The acronym stands for Adding volume, or growth; Decreasing costs; Differentiating or increasing willingness-to-pay; Improving industry attractiveness or bargaining power; Normalising (or optimising) risk; and Generating knowledge (and other resources and capabilities).

Ghemawat, who is currently with the IESE as a full-time professor of Strategic Management Department, and holder of the Anselmo Rubiralta Chair of Strategy and Globalisation, was previously at Harvard Business School (HBS), where he taught from 1983 until 2006. He has developed a 30-session MBA course on globalisation and strategy, chairs focused programmes at IESE and HBS on Getting Global Strategy Right, and has written more than 50 articles and case studies, as wwwapp.iese.edu informs

‘Redefining Global Strategy’ has other catchy acronyms too, such as CAGE (cultural, administrative, geographic, and economic) framework, and AAA (adaptation, aggregation, and arbitrage) triangle. The book propounded that the world is semi-globalised, not flat.

To the IT (information technology) enthusiasts, it should be of interest that the book discusses in detail companies such as IBM, Cognizant and TCS (Tata Consultancy Services).

While most companies stick to only one of the As in the AAA triangle for their global strategies, IBM pursues AA (aggregation-arbitrage) strategies, observes Ghemawat. TCS, according to him, is ostensibly following the same AA combination as IBM, but placing comparatively more emphasis on arbitrage, in line with its initial strategy.

However, “TCS has managed to overlay a degree of regional aggregation on its core strategy of arbitrage,” comments Ghemawat. “In 2002, TCS established a regional delivery centre in Montevideo, Uruguay, and later set up one in Brazil, to serve not just Latin America, but also Spain and Portugal.” Cultural aggregation in TCS, based on language, has continued. For example, to focus on markets in Central Europe, a regional delivery centre was set up in Hungary, where many people speak German as a second language. And, towards the end of 2006, the company signed an agreement with Morocco for setting up a 500-employee unit in that country. “TCS Morocco would function out of Casablanca, and will act as an offshoring delivery centre for the French and Spanish speaking parts of Europe, and will begin operations in January 2007,” informed www.tatainvestment.com then.

“Cognizant has emphasised arbitrage and adaptation, rather than arbitrage and aggregation, by investing heavily in a local presence and ‘face’ in its key market, the US, to a point where the firm can pass itself off as Indian or US-based, depending on the location,” Ghemawat notes. The company set up a ‘two-in-a-box’ structure to ensure that “there were always two global leads for each project — one in India, and one in the US. The leads had joint accountability and were compensated on the same outcomes in the same way.”

Excerpts from the e-mail interview.

Do you see the Indian IT industry strong on all the arms of the ADDING value scorecard? Are there gaps in the industry’s strategy?

The Indian IT industry has traditionally focused on and gotten very good at arbitrage. It now faces challenges at adapting better to foreign markets and aggregating to achieve economies of scale that cut across national boundaries.

Two points are worth adding in this regard. First, different companies within the industries are successfully pursuing different emphases in regard to building up a second ‘A’ to complement arbitrage.

Thus, TCS is emphasising aggregation with its global network delivery model and focus on large, complex deals.

Cognizant, in the meantime, has emphasised adaptation to key foreign markets, particularly the US, so that it can pass, as necessary, as either a US or an Indian firm.

Second, based on research that Thomas Hout and I have conducted on emerging multinationals from India and China, this challenge of moving beyond arbitrage is a generic one facing such companies from these countries — and, apparently, others from other emerging markets.

What kind of a manager is a good global manager?

I think that the key characteristic of a good global manager is to be able to appreciate the differences between countries and people, without getting overwhelmed by the complexity or losing sight of the fundamental challenge facing an organisation that wants to be truly global: ensuring that the whole is more than the sum of the parts.

Experts agree that rote learning about the beliefs, customs, and taboos of foreign cultures — e.g., that a thumbs-up is a gesture of contempt in India rather than an indication that everything is ok — isn’t sufficient in this regard: it will never prepare people for every situation that arises, although it is the approach that corporate training programmes often take.

What are required are mechanisms for cultivating both openness and literacy about diverse cultures and markets.

Within a company setting, how does one effectively build global strategy into corporate strategy?

I recommend a five-step process that starts with background analysis and leads to action:

Performance review: As a backdrop to any attempt to set or reset global strategy, it is useful to review how global operations have been doing.

At least one dimension on which it is useful to disaggregate performance is the geographic one. For a range of possible reasons — a belief in ultimate ubiquity, escalating commitment, and a focus on accounting profits rather than economic profits or value (roughly, accounting profits minus the opportunity costs of the capital employed) — many companies get into but don’t get out of unsuitable geographies.

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