Posts Tagged ‘globalisation’

Who’s #2? Who’s #2?

August 20, 2010

It would be remiss of a blog about International Business to not comment upon a major milestone that occurred (or at least was acknowledged) this week.

China has usurped Japan as the world’s 2nd largest economy behind the US.  This is rightfully being hailed as yet another step on China’s rise to the #1 spot (typically forecast as happening by 2030).

A few issues worth noting:

– This is simply in nominal terms (i.e. converted at prevailing exchange rates).  Allowing for cost of living (what we typically refer to as Purchasing Power Parity) China’s GDP was almost twice as large as Japan already (and about 60% the size of US, rather than the nominal 40% or so)

– There is good reason to believe that these Chinese economy is even larger, with one study estimating the grey economy may add another 30% on top of the official GDP numbers

– A long-term historical perspective would acknowledge this as a “return” to #1 (a rank China has probably occupied more than any other nation-state over human history)

– Putting this all in per capita terms tempers the story considerably, as China struggles to crack the top 100 nations on an income per head basis even when converted to PPP.

This last point is in many ways the most important aspect.  China, and in particular its entrepreneurs, planners, and citizens, isn’t about to slow down in the pursuit of a prosperity.  In the medium-to-long term only India has any real chance of matching the nation for market and labour-force size.  China is already the world’s top exporter, steel-maker and auto market.  The world’s largest multinationals are all scrambling to part of  China’s engagement with each and every aspect of their value chains.

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A much more global World Cup

June 24, 2010

Watching the World Cup football in the wee small hours, I have been struck by something (other than the horrific refereeing and those damn horns): the tournament sponsors.

This Cup may go down as the real turning point in the global economy where emerging market brands (i.e. those from non-First World nations) stepped out into the public eye. Look at the list of official FIFA partners and sponsors (the ones exciting me are in green):
– Adidas (Germany)
– Coca-Cola (US)
– Emirates (UAE)
– Hyundai-Kia (South Korea)
– Sony (Japan)
– Visa (US)
– Budweiser (US-Belgium-Brazil)
– Castrol (UK – it’s BP-owned)
– Continental (Germany – auto parts and tyres)
– McDonalds (US)
MTN (South Africa – telecoms)
Mahindra Satyam (India – IT and consulting)
Seara (Brazil – foodstuffs)
Yingli Solar (China – solar/energy)

This contrasts very markedly with the list from just 4 years ago: Adidas, Budweiser, Avaya, Coca-Cola, Continental, Deutsche Telekom, Emirates, Fujifilm, Gillette, Hyundai, MasterCard, McDonald’s, Philips, Toshiba, and Yahoo!.

The BRICS firms (well, actually BICS) have stood up in joining the Emirates on the scrolling billboards etc. Building powerful, recognised brands will be the next important step for firms from these emerging giants.

Of course, hosting the tournament is a big rite of passage also (Brazil’s up next), and brands can piggyback on this opportunity. Disappointingly the local South African sponsors (beyond MTN – they are listed on the FIFA link) have not been particularly interesting or international in their focus.

I’m sure we’ll see more familiar brands come Brazil 2014 – Havaianas anyone?

The sad passing of a highly competent pyramid builder

April 19, 2010

I was saddened to receive the news today of CK Prahalad’s untimely passing. His influence was felt across the strategic management and international business fields for several decades.

With Gary Hamel he defined and popularised the idea of core competencies as a driver of firm success. This was a wonderful operationalisation of the resource-based view, and helped to shift attention away from external environmental forces (a la Michael Porter).

His earlier work with Yves Doz on multinational headquarters’ control of subsidiaries was just as influential in international business circles, and he integrated strategy and literature very effectively when looking at the role of cooperative strategic alliances.

Hopefully the most influential and world-altering work he produced will be his exploration of the scope for multinationals and entrepreneurs to build advantages through servicing the billions of currently impoverished in the developing world. He coined the bottom of the pyramid concept and worked hard in proselytising on this issue. Here’s a short video of Prahalad explaining his perspective on globalisation and its potential:

It is rare for academics to be so active in their engagement with and pursuit of the ideas they talk about. Prahalad worked with many firms, governments, investment houses and communities. He cared about the future for India’s poor (and beyond). His death is a tragic loss for all.

Might multinational managers be the problem?

July 15, 2009

My recent US trip was principally motivated the big annual conference of international business scholars – the AIB. I spent five sunny days in San Diego presented, discussing and pondering the nature of multinational activities, strategies and impact with 900 or so other academics. There were a range of fascinating sessions and papers.

An opening session featured some IB luminaries – Pankaj Ghemawat and Udo Zander – discussing the nature of the global business environment (notionally the rather non-controversial Flat versus Spikey debate). Both made strong arguments that none of the purported globalisation we’ve seen in recent decades is particularly unprecedented when we look at a time frame of a century or more, nor is international trade and production as integrated or connected as most people assume. They presented some conflicting implications of this however.

Ghemawat argued that firms run the risk of assuming the world is flat and thus adopting big, bland reductionist strategies that will satisfy no consumer’s needs and will stumble in the face of genuine country and regional differences.

Zander argued a more complex and controversial position. In his tale, only a small number of multinationals manage to build temporary innovation and knowledge advantages that they can leverage via global cloning (i.e. advantages that are sufficiently transferable and applicable across multiple markets). Other multinationals will struggle to adapt to to local needs and thus fail (or at least underperform).

the dunceSo far, there’s not much new in this perspective. Even his explanation for the barriers to firm adaptation/learning aren’t surprising – the multinationals are burdened by the organisational history/institutional memory and current wisdom is sticky.

Where it gets intriguing is the examples he gave of subsidiary managers in markets steadfastly refusing to change their strategy in the face of years of failure and repeated suggestions to adapt and learn.

This begs the question, as does Ghemawat’s characterisation of strategies being too simple, are multinational managers the handbrake on multinational success?

Perhaps we have placed too much weight on the size of the challenges in international business, and too little on the failure of managers to tackle these challenges. Firms may be failing more because of the weaknesses of their managers rather than any insurmountable liabilities of foreignness or risks of doing international business.

As scholars we spend too little time looking at failures and too much time looking at the winners. Perhaps the winners are just those who stuffed it up the least. Might we learn more from the mistakes?

Are multinationals better bosses?

April 1, 2009

Quite a neat report was brought to my attention in recent days.  The folks at the OECD have taken a stab at a pretty fundamental (and controversial) international business question: do multinationals pay their workers better?

This is a big issue, because multinationals are often slammed as being exploitative of labour and as having a deleterious effect on host markets.  So what did they find?

“The evidence suggests that MNEs tend to provide better pay and working conditions than their domestic counterparts, especially when they operate in developing and emerging economies.”

They also found that takeovers by a foreign firm tend to also push up wages in the acquired firm.  Is this another nail in the coffin of anti-globalisation?

For more on the report there is a short podcast here.