Managing Differences by Pankaj Ghemawat
The primary idea in Pankaj Ghemawat’s article “Managing Differences: The Central Challenge of Global Strategy” is that the most successful method of globalization involves one or many of what the author refers to as the AAA Triangle. The three A’s stand for aggregation, adoption, and arbitrage. The author provides numerous case studies of several well-known companies that show how using these three strategies leads to the effective expansion on the global stage. Aggregation involves combining aspects of development and production in attempts to “deliver economies of scale” (1). Adoption relies upon tailoring the practices of an organization to those of the local setting in which it is operating, and arbitrage is the exploitation of differences between and within different areas of countries.
A particularly useful part of this article is the fact that Ghemawat even implies what sorts of strategies (initially) will work for a certain type of organization. Organizations that require intense amounts of labor will benefit from arbitrage. Those whose primary area of focus is research and development will profit from aggregation, while organizations that will require a lot of advertising will probably need to use adaptation as they begin their efforts towards globalization.
The most important aspect of this article, however, is the fact that there is no one magic formula for success for a particular company. In fact, Ghemawat provides numerous examples of companies that achieved success by utilizing more than one of these strategies in different ways. Either they pursued two simultaneously, or they switched from one strategy from the next to help their organization to continue to expand. Of additional value is the fact that the author stresses that the type of strategy used and the particular combination that will help a specific company all pertains to a host of factors that affect that company. It truly is up to the leaders of those organizations to clearly establish goals and objectives for globalization, and to transfer strategies and use more than one as needed in order to fulfill those ends.
One of the strengths of this article is the fact that the author provides several different ways to successfully expand one’s companies across international borders. His case studies, which pertain to companies such as IBM, Procter & Gamble, TCS and other reputed organizations explain the various factors that influenced which particular strategy or strategies was necessary for these companies to succeed. In that sense, he has effectively produced a blueprint for success that other organizations in similar industries to those discussed in the article can follow.
As such, it is difficult to argue with the Ghemawat’s claim that AAA Triangle is required for international expansion, since he offers so many that follow this model. That is why it is all the more interesting to note the degree of difficulty the author states is involved in attempting to utilize all three strategies simultaneously. It appears that this limitation really seems to reflect the finite amount of resources that an organization has at its disposal. Still, it seems as though if using two strategies at the same time is effective, using all three would be as well. But the author’s in-depth analysis of the difficulties that PMS encountered while attempting to utilize all three strategies as once is extremely convincing as a warning that mastering two simultaneously is much more preferable. Regardless, there is a fair amount of wisdom in this article, and it certainly would benefit organizations with global ambition to utilize the AAA Triangle.
Pankaj Ghemawat, “Managing Differences: The Central Challenge of Global Strategy,” Harvard Business Review, (2007): 3.
Ghemawat, Pankaj. “Managing Differences: The Central Challenge of Global Strategy.” Harvard Business Review, (2007): 1-14.