca-Cola and eat McDonald’s Hamburgers. A globalization strategy can help any organization reap efficiencies by standardizing product design and manufacturing, using common suppliers, introducing products around the world faster, coordinating prices, and eliminating overlapping facilities. Ford Motor Company’s Ford 2000 initiative built a single global automotive operation. By sharing technology design suppliers, and manufacturing standards worldwide, Ford saved $5 billion during the first three years. Similarly, Gillette Company, which makes grooming products such as the Mach3 for men and the Venus razor for women, has large production facilities that use common suppliers and processes to manufacture products whose technical specification are used around the world.
Globalization enables marketing departments alone to save millions of dollars. Colgate Palmolive Company sells Colgate toothpaste in more than 40 countries. For every country where the same commercial runs, it saves $1 million to $2 million in production costs alone. More, millions have been saved by standardizing the look and packaging of brands.
Source: Strategic Management