Aggregation

The second of the AAA strategies to overcome differences among countries is aggregation. It means creating and implementing mechanisms to be able to operate at levels between a specific country and the world. It groups countries based on similarities.

Regionalization is more important nowadays. It is shown in trade and in activities of cross-border economy. Foreign direct investment exhibits a certain level of regionalization. Of 366 companies, 88% derived at least 50% of their sales from their home region (2001). The significant increase in regionalization reflect the continuing importance of geographic proximity along the CAGE dimensions. In fact, countries that are close geographically share commonalities because of trade agreements or tax treaties, as well of some preferences and currency.

Toyota for example, uses regionalization as a competitive strategy. The author illustrates Toyota's past and future production structure and gives us a very good reference of different regional strategies that this company used through time.

There are six different regional strategies that can be used simultaneously. These strategies can maximize value to the business. Regional or Home focus has to do with the long term strategy. Focus based in circumstances for the companies include: a profitable home market (whirlpool); a need for deep local knowledge (Li & Fung's Asian); a high sensitivity to free trade agreements. Regional Portfolio involves operation outside a single region. Companies who use this strategy are looking to maximize growth and minimize risk. Regional Hubs involves building regional bases that provide a variety of resources or services to the local operations. Conditions that favor the strategy are economies of scale or externalities. Proximity to suppliers and customers is a key to implement this strategy. The risk is adding too much cost or sacrificing opportunities to share costs. Regional platforms divide fixed costs across regions. The objective is to be more cost effective by building local customization on common platforms engineered fro adaptability along these lines. The risk is a certain tendency to centralization which can result in standardization