MGMT 611 Class 19 Henisz, Witold J., (2012) “Summary of Global Strategic Management Frameworks,” Ghemawat’s AAA and Varieties of Capitalism Ghemawat’s AAA  Global Strategy examines the additional opportunities, challenges, and tradeoffs posed when a company crosses national borders  Ghemawat contends that to create, capture, and sustain rents in international operations firms have three strategies they can deploy at the product level to respond to distance: 1. Adaptation – seeks to boost revenues and market share by maximizing a firm’s local relevance  Requires local autonomy but must trade off the gains from such decentralization against the costs of excessive heterogeneity and local subgoals 2. Aggregation – attempts to deliver economies of scale by creating regional or sometimes global operations (standardizing the product or service offering and grouping together the development and production processes)  Requires global coordination but must trade off the efficiency gains of standardization and scale or scope economies against costs of always being perceived as an outsider or cost minimizer 3. Arbitrage – the exploitation of differences between national or regional markets, often by locating separate parts of the supply chain in different places  Requires flexibility and the management of a complex network of internal and external relationships for continuous learning, but must trade off benefits from such dynamism against costs of being perceived as fickle, rootless partner or citizen  Firms can learn to more efficiently design and implement mix of adaptation, aggregation, and arbitrage strategies over time  Strategies can evolve over time from aggregation to adaptation to arbitrage  Over time, value chain internationalizes as benefits of local adaptation outweigh costs of disaggregation Varieties of Capitalism  Strategy that highlights