The Concepts Of Adaptation, Aggregation And Arbitrage Are Part Of The Aaa Triangle Model Ghemawat Proposed

The Concepts Of Adaptation, Aggregation And Arbitrage Are Part Of The Aaa Triangle Model Ghemawat Proposed

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The concepts of adaptation, aggregation and arbitrage are part of the AAA triangle model Ghemawat proposed as the way multinationals could build their competitive advantages looking to internationalise their businesses. The three mentioned concepts may play a key role in the success of the multinational global strategy, identifying what could be the best strategy to differentiate, what should be the structure and how to address the issues that may appear in each strategy.
Thus, to analyse how successful the concepts may be, we will discuss the context in which we will use each of the concepts:
• Adaptation is when MNCs customise their products or services to the specific local market conditions.
• Aggregation is gaining efficiency and lower costs through building scale from standard products or services.
• Arbitrage is taking advantage of differences in absolute costs (e.g. labour costs, tax rates and benefits from regulations), coordinating separate activities or operations of the vertical value chain among different geographies (e.g. production, call centres, access to key resources), according to the availability of the inputs previously mentioned.
Additionally, Ghemawat identifies specific diagnostic indicators in companies, for each strategy to be appropriate. A high % value-added in advertising would indicate that an Adaptation internationalisation strategy would be suitable for the company. A high % of value added in R&D would be a good indication that Aggregation would be appropriate strategy, and finally a high % of labour cost in total value-added would indicate that arbitrage will suit best for the company.
Finding the right structure to support each strategy plays a key role in the overall result of the internationalis...


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...issues between the delivery and marketing functions. The issue was solved investing heavily in its key market, the US, and in the interaction with its home office, India, and stablishing two global leads for each project, one in each country, which were held accountable and rewarded jointly.
In summary, the AAA model is particularly useful for multinational companies to manage or structure their internationalisation and effectively manage the large differences that arise at borders. Adaptation, aggregation and arbitrage are three strategies with different focus, that can be used independently or together with other strategies. Depending on the strategy, geographical, business unit or matrix structure may work best to support them. Also, examples of companies show the opportunities addressed, the issues faced and how they solve their problems with combinations of AAs.

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