Anil gupta presentation slides [compatibility mode]

Th Q t fThe Quest forGlobal Dominance

ANIL K. GUPTAThe INSEAD Chaired Professor of StrategyThe INSEAD Chaired Professor of StrategyINSEAD – The Business School for the World1 Ayer Rajah Avenue, Singapore 138676Email: [email protected]: www anilkgupta comWeb: www.anilkgupta.comTel: +65.6799.5381

__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.

1

Agenda

1. The Changing Global Landscape

2. Designing Global Strategies

a. Foundational Ideas

b. Globalization of Market Presence

c. Globalization of the Value Chain

d. Globalization of Corporate Mindset

3. Globalizing the Young Venture: Additional Considerations

2__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.

Th Ch i Gl b l L dThe Changing Global Landscape


Declining Coordination & Transportation Costs

Average Air Transportation

Revenue/Passenger Mile

Cost of Three-Minute Call

from New York to London

Consumer Price Index

(1990 = 100)*Passenger Mile (US $)*

to London(US $)

(1990 = 100)*

1960 0.061 45.86 231970 0 060 31 58 301970 0.060 31.58 301980 0.115 4.80 631990 0.134 3.32 100

*U.S. data **Using VOIP (e.g., Skype)Sources: U.S. Bureau of Transportation Statistics, IMF World Economic Outlook 1997, other

2000 0.146 0.30 1322007 0.130 0.00** 159Sources: U.S. Bureau of Transportation Statistics, IMF World Economic Outlook 1997, other


Widespread Economic Liberalizationp

1992 1996 2000 2004 2008

# of Countries That# of Countries That Changed Their Investment Regimes

43 66 70 103 55

Total # of Regulatory Ch

77 114 150 270 110ChangesChanges favoring liberalization

77 98 147 234 85

Changes reducing 0 16 3 36 25

Source: UNCTAD, World Investment Report 2009

Changes reducing liberalization

0 16 3 36 25


Emergence ofEmergence of“Complex” Globalization


Emerging Economies Gather BulkWorld’s 24 Largest Economies = 85% of World GDP

Source: World Development Indicators 2010, The World Bank.Source: World Development Indicators 2010, The World Bank.


Aft th fAftermath ofthe Great Recession

Annual GDP Growth Rates (%)

Country* 2000-2007

2008 2009 2010P** 2011P**

World 3.1 3.0 -0.6 4.2 4.3US 2.7 0.4 -2.4 3.1 2.6Japan 1.7 -1.2 -5.2 1.9 2.0Germany 1.1 1.2 -5.0 1.2 1.7France 1.7 0.3 -2.2 1.5 1.8China 10.2 9.6 8.7 10.0 9.9India 7.8 7.3 5.7 8.8 8.4

*The world’s top 12 economies also include U.K. Italy, Spain and Canada**IMF W ld E i O tl k A il 2010

Russia 6.6 5.6 -7.9 4.0 3.3Brazil 3.3 5.1 -0.2 5.5 4.1

**IMF World Economic Outlook, April 2010


Who’s More Risky Now?Who s More Risky Now?Economic “Prudence” vs. Economic “Excess”?

Source: World Development Indicators 2010, The World Bank & CIA, The World Factbook.


F th “D8” t th “E8”From the “D8” to the “E8”:Emergence of A Multi-Polar Economy


New Mega-Markets:Simultaneously Rich-and-Poor

GDP/Capita (US$)GDP (US$b)

46724

56184

14204

1988919510

2911128523860 5762

Note: 2025 projections not adjusted for inflation

1068 4268

2008 2025

1217

2008 2025

Note: 2025 projections not adjusted for inflation.


Emerging Economies:Fi St i R ll d I t O

1. Mega-markets & mega-growth (but i t )

Five Stories Rolled Into One

micro-customers)

2. Platforms for global cost reduction

3. Global hubs for innovation

4. Springboards for the emergence of new global competitorsnew global competitors

5. New sources of capital (esp. China)


Rise of “Born-Globals”and “Micro-Multinationals”

san

d B

enef

itsC

osts

1900 1950 2000 2010


Designing Global Strategy:Designing Global Strategy:Foundational Ideas


Globalization –A Multidimensional Concept

Globalization of Capital Base

Globalization of Organization &Organization &

Mindset

Globalization of Globalization of Market PresenceValue Chain


Why Go Global?

GROWTH Imperative?

Go

LEARNING Gains?

EFFICIENCIES Imperative?

Go Global?

CUSTOMER DE-RISKING Imperative? Gains?


Industry Characteristics MatterIndustry Characteristics Matter

Multidomestic Industries

Globally IntegratedIndustries

Hair-cuttingHospitalsSupermarkets

SemiconductorsPharmaceuticalsTiresSupermarkets Tires

Globalization as a discretionary option

Globalization as a strategic imperative

Size of advantage Hi hSize of advantage from globalization

Bulk of market share in most countries is captured by

Low High

Global players

Local players countries is captured by

Implications for global strategy

players

Globally integrated operations

players

Multi-domestic operations


operationsoperations

Industry Characteristics Matter

“The planned sale is in line with the strategy set out by Lars p gy yOlofsson, chief executive, to pull out of markets in which the supermarket group has little prospect of becoming market leader and invest in those where it already is leader or has a good chance of becoming one. “


g

Designing Global Strategies:Designing Global Strategies:Globalization of Market Presence


Key Questionsy Q

1. Choice of markets?

2. Entry strategies?

3. Extent of local adaptation?


W l M t Ch i f M k tWal-Mart: Choice of Markets


Prioritization Across Markets

Strategic Importance:Strategic Importance:

• Market size• Growth rate• Learning value (leading edge

customers, products, and/ortechnologies)

Ability to Exploit:

• Similarity to current markets• Potential to leverage existing

competencies and infrastructure• Intensity of competition (lower is

)better)• Non-market entry barriers (lower

is better)


W l M t E t St t iWal-Mart: Entry Strategies


Entry Strategy:G Al P t ?Go Alone vs. Partner?

Alliance-based entry modes are more appropriate when:

• The market is more “foreign” (i.e., high economic, cultural, language, and political distance)

• Subsidiary would need low operational integrationSubsidiary would need low operational integration with global network

• Risk of asymmetric learning by partner is low

Y h t f it l• You are short of capital

• Government mandates local equity participation


Degree of Local Adaptation

• Be pragmatic, be open to learning from the market.

• Extent of local adaptation may vary greatly across different elements of the marketing mix:g

Product & service portfolioProduct featuresService featuresPricingAdvertising (theme vs. execution vs. media)Branding & logoDistribution channelsDistribution channels

• In dynamic markets, revisit your decisions at least once a year.


Designing Global Strategies:Designing Global Strategies:Globalization of the Value Chain


Need for Disaggregated Analysis Across Each Activity in the Value Chain

Global Optimization

Specific Value Chain Activities

Declining need for geographic co-location of complementary activities


Gl b l O ti i ti OfGlobal Optimization OfIndividual Value Chain Activities

ActivityActivityArchitecture

A

CoordinationA L ti

CapabilitiesAt th L ti

F AAAcross LocationsAt the Locations

Choice of Location(s)

AA - Highly optimalF - Highly suboptimal


Location(s)

Alternative Activity Architectures

• Concentration in one location

• Differentiated but global centers of• Differentiated but global centers of excellence

• Regional decentralizationRegional decentralization

• Country-level decentralization

The optimal architecture varies greatly across different value chain activities. Also, what’s optimal today will rarely be optimal tomorrow.


Tapping the Most Optimal Locations

Examples:Value Proposition:•Production of Nike shoes in Vietnam

•Microsoft: Speech

•Cost reduction

•Access scarce talent precognition lab in China

•Texas Instruments: Software development in

•Access locally embedded knowledge

Software development in India•Reduce risks


Building World ClassBuilding World-Class Capabilities At the Locations

June 2004June 2004“The World's Hottest Computer LabMicrosoft's six-year-old Beijing lab has already paid dividends in speech recognition, wireless multimedia and graphics.By Gregory T. Huang

Half a world away from the calm beauty of Seattle and Puget Sound, there's a lab where software dreams come true At Microsoft Research Asia thedreams come true. At Microsoft Research Asia, the drive to succeed is as intense as the traffic that roars by the front door in unbridled, chaotic fury…

Microsoft's mantra: work hard to get in the door; k h d t i th k h dwork harder to survive; then work even harder

because the real work-that of an information technology world leader-is just beginning….. The Beijing lab is a key part of Microsoft’s effort to ensure its global future through research.”


g g

Benefiting fromCoordination Across Locations

“We are beginning to understand the true meaning and benefits of being a global company. The best of class from all over the world now set the benchmarks for our industry, whether domestic or international. “Speedy checkouts,” “gravity walls” and new merchandise items are examples of ideas from international markets that we imported and applied to our domestic business. Just think of the multiplier factor when we apply a new sales-generating idea or cost-saving idea to 3,000 existing stores. This is what we call “Global Learning.”” –A l R t 1998Annual Report 1998


Designing Global Strategies:Designing Global Strategies:Globalization of the Corporate Mindset


“Th lt f C C l h d f b i“The culture of Coca‐Cola has moved from being an American company doing business internationally to an international company which happens to be headquartered in Atlanta … We were global when global q g gwasn’t cool. Now everyone is trying to be global. If you go back to our 1981 annual report, you will see references to “foreign” sales or “foreign” earnings. Today, the word “foreign” is foreign to our corporate language ”“foreign” is foreign to our corporate language.”

Roberto GoizuetaCEO, Coca‐ColaBeverage Digest, 1991


Globalization of Corporate Identity and Mindset

Carlos GhosnCEO, Nissan & Renault

“There are no German or AmericanThere are no German or American companies. There are only successful or unsuccessful companies.”

Thomas Middlehoff

Indra NooyiCEO, PepsiCo

Chairman, Bertelsmann AGThe Wall Street Journal, 1998


Are You A Global Company?

“International” Company: “Global” Company:International Company:

• “Domestic” vs. “International” mindset

Global Company:

• “HQ Country” seen as one of many markets

• Foreign markets seen as “add on” to domestic market

• All major geographies viewed as “domestic” markets

• Products and services are invented first for the domestic market and

• Products and services could be invented in any geographydomestic market and

then ported/adapted for foreign markets

any geography

• Market-centric rather than product-centric


Globalizing the Young Venture:Globalizing the Young Venture:Additional Considerations


Whether or Notto Globalize – Early & Rapidly?

Organizational Capability

• Global mindset• Past globalization experience• Acquisition/alliance capabilities

Global coordination capabilities

Early & Rapid

• Global coordination capabilities+

Early & Rapid Globalization?• R&D intensity

• Scale economies• Customer globalization

• Need for local adaptation• Need for local infrastructure• Regulatory barriers+ -

Industry Constraints

Industry Imperatives


Whether or Notto Globalize – Early & Rapidly?

72# of countries “entered” in“entered” in first 5 years

22

7 33


Additional Challengesfor Young Globalizers

1. Limited managerial, organizational, and financial resources

2. Lack of market knowledge, channel access & market relationships

3. Inability to attract and retain top talent in y pforeign locations

4. Limited or no experience in managing cross-cultural conflicts

5. Direct and indirect costs of coordination become unsustainable


Guidelinesfor Young Globalizers

1. Understand the industry imperatives and constraints thoroughly

f2. Don’t let global expansion distract you from maintaining dominant position in strategic markets

3. Leverage existing relationships ( li i )(customers, suppliers, partners, investors)

4. Resist the temptation to globalize too many activities at the same time add complexity in a

ti l th th ll lsequential rather than parallel manner

5. Over-invest in integration capabilities (including early formalization of processes)


Thank you!

Jossey‐Bass/Wiley, March 2008 Jossey‐Bass/Wiley, Feb 2009
