Effects of Globalisation: Pankaj Ghemawat's Theory

This article discusses Pankaj Ghemawat's theory on the effects of globalisation, including the AAA framework and CAGE distance framework. It analyzes the impact of globalisation on different parts of the world and the factors driving it.

Running head: GLOBALISATION
GLOBALISATION
Name of the Student
Name of the University
Author Note

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Introduction
Globalisation is considered to be a process that is based on the integration and
interaction among the companies, people and the governments all over the world. This is
considered to be a multifaceted and complex process that is helpful in the integration of the
local and the national economies within a global and unregulated market economy (Buckley
and Ghauri 2015).
The analysis will be based on the theory that has been provided by Pankaj Ghemawat
related to the effects of globalisation in different parts of the world.
Pankaj Ghemawat theory of globalisation
Pankaj Ghemawat is the Anelmo Rubrialta Professor of Global Strategy at IESE
Business School. Ghemawat has stated that the effects of globalisation have not been able to
make the world flat. The pace of globalisation is quite fast and the connectedness of the
countries on a global basis have not been able to reach the peak levels. Financial crisis that
had taken place in the year 2008 had a major effect on the globalisation based activities that
have taken place in different countries of the world. The levels of global connectedness are
slowly going back to the peak that it had reached in the year 2007 (Hbr.org 2019).
The breadth of the connectedness levels related to globalisation have however started
decreasing in the operations of business organizations in the current environment. The shift
that has taken place of different economic activities to the emerging countries has been able
to affect the breadth of the global decline of the levels of connectedness of different
organizations and countries as well. The major driving factors related to globalisation in the
last few years are the factors based on trade, investments. The interactions that have been

2GLOBALISATION
made by the developed countries with developing ones has a major impact on the
globalisation based factors (Laxton 2017).
The AAA framework has been designed by Ghemawat that has offered three major
generic strategies for the purpose of global creation of value. The three major types of
strategies that have been stated by Ghemawat mainly include, adaptation, aggregation and
arbitrage. The ways by which organizations are able to earn revenues by making changes in
some parts of the business model is termed as adaptation. Aggregation is mainly based on the
achievement of economies of scale. Arbitrage is based on the ways economic opportunities
can be exploited with the help of differences that are present between the national and
regional markets (Tihanyi et al. 2015).
Figure 1 – AAA framework
Source - (Hbr.org 2019)

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CAGE distance framework
The CAGE distance framework is based on the proper identification of different
factors that include, cultural, administrative, economic and geographic differences that exist
between the countries and organizations before the international strategies are formed. This
framework can also be used for understanding the patterns that are related to trade,
information. People flaws and capital (Hbr.org 2019).
Figure 2 – CAGE Distance Framework
Source - (Hbr.org 2019)
Conclusion

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The analysis can be concluded by stating the theory of Pankaj Ghemawat has been
able to provide major importance of the emerging markets and countries that affect the
globalisation in different countries.

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References
Buckley, P.J. and Ghauri, P. eds., 2015. International business strategy: theory and practice.
Routledge.
Hbr.org 2019. The World Is Still Not Flat. [online] Harvard Business Review. Available at:
https://hbr.org/2014/11/the-world-is-still-not-flat [Accessed 28 Jan. 2019].
Laxton, D.M., 2017. Creating A Competitive Advantage Through Strategic
Thinking. Journal of Research in Business, Economics and Management, 8(6), pp.1596-
1604.
Tihanyi, L., Pedersen, T., Devinney, T., and Banalieva, E., 2015. Emerging economies and
multinational enterprises. Emerald Group Publishing.