The competitive playing field is becoming increasingly global, as the ChapterCase
about the movie industry indicates. This globalization provides significant opportunities
for individuals, companies, and countries. Indeed, you can probably see the increase in
globalization on your own campus. The number of students enrolled at universities outside
their native countries tripled between 1980 (about one million students) to 2010 (three million
students). 3 The country of choice for foreign students remains the United States, with
some 600,000 enrolled per year, followed by the UK with some 360,000 foreign university
students.
In Chapter 8, we looked at the first two dimensions of corporate strategy: managing
the degree of vertical integration, and deciding which products and services to offer (the
degree of diversification). The question of how to compete effectively around the world is
the third dimension of corporate strategy. The world’s marketplace—made up of some 200
countries—is a staggering $70 trillion in gross domestic product (GDP), of which the U.S.
market is roughly $15 trillion, or about 21 percent. 4
We begin this chapter by defining globalization and presenting stages of globalization.
We then tackle a number of questions that the strategist must answer: Why should the company
go global? Where and how should it compete? We present the CAGE 5 distance model
to answer the question of where the firm should compete globally. In a next step, we present
the integration-responsiveness framework to link a firm’s options of how to compete
globally with the different business strategies introduced in Chapter 6 (cost leadership,
differentiation, and integration). We then debate the question of why world leadership in
specific industries is often concentrated in certain geographic areas. We conclude with
practical Implications for the Strategist.