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So, why ‘go global’ if the required resources are much greater and,
incidentally, more complex to manage? Because the business
rewards are supposed to be much greater for a global strategy. And
so are the risks!
1. Lack of sensitivity to local demand: Leavitt argued that people would be prepared to
compromise on their individual tastes if the product was cheap enough deriving from
economies of scale and scope. Is this really correct? Other writers argued that there could
be costs in adapting products to match local tastes, local conditions like the climate and
other local factors like special laws on environmental issues.
2. Transport and logistics costs: if manufacturing takes place in one country, then it will be
necessary to transport the finished products to other countries. The costs for some heavy
products, like steel bars, may be greater than the economies of scale from centralised
production in one country.
3. Economies of scale benefits may be difficult to obtain in practice: plant takes time to
commission, local competitors still using old plant and cheap labour may still be competitive.
For an example, see the Tate & Lyle Case in Chapter 19 of Lynch.
4. Communications costs will be higher: standardisation of products and services needs to be
communicated to every country. In virtually every case, it will also be necessary to monitor
and control the result. All this is time consuming, expensive and at the mercy of local
managers who may have their own agendas and interests.
5. Management coordination costs: in practice, managers and workers in different countries
often need to be consulted, issues need to be explored and discussed, local variations in tax
and legal issues need to be addressed. This means that senior managers operating a global
strategy need to spend time visiting countries. It cannot all be done on the telephone and
worldwide web. This takes a tremendous toll of people personally.
6. Barriers to trade: taxes and other restrictions on goods and services set by national
governments as the goods cross their national borders.
7. Other costs imposed by national governments to protect their home industries – like special
taxes or restrictions on share holdings.
In practice, the business case for a global strategy will vary with the product category.
The real issue for many companies is what decisions are treated globally and what
locally. This is explored in the separate section on this website: ‘How do you balance
global and local?’
Corporate Strategy
We help media and entertainment companies develop and implement strategies that
accelerate growth and improve top line profitability.
Restrained credit as well as shifts in media consumption can make it difficult for media
companies to grow and maintain adequate cash flow. McKinsey works with senior management
to address these and other challenges with a range of corporate strategies, including joint
venture and acquisition opportunities.
What we do
Our corporate strategy teams take a top-management perspective, helping media and
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Our expertise and experience includes:
Developed a long-term strategic plan for a motion picture studio that included
rationalizing the 5-year film portfolio to increase returns on investments. The work
resulted in major shifts in the genres of films targeted, adjustments to film budgets to
better reflect risks and revenue projections, and more use of outside financing.
Helped develop a 5-year business plan for a newly merged European pay-tv
organization. The plan included developing a pricing methodology to support
divestment of several channels required to obtain regulatory approval.
Research and insights
Our corporate strategists regularly conduct original research focused on strategic business
growth. Three recent efforts include:
The Granularity of Growth, explaining how to identify the sources of growth in an era
of hyper-competition and globalization, with the aim of driving enduring company
performance.
Global Forces research, incorporating original research and insights from more
than 1,000 executives, identifying five forces that will restructure the global economy
and their implications for global companies.