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Redefining Global Strategy: Crossing Borders in A World Where Differences Still Matter by Pankaj Ghemawat

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Arbitrage

Exploiting Differences

Globalization is about producing where it is most cost effective, sourcing capital from where it’s cheapest and selling it where it is most profitable.

—N. R. Narayana Murthy, Infosys, August 2003

THE THIRD OF OUR AAA STRATEGIES for dealing with distances and crossing borders successfully is arbitrage. Arbitrage is a way of exploiting differences. It implies seeking absolute economies, rather than the scale economies gained through standardization. It treats differences across borders as opportunities, not as constraints.

This chapter begins by underscoring the absolute importance of arbitrage. It then uses the CAGE framework to unpack the cultural, administrative, geographic, and economic ...

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