Global competitive advantage

Abstract

The global business locates its activities around the world for competitive advantage. The company draws on the strengths of its home country, supplier countries, and partner countries. It targets a desired group of customer countries. The global business then coordinates its global purchasing, manufacturing, alliances, distribution, and sales to generate value. The global business uses its transactions and activities to connect markets across country borders. I refer to this as the company's global value connection . The global value connection does not mean choosing the lowest-cost supplier countries or the highest-income customer countries. The global business chooses the best match between its home country, supplier countries, partner countries, and customer countries. Toyota produces cars in the US, with relatively high labor costs, to build customer relationships and respond quickly to changes in market demand. In choosing country locations, the global business also must take account of its own market knowledge, technical skills, and organizational capabilities. Nokia assembles phones in relatively high-cost Finland to control its technology, component sourcing, and worldwide product distribution. In addition, the company operates manufacturing facilities in Brazil, China, Germany, Great Britain, Hungary, India, Mexico, and South Korea. The company handles 100 billion parts per year, achieving both global scale and local-market customization for the phone operators that it serves. A global business gains a competitive advantage when it is able to create greater value than its competitors.