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Summary of the article “Managing Differences

The primary tension companies face when going global is between economies of scale and localresponsiveness. This arcle provides a framework of approaching global integraon. The framework isnamed the AAA Triangle.A: Adaptaon, boosng revenues and market share by maximizing a rm’s local relevance.A: Aggregaon, bene ts from economies of scale by standardizing the product regionally or globally.A: Arbitrage, exploing di”erences between naonal and regional markets by locang supply chains indi”erent markets. (Call centers in India, factories in China)The AAA Triangle serves as a kind of strategy map for managers.The percentage of sales spent on adversement representsadaptaon.The percentage of sales spent on R&D representsaggregaon.The percentage of sales spent of labor represents arbitrage.Most companies will emphasize di”erent A’s at di”erent

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 Download  Conclusion of the arcle : Focus on one or two A’sMake sure the new elements of a strategy are a good t organizaonallyWhile this isn’t a xed rule, if your strategy does embody new elements, you should pay a.enon tohow well they work with other things the organizaon is doing.Employ mulple integraon mechanismsPursuit of more than one of the A’s requires creavity and breadth in thinking about integraonmechanisms. Given the stakes, these factors can’t be le2 to chance.Think about externalizing integraonNot all integraon required to add value across borders needs to occur within the organizaon.Know when not to integrateSome integraon is always a good idea, however this doesn’t mean that more integraon is be.er. First,very ghtly coupled systems are not parcularly 4exible. Second, even when many diverse acvies arehoused within one organizaon, keeping them apart may be be.er than forcing them together. points of their evoluon. Companies will not be able to pursue all three A’s at once, companies shouldfocus on one or two A’s.There are serious constraints on the ability of any organizaon to use all three A’s with greate”ecveness. First, the complexity of doing so collides with limited managerial bandwidth. Second,many people think an organizaon should only have one culture. Third, competors can force acompany to choose which dimension it is going to beat them on. Finally, external relaonships may havefocusing e”ects as well.For a company to even contemplate an AAA strategy, it must be operang in an environment which thetensions among adaptaon, aggregaon and arbitrage are weak

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