Aggregation And Arbitrage Case Study

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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 …show more content…

The adaptation strategy can be better supported with a geographic structure (e.g. Holcin), where the company is divided in country subsidiaries. In the other hand, if aggregation or arbitrage are the chosen strategies, then a business structure would be more appropriate (e.g. Du Pont). Finally if there is a need of coordination on both dimensions, then a matrix structure would work best. This option may have a geographic or business dominance depending on what is more commonly required in the industry (e.g. Nestle with geographically-dominated matrix and HP with business-dominated …show more content…

It has stablished a functional organisation for R&D and divisional organisation for marketing and sales of their products. • Walmart used the arbitrage strategy, investing in a Global Procurement Centre in China, with very sophisticated capabilities, to realise cost savings in the procurement of their products from that region. As other examples, German automotive companies, such as BMW and Audi, are using the arbitrage strategy to produce the BMW 3-series or the Q5 crossovers in Mexico, and export them to the US market, taking advantage of the lower labour costs in Mexico and the NAFTA free trade zone agreement benefits between the US and Mexico. Although companies may focus their internationalisation on one of the three strategies, chances are that they will try to have a combination of two of them. Following are some challenges that commonly arise from the combination of

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