Introduction to AAA framework Harvard Case Solution & Analysis

Introduction to AAA framework Case Study Solution 

After the revolution in the usage of the internet and advancement of the technologies, many of the companies are expanding in geographically dispersed locations in order to achieve significant growth in profits and to gain competitive advantage for a long period of time. These transactions of international expansions have also given rise to multiple risks, some risks are operational and some risks are strategic. Some risks lie with the overall strategies of the particular company and some lies with the factors outside the control of an entity. There are many theories and frameworks which can help an organization to make the globalization process smoother and fluent and AAA framework is one of them. In this framework, there are three elements names Adaptation, Aggregation and Arbitrage, it can be said that these are one of the most critical and key factors for organizations when deciding and finalizing the strategy for global expansion. (Kluyver, 2007)

Summary of the chosen industry:

The industries which are chosen for the discussion of the AAA framework are IT and Food and beverages industries, the companies from the IT industry are IBM and Google and from the food and beverages industry Nestle and McDonald’sarechosen.


Adaptation is the most critical aspect of the AAA framework of Pankaj Ghemawat, at this stage, and entity normally adopts local principals, trades and customs. Failure to adopt the domestic culture and trade, the globalization strategy cannot succeed. All of the four companies have very thorough understanding and application of the adaptation strategy which have made there international expansion strategy very successful. (Li, 2016)


Aggregation refers to the achievement of the economies of scale by combining the various functions of the subsidiaries of more than one country. It can be said that this factor can result in the immediate positive financial impacts for any organization, normally the accounting, administrative and marketing function of the entities are combined in this stage which requires resources regularly. In absence of the positive aggregation strategy, an entity cannot ensure significant economies of scale because of the centralization affects. (Gupta, 2015)


Arbitrage refers to the exploitation of differences in a favorable way rather than minimizing the differences, bridging the gap is favorable in some situations and in some cases it is more financially and operationally beneficial for the company to maintain the difference at an acceptable level. Outsourcing and offshoring are one of the key examples of this strategy in the modern trading environment, and selling from one international market and buying from another international market where the prices are low, these are one of the most basic examples of the arbitrage strategy. (Barber, 2015)

IBM (Adaptation):

IBM is one of the most successful technology company and is operating in many technological sectors. IBM is operating in more than 75% areas all around the world which depicts the extremely successful globalization strategy. For almost all of the markets of IBM there are different products with different features and with different specifications, for example in the countries where there are large manufacturing industries, IBM provides wide range of software which can ensure effective production and inventory management systems. On the other hand, in the countries where there is a high agricultural production and oil extraction opportunities, relevant software is offered in great numbers.

IBM (Aggregation):

The senior management and the management of particular subsidiaries of IBM implements various strategies for the aggregation of different functions into one. For this purpose, IBM makes various groups of international subsidiaries and aggregate them into a single segment, this is effectively a centralization arrangement from a where particular headquarter, some of the functions of more than one company are being managed.

IBM (Arbitrage):

The arbitrage strategy of IBM is one of the most successful arbitrage strategies in the world, in the year 2006, IBM acquired more than 34000 workers in India in order to exploit the wage differences. It can be said that the developing nations like India have very cheap workforce which have made the arbitrage strategy so successful.


Apple Inc. is one of the biggest multinational technology companies in the world and its products are sold in almost all of the parts of the world. Apple Inc. has expanded into many parts of the world such as China and UK. In particular Apple Inc. hasn’t implemented the entire framework of Pankaj Ghemawat but it had implemented part of the AAA framework, in particular the management of Apple has followed the principle of arbitrage.

Apple Inc. (Adaptation):

Although Apple has extended in many parts of the world and plays heavy reliance on the globalization of its products but the management of Apple Inc. have rarely followed the principle of adaption. Almost all the products of Apple have same features and specifications in all parts of the world except for some minor variances. It can be said that this is the strategic principle of Apple Inc. to maintain same level of features for all the countries in which their products are sold.

Apple Inc. (Aggregate):

On the other hand, the management of Apple Inc. have implemented the principle of aggregation to some extent, they have made certain countries as their regional head offices in which all the information and decisions regarding the sub-regional offices are taken. Furthermore, the marketing related strategies are also taking place in those headquarters,and all the financial and operational results and performance is forwarded to the main head office for further resource allocations..............

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