The AAA Triangle

In M21-S8 - Article - Managing Differences the AAA triangle is defined to include three measures to manage differences in 'distance' between companies (see M21-S2 - Article - Distance Still Matters):

• Aggregation
  • With the strategy of Aggregation a company tries to achieve economies of scale by standardizing regional or global operations.
• Adaptation
  • With the strategy of Adaptation a company tries to boost market share by adapting process and offerings to meet local needs.
• Arbitrage
  • With the strategy of Arbitrage a company exploits differences and local strengths, for instance by outsourcing labor to lower wages countries.

The percentage of sales spend on advertising is a metric on how important Adaptation is for the company. The percentage of R&D is an indication of the importance for Aggregation and the percentage spent on labor helps gauge the importance of Arbitrage.

	Adaptation	Aggregation	Arbitrage
Competitive advantage Why globalize at all?	To achieve local relevance through national focus while exploiting some economies of scale	To achieve economies of scale and scope through international standardization	To achieve absolute economies through international specialization
Configuration Where should we locate operations overseas?	Mainly in foreign counties that are similar to the home base, to limit the effects of cultural, administrative, geographic and economic distance	Same as adaptation	In a more divers set of countries, to exploit some elements of distance
Coordination How should we connect international operations?	By country, with emphasis on achieving local presence withing borders	By business, region or customer, with emphasis on horizontal relationships for cross border economies of scale	By function with emphasis on vertical relationships, even across organizational boundaries
Controls What types of extremes should we watch for?	Excessive variety or complexity	Exessive standardization, with emphasis on scale	Narrowing spreads
Change Blockers Whom should we watch out for internally?	Entrenched country chiefs	All-powerful unit, regional or account heads	Heads or key functions
Corporate Diplomacy How should we approach corporate diplomacy	Address issues of concern but proceed with discretion, given the emphasis on cultivating local presence	Avoid the appearance of homohenization or hegemonism (especially for U.S. companies), ben senistive to any backlash	Address the exploitation or displacement of suppliers, channels or intermediaries, which are potentially most prone to political disruption.
Corporate Strategy What strategic levers do we have?	Scope selection Variation Decentralisation Partitioning Modularization Flexibility partnership Recombination Invocation	Regions and other country groupings Products or business Function Platform Competence	Cultural (country of origin effects) Administrative (taxes, regulations, security) Geographic(distances, climate) Economic (Differences in prices, resources, knowledge)