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AAA Strategy

AAA Strategy offers 3 frameworks for global strategies: Adaptation Strategies which involve changing elements of a company's offer to meet local requirements; Aggregation Strategies which create economies of scale without compromising localization; and Arbitrage Strategies which exploit differences between markets such as buying low in one market and selling high in another or leveraging differences in costs of labor and capital through outsourcing.

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817 views6 pages

AAA Strategy

AAA Strategy offers 3 frameworks for global strategies: Adaptation Strategies which involve changing elements of a company's offer to meet local requirements; Aggregation Strategies which create economies of scale without compromising localization; and Arbitrage Strategies which exploit differences between markets such as buying low in one market and selling high in another or leveraging differences in costs of labor and capital through outsourcing.

Uploaded by

siddharth
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AAA Strategy offers 3 kinds of

framework-

Adaptation Strategies
Aggregation Strategies
Arbitrage strategies

Adaptation Strategies

Creating global value by changing one or more elements of a


companys offer to meet local requirements or preferences.
Variation strategies not only involve making changes in
products and services but also making adjustments to policies,
business positioning, and even expectations for success.
Example- IKEA having to modify itself in China.

Focus/ Externalization strategies help overcome regional


differences through strategic alliances, franchising, user
adaptation, or networkingresponsibility for specific parts of a
companys business model to partner companies to
accommodate local requirements, lower cost, or reduce risk.
Example- General Mills and Nestle strategic alliance in Europe.

Adaptation strategies cont...

Design strategies help reduce the cost of product, rather than


the need for variation. Manufacturing costs can often be reduced
by introducing design flexibility so as to overcome costs.
Example- Tata Motors, which has successfully introduced a car in
India that is affordable to a significant number of citizens.

Innovation strategies help in improving the effectiveness of


adaptation efforts.
Example- IKEAs flat-pack design, which has reduced the impact
of geographic distance by cutting transportation costs, has helped
that retailer expand into 3 dozen countries.

Aggregation strategy
Aggregation is about creating economies of scale
or scope as a way of dealing with differences.
The objective is to exploit similarities among
geographies rather than adapting to differences but
stopping short of complete standardization, which
would destroy concurrent adaptation approaches.
The key is to identify ways of introducing economies
of scale and scope into the global business model
without compromising local responsiveness.

Arbitrage Strategy
A third generic strategy for creating a global advantage is
arbitrage. Arbitrage is a way of exploiting differences,
rather than adapting to them or bridging them, and
defines the original global strategy: buy low in one
market and sell high in another. Outsourcing and
offshoring are modern day equivalents. Wal-Mart saves
billions of dollars a year by buying goods from China. Less
visible but equally important absolute economies are
created by greater differentiation with customers and
partners, improved corporate bargaining power with
suppliers or local authorities, reduced supply chain and
other market and nonmarket risks, and through the local
creation and sharing of knowledge.

Types of Arbitrage strategies

Cultural- French culture has long been an international success


factor for fashion items, perfumes, wines, and foods.
Administrative- Buy low , sell high.
Geographic- online transactions and channels, save on
transportation and communication
Economic- Leverage differences in cost of labour and capital.
Like contract manufacturing, outsourcing etc.

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