Researchers offer new global business strategy for a landscape transformed by digitalization

No unified vision of the post-digital business landscape and global business strategy has emerged amid the sweeping transformations digitalization incited in the last 20 years. Digital assets seem to be expanding global reach and communications while also standardizing tasks and centralizing control. A new study from the Global Strategy Journal helps contextualize these discrepancies and give managers better global business strategies for a digitalized world.

“With digitalization, the internationalization process transforms,” says Ram Mudambi, a professor of strategy in Temple University’s Fox School of Business, and a co-author of the paper. “Businesses shift from a strategy requiring successive market entries and coordination of country-specific operations to a unified business model and implementation.”

Mudambi and co-authors Erkko Autio, of Imperial College London, and Youngjin Yoo, of Case Western’s Weatherhead School of Management, theorize that two distinct types of digitalization impact global strategy: communications tools and in situ technologies. Communications tools enable globally dispersed networks and online payments while in situ technologies typically automate and reorganize production and operations management.

“Most business literature tends to treat digital communication technologies as synonymous with digitalization,” says Autio. “But it is a statement of reality that in situ technologies have changed the face of production systems as well as value creation and delivery.”

Communications tools allow businesses to connect disparate, specialized knowledge across the globe. They make location less relevant to innovation and effectively decentralize control. In situ technologies automate, standardize and continuously improve low skill, repetitive tasks, allowing them to be located in less risky locations that almost always would incur higher labor costs if the tasks weren’t automated.

The balance of whether digitalization will consolidate or decentralize control and locations within a business depends on the tangibility of the product in combination with the nature of activities being digitalized. For example, highly specialized professionals working for a software company become decentralized with digital communications tools while automobile manufacturing gets automated with in situ technology in centralized locations. The authors created a table capturing this interaction.

“It is important to bear in mind any product almost always involves both specialized and routine activities and often incorporates both tangible and intangible elements,” says Yoo. “All firms are likely to have some activities in all four cells of the table, even if the majority fall in one cell.”  

Digitalization’s net effect causes multinational organizations to geographically disperse some value chain activities while concentrating others. Global disruptions like the Covid-19 pandemic accelerated the pace of digital asset adoption and help make multinational organizations more resilient. How digitalization will continue to affect businesses largely depends on whether computing power and algorithm sophistication continue to improve. Algorithm development has been decreasing over the past few years, despite globalization, which is a worrying trend that might threaten further transformation.

The Global Strategy Journal (GSJ), founded in 2011, is the leading journal on global strategic management research. It aims to shape the direction of conversations on the interaction between the global context and the strategy and strategic management of for-profit and not-for-profit organizations. The global strategic management domain encompasses the strategic management, organization, and success of multinational organizations; the bidirectional interaction of the global business environment and organizational strategies; comparative strategies in different national settings; and the comparative effect of regional and national contexts on the strategies of domestic and multinational organizations. It publishes double-blind reviewed and invited papers that offer innovative theoretical perspectives or provide tests of empirical relationships based on quantitative or qualitative analyses.

GSJ is published by the Strategic Management Society (SMS), an association comprised of 3,000 academics, business practitioners, and consultants from 80 countries that focuses on the development and dissemination of insights on the strategic management process, as well as on fostering contacts and interchanges around the world. To find out more about SMS’s scientific and educational programs in strategic management, please visit www.strategicmanagement.net.