Management Summary:

The competitive market of todays business offers lot many challenges on the
business owners to successfully run their business worldwide and make profits
out of it.To cater needs of these business giants and help them to succeed
requires a well defined business strategy without which making global presence
is questionable. This report will give insights by quoting few examples on how
industries worldwide are using AAA theory to take advantage of opportunities presented
by globalization.
People and well defined policies are crucial for the growth of COMPANY.

Table of Contents

1.
2.
3.
4.
5.

Management Summary1
Table of Contents....2
Introduction.......3
Case Study............................................................4
Conclusion.....................6

6.

References...........7

Introduction :
Todays time is called as Globalization Era as it has brought people and economies from different
countries more closer and thus offers various business opportunity all over the world. While
globalization has made positive impact on the lives of people around the globe with minimum negative
effects it has also exposed to new unforeseen challenges for businesses which were never faced before

and thus has necessitated the development of a global framework that can help effectively manage
the challenges of globalization and result in creating a globally competitive advantage.
To manage the challenges and complexities of the global economy Pankaj Ghemawat has developed a
theory which is called as AAA Traingle theory or we can say simple language multiple variants of
individual tailoring. These three strategies when implemented are believed to successfully manage the
challenges brought about by globalization. Each A in AAA stands for Adaptation, Aggregation and
Arbitrage.
Adaptation calls for the necessary adjustments and adoptions to be made by a company so that its
operation and products can be suitable for local markets and the local people based on their choice
and preference. Aggregation assists companies to create economies of scale through the creation of
regional or global business operations and at the same time remaining responsive to local markets.
Arbitrage enables companies take advantages of cost, price and currency differences and make a
decision on which markets to venture into regarding buying and selling so as to realize profits.
These strategies help companies face global business environment with more confidence allowing
them to successfully access outside markets with varying demands and market prices for their
products. Additionally, it enables companies to find good business environments and allow them to
dominate in those markets. All these strategies are important but it must be kept in mind that each A
of the strategy will have different degree of effectiveness and relevance for different companies and
hence every company must decide whether to integrate two or all of the three strategies at the same
time or in phases and then draw a staged implementation plan.
This AAA theory has helped companies to take advantage of numerous global opportunities and
successfully manage the challenges thrown open owing to globalization. It is just that companies have
to invest time in prioritizing which strategy to implement to achieve the optimum advantage.
Our report will discuss two major industries which are growing exponentially worldwide:

Food industry : McDonalds and Coca Cola Company

Pharmaceutical industry : Sun Pharmaceutical industries and Pfizer Inc.

Fast food and pharmaceuticals are truly global businesses and are relevant in all economies and
countries irrespective whether its a developed or developing. Both the industries provides
numerous employement opportunities and crucial for the population. To make their presence
worthwhile and for sustenance, these industries have successfully adopted AAA framework so that
they continue growing and gaining competitive advantage.

Case Study :
3

1) Food/Beverage: This industry be it in any country is integral part of nations GDP,its

contribution is significant.Below explained are two famous examples of the same.

Food/Bever
ages

Adaptation

Aggregation

Arbitrage

McDonalds

McDonald's restaurants made

there
presence
in
118
countries and serve millions of
customers
each
day.
McDonalds has a tag line
Modifying the burgers around
the world. Originated in US
now it has got its presence
worldwide and what helped
them a lot is adapting the
burger as per the country.
Further,
in
response
to
changing consumer tastes, the
company has modified its
menu to include salads, fish,
wraps, smoothies, fruit and
seasoned fries.

World famous McDonald's

Corporation earns revenue
by investing in properties,
franchising of restaurants,
and an operator of
restaurants.

McDonalds is a classic
example of clear
beneficiary from arbitrage
opportunity offered by
globalization. Mc Donalds
leverages its US
reputation for excellence
and high class for doing
business in other
countries. It is already
positioned as a high
quality Fast Food chain in
the mind of consumer in
new economies.
In addition, they did
Backward integration
with farmers through
Contract farming in
agricultural economies to
ensure consistent supply
of required quantity and
quality of their raw
material at fixed
negotiated price. This
ensures consistent quality
and taste of the final
products.

McDonalds has used all

possible means for
revenue maximization and
cost minimization. It has
also used
franchising model as there
growth strategy which has
minimum risk.

The local deviation from the

standard menu is employed
either to abide by regional
food preferences such as the
religious prohibition of beef
consumption in India or to
make available foods with
regional taste such as McRice
in Indonesia, or prawn burger
in Singapore and Japan.
In Germany and Western
European
countries,
McDonald's sells beer and sells
meat pies in New Zealand.
(Sameer Mathur,2012)

Coca Cola

According to the companys

Annual Report, the company
sells beverage products in
more than 200 countries.
Notable here is that Coca cola

Coca Cola implemented

aggregation strategy to
expand beyond US and to
achieve worldwide
economies of scale. As a

Coca-cola is a prime
example of Economic and
Geographic arbitrage. It
outsources and produces
majorly in China with 39

has not modified the taste of

the base product except where
it changes due to quality of
water and sugar available and
it may happen that taste of
Coca-Cola in Europe is
different from that in the
United States.
However, coca cola has
adapted its packaging,
marketing and branding
strategies to be successful in
various countries. Also, it has
used acquisition of major local
brands as a key strategy to
establish connect with the
consumers and to push its
base brand along with the
popular local brands.

proof, The Coca-Cola

Company offers more than
350 brands aside from its
Coca-Cola beverage to suit
customer preferences.
The company has a long
history of acquisitions.
Coca-Cola acquired Minute
Maid in 1960, The Indian
cola brand Thums Up in
1993, and Barq's in 1995.
In 2001, it acquired the
Odwalla brand of fruit
juices, smoothies, and
bars; and in 2007, it
acquired Fuze Beverage.

facilities across the

country.
Besides this it has
manufacturing plants with
local bottling rights in
most of the countries to
reduce its cost of
production.

Coca Cola also announced

its presence in Burma a
new geographical location
as soon as they lifted their
suspension on Western
sanctions. Now its regional
portfolio expands all across
the globe.

2) Pharmaceuticals:
Pharma companies are growing at a rapid rate, primarily because of the advancement in research
which enables them to come up with new drugs. Since there is lot of cost involved in the research of a
new drug or patent and that it has to undergo the process of patenting, testing, safety, efficacy and its
marketing, the company has to ensure it can rightly market the end product to his customers in
various countries as the law differs in different parts of the world. With the two examples of pharma
companies quoted below we can get glimpse of how these industries are implementing AAA strategy
to expand their operations.

Pharmaceu
tical
Sun
Pharmaceuti
cal
industries

Adaptation

Based in India this is the 5th

largest Pharmaceutical
company in the world. To
make its presence
worldwide, Sun Pharma has
to make changes that suits
to the needs of the country.
Likewise they adapted their
chemical formulae,

Aggregation

Sun Pharma realized the

importance of Global
presence for its growth and
Successfully acquired
competing businesses in
various countries and
geographies.
Till date, company has been
able to make 19 global

Arbitrage

Company has
established its
research capabilities in
developing countries to
substantially reduce its
cost which has
immensely increased
its capabilities to
provide its products at

Pfizer

ingredients and packaging

style which was suitable to
the people of that particular
country.
Companys strong research
strategy and county specific
implementation strategy
has given the competitive
advantage.
Over the last 10 years,
company has been
consistently successful in
challenging patents on
several high-value products
in the US and thus helped
introduce cheaper, highquality generic versions of
such products to the market
to gain market share.

acquisitions to increase its

reach to various countries.

Selling anything in different

country from where it was
originated requires
modification .Similar is the
case with
pharmaceutical companies.
This fact is well supported
by Pfizer sales stratergy in
latin America. To be
successful in Latin America,
Pfizer has had to learn
alternative ways which
take into account cultural,
economic, and regulatory
differences to market its
products.The steps taken by
Pfizer in that regard are:

Extensive brand
building through
community
outreach programs.

Devoted resources
to work with
Pharmacist who
plays major role in
helping patients to
choose
medications.
(Susan Silbermann,2012)

Its an example of
administrative aggregation.T
o market its drug lets say in
Europe it has to meet
regulatory requirements of
few countries and then they
are qualified to sell
throughout Europe.

much cheaper price.

Further, established
majority of its
manufacturing facilities
in Asian countries with
lower cost of
production and made
exports to developed
countries for selling at
higher price

Conclusion:
6

Its a good example of

TAX arbitrage:
relocation to cut their
taxes.
Pfizer takes over
AstraZeneca of UK.By
doing this Pfizer is
benefitted as :

UK companies
dont pay taxes
on overseas
earnings

Tax Rate is
lower

Tax rate on UKpatented

products is also
less
And thus making more
profit.

This paper focuses on growth of two major industries using AAA framework, any organizations
must use and balance these strategies but the trade-offs is always there between them . Its
all about managing cross border differences,every industry is part of Globalization which is
restructuring the world and the major factors which contributed for it are:

Technology
Relaxed trade policies

Which strategy a company should use depends on factors like:

Globalization history
Financial statements

And companies may not require all strategies at single point of time but probably some years down the
line.
Nothing is simple so Globalization too creates challenges for the industries in terms of lengthy supply
chains and distribution, security of facilities and information systems.
Every industry in the World is adapting the Globalization strategy to position themselves in this
competitive world where survival depends upon various factors like quality, policies,placement,need
etc. The extent of a companys capabilities to tailor its offerings around the globe limits or broadens its
options to successfully enter new markets or cultures. As everything has its pros and cons so is the
case with Globalization and few of them are as follows:

Damage to environment
Less job security

In short,globalization is a serious issue that is affecting everybodys life.There is a need of analyzing its
negative impact so that steps can be taken for their preventions.This is going to be win-win situation to
everyone around the world .

References:
Sameer Mathur(2012) , http://www.slideshare.net/ProfessorMathur/9-examples-of-firms-implementingglobal-strategy-by-adaptation

Susan Silbermann(2
012), https://hbr.org/2012/08/how-pfizer-adapts-its-sales-strategy-for-latin-america

http://catalogue.pearsoned.co.uk/assets/hip/gb/hip_gb_pearsonhighered/samplechapter/02
73752634.pdf