well, in my opinion, the misconception on arbitrage strategy its only at the conception of the business-view. The arbitrage strategy is often confunded with a low cost option...but not cosidered for a posible strategy. Again, the problem is the kind of business managing and thinking.

Dear Prof. Ghemawat,

It is my submission that cost-leadership makes sense in any industry, anytime, anywhere. Since costs are internal to an organization and by logical extension should be within its control, attaining cost-leadership may be a better option (at least to start with) than differentiation. In contrast, if we believe in free-market dynamics, price (and therefore revenues) may not be in an organization's control.

The success of the IT Enabled Services sector in India can be directly attributed to the cost-leader approach. After all, the services provided are similar along many dimensions (it is common to term these as end-to-end solutions.) Hence, the scope for differentiation is minimal. However, this approach has its limitations as well. So long as the exchange rate between the US Dollar and the Indian Rupee was favorable, the firms rode a wave of spectacular profits. With the rupee hitting a new high almost every day vis-a-vis the dollar, firms primarily focused on the US market have started feeling the heat. Already, there is a talk of looking at alternatives like Europe which has a relatively stronger currency.

While the model has worked very well for one service sector, the same cannot be said of another service - airlines. A few years back, a low-cost airline was launched and had to struggle to make an impact, primarily due to the lack of infrastructure (airports) and support facilities. With the recent investment of a sizeable stake by a player at the other end of the value spectrum, the future of the low-cost-airline concept in India is suspect.

Focusing on cultural differences, a useful case in point is Mcdonald's entry into India. Knowing India's culture and tradition, the firm consciously avoided the main ingredient in its burger - beef and even introduced a veggie burger. The mere whiff of a report that one of the ingredients in its French Fries indeed contained a beef extract was enough to provoke a severe backlash. Thus, even with cultural adaptation, the going has not been smooth for the fast-food giant.

Which brings us to the critical question: in suggesting a global strategy based on differences, are you, Sir, advocating a preference for a multi-domestic strategy? If yes, are we not placing a lid over global learning (the transnational)?.

Warm regards

Arbitrage strategies if employed should have short term goals. For businesses today, the bye word should be sustainable Strategies and Arbitrage is not one of them. The short term gains of Arbitrage is easily replicated by competitors. Today , the cost advantage of outsourcing to India etc by western companies , has been eroded because of "Herd mentality" of Business Strategy formulators,they are all coming up with the same Startegic map

Regards

I think you will find that South Africa has a significant medical tourism industry as well.
Good to see some academic research to counter the 'flat world' mis-conceptions.

It is common sense for people and organizations to look for the highest returns on their investments (money, time, manpower, and other costs) and that results in people migrating to other places, companies moving their manufacturing bases or outsourcing their services. It has been happening since ages but the pace has been increasing exponentially thanks to the fast access of information through the Internet. In short, it is plain "Value for money" but "arbitrage-based cross-border global strategies" sounds more esoteric and therefore impressive. However, cheaper does not always mean better. Remember the old adage,"You get what you pay for !"

Raj K. Bose
Faculty, University of Phoenix

I completely agree with Prof. Ghemawat's point of view.

Prof. Ghemawat,
I’ve a degree in engineering, and at the moment, I’m a MBA student from Portugal. Because of mine academic graduation, until now, my knowledge in economics’ and above all strategic, were very few ones, so I’ve find this issue very interesting.
I’ve bought your latest book “Redefining Global Strategy”, which I enjoy reading and learning. But I’ve a question that, and forgive my mistreatment, that I’d like to ask, that is in a internationalization process of an organization, how can you use the CAGE framework to evaluate and chose the foreign strategic market were the organization should entered. That is, can we use the model with a mathematical evaluation to conclude about the most indicate market?
I express gratitude, and apologise myself, for your spending time.
Best regards,
Gonçalo Pacheco