AQA A-Level Business (7138)

## Learning Outcomes

- Understand what a **global strategy** is and why businesses use it
- Identify the difference between **standardisation** and **adaptation**
- Explain Bartlett and Ghoshal's four international strategy options
- Analyse why economies of scale can support global expansion
- Assess when a global strategy is suitable and when it may fail
- Distinguish between a strategy choice and a market entry method
- Structure evaluative answers on international strategy for higher-mark questions

## AQA A-Level Business (7138) Syllabus

For the AQA A-Level Business (7138), you are expected to understand global strategy and how businesses choose between standardisation and adaptation, with a focus on the following syllabus points:

- Know that a **global strategy** uses a largely standardised approach across countries
- Identify the pressures of **local responsiveness** and **global integration**
- Explain the difference between **global**, **international**, **multi-domestic**, and **transnational** strategies
- Understand how **economies of scale** can make global standardisation attractive
- Analyse why cultural, legal, income, and taste differences may force adaptation
- Distinguish between **global strategy** and **market entry methods** such as export, licensing, alliances, and direct investment
- Assess how strategy choice affects marketing, operations, finance, and human resources
- Evaluate which international strategy is most suitable in a given business context

## Test Your Knowledge

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, look more closely at that area during your revision._

1. What is meant by a global strategy?
2. How does standardisation help a business reduce average costs?
3. What is the difference between a multi-domestic strategy and a transnational strategy?
4. Why might a food business need more local responsiveness than a consumer electronics business?
5. Name four market entry methods and explain why they are not the same as global strategy.

## Introduction

When a business expands overseas, it must make a major strategic choice. Should it sell the same product in the same way everywhere, or should it adapt to each local market? That decision sits at the centre of global strategy.

For AQA Business, this topic is not just about definitions. You need to analyse why a business might prefer standardisation, why this can cut costs, and why local differences may make adaptation necessary. Strong answers also recognise that many firms do not choose a pure extreme. They combine global efficiency with some local change.

> **Key Term: global strategy**
> A largely standardised approach to international markets in which a business sells similar products and uses similar policies across countries to gain cost efficiencies and brand consistency.

### What global strategy means in practice

A global strategy usually means centralised control, standardised products, and similar branding across different countries. Head office often makes the main strategic decisions. Overseas units then implement those decisions rather than act as highly independent businesses.

This approach works best when customer needs are similar across countries and when the business can gain strong economies of scale. Products such as aircraft, some electronics, chemicals, or branded technology are often easier to standardise than food or fashion.

> **Key Term: standardisation**
> Using the same or very similar product, branding, and marketing approach in different international markets.

A standardised approach can support a clear global brand. If customers see the same product design, logo, message, and quality in different countries, the brand may become more recognisable and trusted. This can help sales and reduce marketing confusion.

Global strategy can also simplify management. A business can use the same production systems, similar training, and common operating procedures worldwide. This may reduce duplication and make coordination easier.

However, global strategy does not mean zero change in every case. Even firms with a strongly global approach may still need to alter packaging, language, pricing, or distribution because of local laws and market conditions.

> **Test Tip:** In exam answers, avoid saying that global strategy means "exactly the same in every country". A stronger answer says "largely standardised, with limited adaptation where needed".

### Why businesses choose global strategy

The biggest reason is usually cost. If a firm produces large volumes of a standard product for many countries, it may lower its average cost per unit.

> **Key Term: economies of scale**
> Cost advantages that arise when a business increases the scale of production, causing average costs to fall.

The basic quantitative link is:

- **Average cost = Total costs / Output**
- **Total costs = Fixed costs + Variable costs**

If output rises sharply while fixed costs are spread across more units, average cost may fall.

Worked example:

A business makes smart speakers.

Before international expansion:

- Fixed costs = £2,000,000
- Variable cost per unit = £30
- Output = 100,000 units

Step 1: Calculate total variable costs  
100,000 × £30 = £3,000,000

Step 2: Calculate total costs  
£2,000,000 + £3,000,000 = £5,000,000

Step 3: Calculate average cost  
£5,000,000 / 100,000 = **£50 per unit**

After adopting a successful global strategy:

- Fixed costs = £2,400,000
- Variable cost per unit = £28
- Output = 300,000 units

Step 1: Calculate total variable costs  
300,000 × £28 = £8,400,000

Step 2: Calculate total costs  
£2,400,000 + £8,400,000 = £10,800,000

Step 3: Calculate average cost  
£10,800,000 / 300,000 = **£36 per unit**

So average cost falls from **£50** to **£36** per unit.

This gives a strong chain of analysis:

larger global output -> lower average cost -> lower prices and/or higher profit margin -> stronger competitiveness

Businesses may also gain:

- purchasing economies from buying inputs in bulk
- marketing economies by spreading advertising costs across many markets
- technical economies from specialist machinery
- managerial economies from specialist expertise
- financial economies if larger scale improves access to finance

A global strategy may also strengthen brand consistency. Apple is often used as an example because its core product design and branding are similar across many countries. That consistency can build a premium image.

Common student errors:

- assuming economies of scale happen automatically
- forgetting to explain how lower average costs improve competitiveness
- describing scale benefits without applying them to the business in the question

### The trade-off: local responsiveness versus global integration

Bartlett and Ghoshal's framework helps explain international strategy choices. It is based on two pressures:

- the pressure for **local responsiveness**
- the pressure for **global integration**
  > **Key Term: local responsiveness**
  > The extent to which a business must adapt products or operations to meet differences in local tastes, culture, laws, or market conditions.
  >
  > **Key Term: global integration**
  > The extent to which a business coordinates and standardises activities across countries to gain efficiency and consistency.

If local responsiveness is low and global integration is high, a **global strategy** is often suitable.

If local responsiveness is high, a pure global strategy may be risky. A food business may need to adapt recipes for religion, culture, or taste. A clothing retailer may need different sizing, styles, or seasonal ranges. A business selling into lower-income markets may also need a different pricing or packaging strategy.

> **Key Term: adaptation**
> Changing the product, marketing mix, or operations to suit local market conditions such as culture, law, income, or consumer preferences.

Bartlett and Ghoshal identify four broad strategy types:

- **International strategy**: mainly home-market based, with limited adaptation abroad
- **Global strategy**: high standardisation and centralised control
- **Multi-domestic strategy**: strong local adaptation and decentralised decisions
- **Transnational strategy**: combines global efficiency with local responsiveness

A useful comparison is below.

| Strategy       | Local responsiveness | Global integration | Main feature                                     |
| -------------- | -------------------- | -----------------: | ------------------------------------------------ |
| International  | Low                  |                Low | Domestic model sold abroad with limited changes  |
| Global         | Low                  |               High | Standardised products and centralised control    |
| Multi-domestic | High                 |                Low | Country-by-country adaptation and local autonomy |
| Transnational  | High                 |               High | Balance of efficiency and adaptation             |

> **Key Term: transnational strategy**
> A strategy that aims to combine global efficiency with local responsiveness by standardising where possible and adapting where necessary.

Many exam answers improve when they show that transnational strategy is often the realistic middle ground. McDonald's is a common illustration: global branding and systems, but menus adapted to local tastes.

> **Test Tip:** If a 16-mark question asks whether a business should use a global strategy, do not stop at advantages. Compare it with multi-domestic or transnational options and decide which fits the case best.

### When global strategy works well, and when it does not

A global strategy is most suitable when:

- customer needs are similar across countries
- the product is easy to standardise
- cost pressure is high
- economies of scale are large
- brand consistency matters
- centralised control is feasible

It is less suitable when:

- tastes differ sharply between countries
- legal rules vary a lot
- language or culture affects demand
- incomes vary widely
- local competitors understand customers better
- the product needs significant adaptation

This is where analysis must be contextual. For example, a business selling industrial chemicals may find standardisation easier than a chain selling prepared meals. The first may benefit heavily from scale and consistent technical standards. The second may face much stronger local taste differences.

Global strategy also creates implementation challenges. A strategy may look good on paper but fail in practice if employees do not understand it, if managers in overseas divisions do not trust it, or if different functions are not coordinated. Marketing, operations, finance, and HR all need to support the same plan.

For example:

- marketing must decide how far promotion should be standardised
- operations must choose production locations and supply chains
- finance must fund expansion and manage risk
- HR must recruit and train staff across countries

If these decisions are not joined up, the strategy may fail even if the original idea was sound. This links to a wider exam theme: poor implementation can damage a good strategy.

A related issue is the difference between strategy and tactics. Strategy is the long-term direction. Tactics are short-term actions used to support it. A business may have a global strategy but still use local tactical promotions in specific markets.

Another common confusion is between international strategy and market entry method. These are not the same.

Market entry methods include:

- export
- licensing
- alliances
- direct investment

A business could enter a market by direct investment and still choose either a global, multi-domestic, or transnational approach afterwards. Entry method is the route in; strategy is the way the business chooses to compete.

> **Key Term: direct investment**
> Entering a foreign market by setting up or buying operations there, such as factories, offices, or subsidiaries.

### How to structure an evaluative answer

For 16-mark or 20-mark strategy questions, use an "on the one hand / on the other hand / it depends" structure.

On the one hand:

- explain why global strategy could reduce average costs
- show how standardisation may strengthen brand consistency
- apply this to the product and industry in the case

On the other hand:

- explain why adaptation may be needed because of taste, law, income, or culture
- show the risk of poor sales if the offer does not fit local demand
- consider management and implementation difficulties

It depends on:

- the type of product
- the degree of similarity in demand
- the scale of cost pressure
- the firm's resources and management capability
- the country differences involved
- the stakeholder view and time horizon

A strong judgement is specific, not generic. For example, do not say "it depends on the business". Say "it depends on whether the firm's products can be standardised without damaging demand, and whether cost savings are large enough to outweigh weaker local fit".

## Key Point Checklist

_This article has covered the following key knowledge points:_

- A global strategy uses a largely standardised approach across countries
- Standardisation can reduce costs and strengthen brand consistency
- Economies of scale may lower average cost when output rises
- Average cost is calculated as total costs divided by output
- Businesses must balance local responsiveness against global integration
- Adaptation may be needed because of culture, law, income, language, or consumer taste
- Bartlett and Ghoshal identify international, global, multi-domestic, and transnational strategies
- A transnational strategy aims to combine efficiency with local responsiveness
- Global strategy is most suitable where demand is similar across countries and scale benefits are large
- Strategy choice is different from market entry method
- Market entry methods include export, licensing, alliances, and direct investment
- Good evaluation depends on the product, market differences, cost pressures, and implementation capability

## Key Terms and Concepts

- global strategy
- standardisation
- economies of scale
- local responsiveness
- global integration
- adaptation
- transnational strategy
- direct investment


Strategy - Global strategy