Global Strategy

Vinod K. Jain

• Editorial: Routledge
• Año: 2016
• ISBN:
  9781317549291
• Edición: 1
• Categoría: Negocios y empresa
• Categoría: Estrategia empresarial

Global Strategy: Competing in the Connected Economy details how firms enter, compete and grow in foreign markets. Jain moves away from the traditional focus on developed countries and their multinational enterprises, instead focusing on both developed and emerging economies, as well as their interaction in an increasingly connected world.

As the current global business environment is increasingly shaped—and connected—by faster technological developments, geopolitical forces, emerging economies, and new multinationals from those economies, this highly charged dynamic provides rich opportunity to revisit mainstream paradigms in globalization, innovation, and global strategy. The book rises to the challenge, exploring new competitive phenomena, new business models, and new strategies. Rich illustrations, real-world examples, and case data, provide students and executives with the insights necessary to connect, compete, and grow in a globalized business environment.

This bold book succinctly covers strategy models and implementation for a range of global players, providing students of strategy and international business with a rich understanding of the contemporary business environment.

For access to additional materials, including Powerpoint slides, a list of suggested cases, and sample syllabus, please contact Vinod Jain ([email protected]).

Part I

THE CONTEXT OF GLOBAL BUSINESS

1
INTRODUCTION

The Connected Economy

It’s all so simple, Anjin-san. Just change your concept of the world.

—James Clavell, Shögun, 1975

Baltimore was once a quintessential manufacturing city with an economic base spanning steel processing, shipping, auto manufacturing, transportation, and other industries. Over the last several decades, however, the Maryland city, like many other industrial cities and towns in the United States, has been experiencing deindustrialization and declining population. Today, while manufacturing remains an important part of Baltimore, the city is increasingly a hub for higher education, healthcare, and many other high-technology enterprises, including high-tech manufacturing enterprises. This, along with immigrant-friendly policies, has allowed the city to begin seeing some population growth as well.¹

According to a Brookings Institution study, almost a quarter of Baltimore jobs are in the STEM (science, technology, engineering, and math) fields.² In fact, Greater Baltimore is among the top six percent of all U.S. metropolitan areas in terms of the percentage of jobs requiring STEM skills. According to another Brookings Institution study, the Baltimore metropolitan area has “a robust network of colleges and universities, several world-class hospital systems, close proximity to the nation’s capital, and, importantly, sophisticated firms, skilled talent and formidable research capacity.”³

The American Can Company building in Baltimore’s historic Canton neighborhood is a classic example of how the old smokestack brownfields became home to established companies and high-tech startups. The American Can Company had operated at this site since 1895, when the first factory building was constructed by the Norton Tin Can and Plate Company. By 1900, the company was the largest can manufacturer in the United States. Construction of other buildings and structures and expansion of the site continued through the early 1960s. In the late 1980s, however, when the American Can Company merged with the National Can Company, the Baltimore factory shut down; the property became a brownfield. In the 1990s, after the cleanup of the environmental contamination at the site, it was reborn as a mixed-use retail and office complex (Figure 1.1).

Figure 1.1 The Can Company, Baltimore

In 1998, DAP Products, Inc., the largest manufacturer of sealants and adhesives in the world, made the former Can Company complex its world headquarters. The Emerging Technology Center (ETC), a nonprofit tech incubator that works with almost a hundred tech startups at different stages in their evolution, is among other high-tech tenants of the complex. In late 2013, ETC moved its operations to, perhaps unsurprisingly, a former, huge brownfield owned by the Crown Cork & Seal Co., which had abandoned the site in 1959. The Crown Cork & Seal complex in Baltimore, once the largest bottle cap factory in the world, today houses cabinet makers, a craft brewer, an eclectic mix of musicians, artists, studios, and now the ETC, along with its several dozen resident companies.

This story of converting former abandoned industrial sites into new uses is being repeated in hundreds of cities across the United States and around the world. Cities and towns once home to manufacturing industries, the “old economy,” are increasingly transitioning to what may be referred to as a “new economy.” This highlights two important trends in the U.S. (and other developed countries⁴). First, the old economy survives and even thrives in America, though it is now also focused on high-tech products and services—the U.S. is the world’s second largest manufacturing nation. Second, the “old” and the “new” economies continue to co-exist and co-evolve—one at a snail’s pace and the other at warp speed. This is the context of business today, which is defining how we live, work, and do business. The context in which business operates in different countries must be taken into account when firms craft their strategies for international markets.

“New Economy”

“New economies” emerge following major technological innovations, which typically redefine the rules of the game and how people live and work. The term “new economy” has been in use as a metaphor for transformational change in societies for a long time, but it acquired almost a new meaning in the dot-com era of the late 1990s and early 2000s when the digital economy was the new economy. The world has seen many new economies since the first Industrial Revolution of the late 18^th century, which ushered in disruptive change in most industries of the time and led to rising prosperity in Britain. These changes then spread to Europe, North America, and eventually to the rest of the world.

Venture capitalist and economist William Janeway has charted the evolution of new economies over the last 250 years.⁵ In Britain, a period of extensive canal building began in the 1760s to improve the transportation of coal to the northwest of the country. Canals, combined with turnpikes and related infrastructure in the early 1770s, formed the backbone of the first Industrial Revolution. As the Industrial Revolution progressed, and the tempo of industrial activity picked up in Britain, more efficient transportation for people and freight was needed, which led to developments in railway technologies. During the 1830s and 1840s, Britain experienced what came to be known as the two “Railway Manias” that led to huge investments in railways, despite the economic depression of the late 1830s, and high financial rewards for investors. The canal-turnpike-railroad transportation networks enabled the new economy of the latter 19^th century in Britain.

In the United States, canals and turnpikes were being constructed in a big way in the early 1800s, leading to the use of steam power for river transportation. The railroad boom in the U.S. began in the late 1840s, culminating with the construction of over 30,000 miles of railroad tracks by the early 1860s. The 1880s saw a second wave of American railroad construction, with an additional 75,000 miles of track. According to business historian Alfred Chandler, the growth of railroads (and, concurrently, of steamships and telegraph) enabled a transportation and communication revolution in the United States. For instance, the Post Office benefited greatly from “faster, cheaper, and more certain” communications and even dropped postage rates in 1851 from 5 cents for 300 miles to 3 cents for 3,000 miles.⁶

In addition to the direct macroeconomic effects of the transportation and communication networks, they also made mass production and mass marketing in America possible in the decades that followed. More specifically, the networks encouraged the rise of wholesalers and middlemen, the movement of people from East to West, the development of new management and organization practices such as the multi-divisional structure and accounting practices, and the emergence of nationally branded goods. With the second great wave of American railway construction, “a new economy in the country had definitely arrived.”⁷

Innovations in technology, and especially in transportation and communication networks, have typically been behind the emergence of new economies. These have ranged from canals, turnpikes, and railroads in the 1700s and 1800s, to the information superhighway in the 1990s, and to the social networks of the last decade. Networks create network externalities (“network effects”), which essentially means that the value of a network (to its owners and users) rises exponentially as the number of users increases. Thus, technology and networks have been the key building blocks of new economies ever since the first Industrial Revolution.

The end point of a new economy typically merges with the beginning of another new economy, though both continue to co-exist and co-evolve. And, so it was with the dawn of the second Industrial Revolution in the early 20^th century with Henry Ford’s moving assembly line that launched the era of mass production and continuing rise of prosperity in America. This transformational change in manufacturing technologies and processes indeed changed how people lived and worked in the decades that followed.

In May 1983, Time magazine carried a cover story on “The New Economy” with the subheading, “Technology has set off a scramble for jobs, profits and global markets.”⁸ It highlighted the transformational change that was occurring in the business and economic environment of the time—a shift from heavy industry to a technology and service-based economy. Even in manufacturing, according to the cover story, growth was coming from “high-tech fields such as semiconductors and computers.” Some 25,346 businesses had gone bankrupt during 1982, but 566,942 new companies had been launched the same year. According to Pierre du Pont IV, the Governor of Delaware at the time, “[T]he transformation of our jobs, the movement of our people, the improvements in our skills over the first 80 years of this century have been stunning. But it is entirely likely that those changes will be matched and exceeded during the final 20 years of this century.”

The final two decades of the 20^th century did indeed prove the Governor right. Since the 1980s, the term “new economy” has found increasing usage in both professional and scholarly publications. The term became really popular in the dot-com era of the 1990s. Some of the monikers given to the economy of that era were: the digital economy, the information economy, the e-conomy, or simply the new economy. This new economy, like the earlier ones, was born out of technological innovations (the Internet), had its own players (e.g., the dot-coms), playing fields (e.g., the World Wide Web), rules of the game (e.g., “information rules”), and business models (e.g., clicks-and-bricks).

The Connected Economy

Today, the world has both the old economy and the digital economy, as well as a “new” new economy that has emerged in the last 5 to 10 years. This “new” new economy has been called by various names, such as the second Machine Age,⁹ the third Industrial Revolution,¹⁰ and the age of smart machines.¹¹ For sake of simplicity, we will refer to today’s economy as the “connected economy,” for reasons that will soon become clear. This term comprises the old economy, the digital economy, and the age of the smart machines.

The connected economy is today’s global economy. It consists of markets, firms, consumers, governments, and other actors that are more connected to each other than at any time in previous decades. As in the past, such connections are facilitated by the twin forces of globalization and technology, but now at an unprecedented and increasing rate of change.

Economics Nobel Laureate Michael Spence has explored the growing convergence between developed and developing countries.¹² About 60 percent of the world’s population, starting with China, India, and some other developing countries, is on track to achieve the living standards of the richest 15 percent of the world’s population in the coming decades. The developing world started on a century of growth, development, and convergence with the developed world and, according to Spence, is currently midway through this process. By the end of this development process, in another 30 to 40 years, China and India woul...