Harold L. Sirkin (Senior partner of The Boston Consulting Group (BCG) and of worldwide trade and economic development which the authors call “globality. This chapter explains the concept of globality. Globality is not an activity so much as it is an environment, a state of being. It is mainly fueled by. “A revolution in global business is under way.” So starts Hal Sirkin’s new book, Globality: Competing with Everyone from Everywhere for Everything (Business.
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Competing with Everyone from Everywhere for Everything. The one thing we have found is that the age of globalization is actually over. Globalization was a one-way street. It was about the companies from the U. So, it was fundamentally a one-way street. What has changed over the last few years with the rise of China, India, Russia, Eastern Europe and Brazil is the emergence of a two-way street. What we have seen over the last five years is not just companies from the West coming to India and China, etc.
And, in doing so, they are starting to challenge the traditional multinational companies. That means that companies from India, like Tata, or companies from China, like Baosteel, play on the global stage, and compete with globa,ity Western companies. You may overlook them as potential competitors, but they are starting to show up in the U.
But of course, the flip side of a threat is an opportunity. The companies that win will be those that can bring the best of the West and tlobality best of the East to bear in global markets.
We think that the world is very spiky. Thomas Friedman wrote a great book that really awakened people to the changes that are taking place in the world. The World Is Flat. Companies that operate in environments with different spikes, such as low-cost labor, are beginning to use those spikes to their gloablity. Then they can build on that advantage by investing in research and development, new product development and distribution.
As we see that happening, glpbality see the environment changing. What are the implications for companies in places like India and China? What are the opportunities and threats that globality presents for them? They face the same opportunities and threats in many ways as the Western companies. They can use that advantage. If you want to produce a low-end product, you can do it that way. The world is going to get much more competitive.
To compete, companies must know how to balance things. But over time, everybody will have access to lower costs. What should be their strategy to globalize? If you look at the population in India, there are about 1. China has about 1. Those are huge markets. And if you look at the rapidly globaliy economies overall, there are about 3. We think that over the next 20 years, another billion consumers will move from abject poverty and enter the consumer market.
That means a lot of opportunities for consumer products, but also for companies that make things for businesses that sell to siriin consumers. Recognize that a billion people is more than the combined population of the U. It is a huge opportunity….
A lot of companies are globlity that. Perhaps one of the best examples is Nokia, the Scandinavian manufacturer of cellular telephones. They built a position in China in the early days, by selling the traditional way — by offering a higher-cost Western globalify.
However, a bunch of local companies slrkin in and started producing cell phones at a much lower cost. The demand increased and Nokia started to lose market share. The conventional response might have been to retreat. They also found a way to produce a high quality product at a much lower cost. Nokia also changed its third-party distribution system, recognizing that when it came to sales and understanding customers — particularly the retailers — they had to be there themselves with their own people.
This gave Nokia an incredible learning experience. They now understand how to operate in rapidly developing economies such as China. You have to be there, you have to learn, and retreat is not an option. How much does this erode the competitive advantage of emerging challengers from these countries, when multinational companies set up operations there?
Now the Western companies have the advantage, so the advantage of the emerging local company is reduced. But slrkin smart local company will learn from Western companies and tlobality competing with them by selling in Philadelphia, Los Angeles and Paris.
And again, it gloablity become a significant battle. It will balance out because there will be competitive dynamics….
Losers and winners will come from the rapidly developing economies as well as the developed countries. A new equilibrium will eventually settle in, but it will be a long time before that sirkinn because a lot of change will take place first.
We see this in Gloality, where a competitor hires away your talented new people after six months — for a lot more money. There is a huge competition for human resources. So the basis of competition that this new equilibrium is starting to create is also different. And you have to start thinking about the pricing and sourcing of all these things.
You referred to the fact that there will be winners and losers, both among the challengers as well as among the incumbents. It requires a willingness to understand the other paradigm. If you take a U. The way to increase the odds of success is to blend those two perspectives together. I look at an Indian company like Bharat Forge in Pune, India, which is the third-largest manufacturer of forgings in the world. I can charge the right price and learn the right skills.
They have hundreds of glboality of employees there. So with that kind of a dynamic, it almost seems easier to me for IBM to create a production back end that can mimic the costs of the Indian challengers, but not that easy for the Indian challengers to develop the customer relationships off of the incumbents. How do you think that dynamic will play out? One more thing to add to the dynamic is creativity.
In the West we have a very traditional engineering mindset that is hard to break out of. That level of creativity may well be leveling the playing field. You mentioned rising oil prices and the Tata Nano, the emergence of this inexpensive car.
Globality – Wikipedia
What other ways will people — everyday consumers — recognize the emergence of this process outside of business? We are seeing it in all sorts of places.
But his competition is going to be far more fierce than when I applied in So, competing for everything includes competing for the right to go to Wharton. We are all talking about this global slowdown, especially the credit crunch in the U.
Does that affect the process of globality at all? It may speed it up a little bit because there will be more pressure to lower costs, which of course is one of the advantages of operating in developing economies.
That may encourage even more Western companies to go beyond their own borders to lower costs, and may also create more opportunities for companies from India, China, Russia and Brazil. Many view private equity firms as villainous actors intent on the singular goal of profit.
BCG’s Hal Sirkin on ‘Globality’ and the New Two-way Street of Global Business
But new Wharton research provides better insight into the benefits of PE buyouts. Audacity and courage are among the hallmarks of successful startup founders, according to panelists at the recent Wharton India Economic Forum. Companies are refining their business intelligence gathering by capturing smart data and conducting analytics to yield the desired insights. Log In or sign up to comment.
Additional Reading Management Finding the Virtue in Private Equity Firms Many view private equity firms as villainous actors intent on the singular goal of profit. Innovation What Traits Entrepreneurs Need to Succeed Audacity and courage are among the hallmarks of successful startup founders, according to panelists at the recent Wharton India Economic Forum.
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