The Quest for Global Dominance

Transforming Global Presence into Global Competitive Advantage

Anil K. Gupta, Vijay Govindarajan, Haiyan Wang

• Publisher: Jossey-Bass
• Year: 2015
• Print ISBN: 9780470194409
• eBook ISBN: 9781119097457
• Edition: 2
• Topic: Business
• Subtopic: Decision Making
• Index: Business

Anil K. Gupta, Vijay Govindarajan, and Haiyan Wang are among the most distinguished experts in the field of globalization. In The Quest for Global Dominance they present the lessons from their twenty-year study of over two hundred corporations. They argue that, in order for a company to create and maintain its position as a globally dominant player, executives must ensure that their company leads its industry in the following four essential tasks:

• Identifying market opportunities worldwide and pursuing them by establishing the necessary presence in all key markets
• Converting global presence into global competitive advantage by identifying and developing the opportunities for value creation that global presence offers
• Cultivating a global mindset by viewing cultural and geographic diversity as an opportunity, not just a challenge
• Leveraging the rise of emerging markets especially China and India to transform the company's growth prospects, global cost structure, and pace of innovation

The Quest for Global Dominance

1
Rising Up to the Global Challenge

The world is your oyster. Do you have the right fork?

—Thomas A. Stewart¹

What do we mean when we say that we live in an increasingly global world? If you are a Silicon Valley entrepreneur, it means that unless your business plan includes doing R&D in a low-cost, high-talent location, such as India, China, or Eastern Europe, you have almost no chance of being taken seriously by any venture capitalist. If you are Larry Page and Sergei Brin, the cofounders of Google, it means that you see your company as a born global player that will pursue customers everywhere almost from day one. If you are the CEO of Black & Decker, it means that you track the strategies of not only your long-established competitors such as Makita and Bosch but also new and aggressive entrepreneurial firms such as the Hong Kong–based Techtronic Industries. If you are the chairman of Nippon Steel, it means that you wake up every morning conscious of the possibility that your company may be an acquisition target for the global steel giant ArcelorMittal headquartered in Luxembourg but with steel operations on virtually every continent. If you are the CEO of Nokia, it means that the most important strategic question that you face may well be not how you will defend your market share in the United States and Europe, but how you will capture the attention and wallets of the next billion cell phone users in emerging markets, such as China, India, Indonesia, Brazil, Mexico, and Russia. If you are the finance minister of India, it means that you regard the ongoing integration of the country’s economy with the rest of the world as fundamental to the realization of your homeland’s potential as an economic superpower. And, last but not least, if you are a recent MBA and a junior manager at Procter & Gamble, you vow never to forget that you do not have a prayer of making it into the top ranks of the company unless you combine superb on-the-job performance with extensive international experience.

The twin forces of ideological change and technology revolution are making globalization one of the most important issues facing companies today. The makeover from state-dominated, isolated economies to market-driven, globally integrated economies is proceeding relentlessly in all corners of the world, be it Brazil, China, France, India, Russia, or South Africa. Accelerating developments in the information and transportation technologies are making realtime coordination of far-flung activities not only more feasible but also more reliable and efficient. In addition, we can now witness a rapid rise in the emergence of born global companies, such as Skype, Joost, and Facebook. The rise of born global companies is further transforming the worldwide economic landscape.

In this emerging era, every industry should be considered a global industry and every business a knowledge business. Today, globalization is no longer an option but a strategic imperative for all but the smallest corporations. This is as true of firms in such industries as cement, construction, and health care, which have traditionally been quite local, as it is of firms in such industries as semiconductors, pharmaceuticals, and automobiles, which globalized many decades ago. The only relevant question today is: Is your company a leader or a laggard in engineering and exploiting the ongoing globalization of your industry? The central premise of this book is that, no matter what the industry, only those companies that successfully lead the global revolution within their industry arenas will emerge as the winners in the battles for global dominance.

Over the last twenty years, we have studied over two hundred global corporations through a variety of research methods: large-scale surveys, case studies, and in-depth discussions with executives. We have also served as advisers and consultants to dozens of companies in their efforts to review, redesign, and recreate their global strategies and organizations. Building on this knowledge base, we provide herein a road map for smart globalization. We identify and focus on four tasks essential for any company to emerge and stay as the globally dominant player within its industry:

• People must ensure that their company leads the industry in identifying market opportunities worldwide and in pursuing these opportunities by establishing the necessary presence in all key markets. In some cases, these opportunities entail creating a new industry—as illustrated by Yahoo!, which pioneered the Internet portal market in many parts of Asia and Europe. In other cases, these opportunities might manifest in the form of transforming an existing industry as illustrated by CEMEX, whose global expansion has catalyzed a restructuring of the worldwide cement industry.
• People must work relentlessly to convert global presence into global competitive advantage. Presence in the strategically important markets gives you the right to play the game. However, it says nothing about whether and how you will actually win the game—doing so requires identifying and exploiting the opportunities for value creation that global presence offers. Converting global presence into global competitive advantage requires managers to address several important questions. How do you convert global scale into “economies” of global scale? How do you convert global scope into “economies” of global scope? How do you engage in just the right level of local adaptation? How do you optimize the choice of locations for different activities? How do you foster knowledge sharing across locations? And how do you leverage your positions in various locations around the world to compete on a globally coordinated rather than disjointed basis?
• People must cultivate a global mindset. They must view cultural and geographic diversity as opportunities to exploit and must be prepared to adopt successful practices and good ideas wherever they come from. The global economic landscape is changing much faster than most people realize. The winning corporations of tomorrow will be those that look at the world not only through American, European, or Japanese lenses but also through Chinese, Indian, Russian, Brazilian, and Mexican ones.
• In developing their global strategies, people must take full account of the rapid growth of emerging markets, in particular the rise of China and India. China and India are the only two countries in the world that simultaneously constitute four realities: mega-markets for almost every product and service, platforms to dramatically reduce the company’s global cost structure, platforms to significantly boost the company’s global technology and innovation base, and springboards for the emergence of new fearsome global competitors. Given the game-changing nature of these realities, whether or not you have solid strategies for China and India will rapidly become a growing factor in determining whether or not your company is even a survivor ten years from now.

We begin the journey by examining some of the fundamental questions: What is globalization? What is driving globalization? And what do these trends imply for companies and for managers?²

What Is Globalization?

At one extreme, imagine a world that is a collection of economic islands connected, if at all, by highly unreliable and expensive bridges or ferries. At the other extreme, imagine the world as an integrated system where the fortunes of the various peoples inhabiting the planet are highly intertwined. The sneakers that you wear were manufactured in Indonesia. Your mutual fund company invests a part of your savings in companies listed on the Hong Kong Stock Exchange. The software that you just downloaded from the Web was developed in India. And the company that you work for routinely exchanges technologies and management ideas with its subsidiary operations in Japan and Germany. If you agree that, over the last fifty years, the world around you has undergone a transformation from something like the first scenario to something like the second one, then we would say that the worldwide economy is indeed undergoing a process of globalization. More succinctly stated, globalization refers to growing economic interdependence among countries as reflected in increasing cross-border flows of three types of entities: goods and services, capital, and know-how. The term globalization can relate to any of several levels of aggregation: the entire world, a specific country, a specific industry, a specific company, or even a specific line of business or functional activity within the company.

At a worldwide level, globalization refers to the aggregate level of economic interdependence among the various countries. Is the world truly becoming more global? Yes. As evidence, consider the following trends. In 2006, trade in goods and services stood at 31 percent of world GDP, up from 23 percent in 1999 and under 10 percent in 1970. Annual flows of foreign direct investment grew from 1.0 percent of world GDP in 1990 to 2.2 percent of world GDP by 2005. Trends in cross-border transactions in bonds and equities are even more dramatic. In 1970, such transactions as a ratio of GDP stood at less than 5 percent for the United States, Germany, and Japan. By 2005, they had grown to over 200 percent...

Table of contents

• Cover
• Contents
• Praise for The Quest for Global Dominance
• Title Page
• Copyright
• Foreword
• Preface
• Acknowledgments
• The Quest for Global Dominance
• Notes
• The Authors
• Index
• End User License Agreement