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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: anil.gupta@insead.eduWeb: 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
3__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
4__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
5__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Emergence ofEmergence of“Complex” Globalization
6__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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.
7__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
8__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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.
9__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
F th “D8” t th “E8”From the “D8” to the “E8”:Emergence of A Multi-Polar Economy
10__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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.
11__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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)
12__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Rise of “Born-Globals”and “Micro-Multinationals”
san
d B
enef
itsC
osts
1900 1950 2000 2010
13__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Designing Global Strategy:Designing Global Strategy:Foundational Ideas
14__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Globalization –A Multidimensional Concept
Globalization of Capital Base
Globalization of Organization &Organization &
Mindset
Globalization of Globalization of Market PresenceValue Chain
15__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Why Go Global?
GROWTH Imperative?
Go
LEARNING Gains?
EFFICIENCIES Imperative?
Go Global?
CUSTOMER DE-RISKING Imperative? Gains?
16__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
17__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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. “
18__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
g
Designing Global Strategies:Designing Global Strategies:Globalization of Market Presence
19__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Key Questionsy Q
1. Choice of markets?
2. Entry strategies?
3. Extent of local adaptation?
20__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
W l M t Ch i f M k tWal-Mart: Choice of Markets
21__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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)
22__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
W l M t E t St t iWal-Mart: Entry Strategies
23__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
24__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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.
25__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Designing Global Strategies:Designing Global Strategies:Globalization of the Value Chain
26__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
27__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
28__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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.
29__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
30__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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.”
31__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
32__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Designing Global Strategies:Designing Global Strategies:Globalization of the Corporate Mindset
33__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
“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
34__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
35__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
36__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Globalizing the Young Venture:Globalizing the Young Venture:Additional Considerations
37__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
38__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Whether or Notto Globalize – Early & Rapidly?
72# of countries “entered” in“entered” in first 5 years
22
7 33
39__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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
40__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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)
41__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
Thank you!
Jossey‐Bass/Wiley, March 2008 Jossey‐Bass/Wiley, Feb 2009
42__________________________________Anil K. Gupta, The Quest for Global Dominance. July 2010. All rights reserved.
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