Hbr Going Global Presentation Erlana

Professor : Belmiro N. João Aluna: Erlana Castro Mestrado PUC SP Fev 09

ABSTRACT

Conventional wisdom says that companies from the periphery of the global market can't compete against established global giants from Europe, Japan, and the United States. Companies from developing countries have entered the game too late; they don't have the resources.

But Christopher Bartlett and Sumantra Ghoshal disagree. The problem for most aspiring multinationals from peripheral countries, say the authors, is that they enter the global marketplace in low-margin businesses at the bottom of the value curve, and they stay there. But it doesn't have to be that way.

They studied 12 emerging multinationals based in such countries--from emerging markets like Brazil to relatively more prosperous yet still peripheral nations like Australia to developing countries like the Philippines.

These companies now enjoy global success because they treated global competition as an opportunity to build capabilities and move into more profitable segments of their industry. The path to globalization isn't easy, but the authors show that it is possible.

Each company in the study overcame the same core challenges. They broke out of the mind-set that they were unable to compete successfully on the global stage. They adopted strategies that made being a late mover a source of competitive advantage. They developed a culture of continual cross-border learning. And they all had leaders who drove them relentlessly up the value curve.

The companies discussed in this article are models for the thousands of marginal companies in peripheral economies that have the potential to become legitimate global players.

Consider labels such as Made in Brazil or Thailand

Someday they will be symbols of high quality and value, but today many consumers expect products from these countries to be inferior. There’s a huge prejudice on value perception. Consider labels such as Made in Brazil or Thailand

“ We foresee ample opportunity in brands and fabrics and will innovate the profitable portfolio by introducing functional, protective and performance fabrics”. “ The ratio of domestic to foreign business for the company is currently 50:50, which will become 65:35 in the next few years, however, it doesn’t mean that the domestic business will decrease. The international business will grow too”. Mr Sanjay Lalbhai, CMD, Arvind Ltd, at the unveiling of the company’s new logo in Mumbai on Monday. Our Bureau Mr Sanjay Lalbhai, CMD, Arvind Ltd, at the unveiling of the company’s new logo in Mumbai on Monday. Our Bureau Mr Sanjay Lalbhai, CMD, Arvind Ltd May, 2008

An old history

The moral is consistently negative;

Companies from developing countries have entered the game too late in the global marketplace;

They don’ t have the resources;

They can’ t hope to compete against giants

Companies like Sony, Toyota, and NEC transformed the cheap, low-quality image of Japanese products in little more than a decade.

An Indian pharmaceutical company

Parvinder Singh, CEO

Enters in global market in 1975 (exports)

Was trapped at the bottom of the pharmaceutical value curve

In 1993, Ranbaxy’s approach to internationalization changed fundamentally

“ Rambaxy cannot change India. What it can do is to create a pocket of excellence. Rambaxy must be na island within India”.

Breaking Out of the Marginal Mind-Set

Psychological factors that hold back most companies and the ways our emerging multinationals dealt with them.

Liabilities of origin

Companies with competitive products but...

Prison of local standards

Gap between technical requirements and design norms at home and world-class standards abroad

Limited exposure to global competition, leaving them overconfident in their abilities or blind to potential dangers.

Moment of truth (shock of recognition)

The companies that are so blinded by their domestic success. Ex. Samsung USA

Leap of faith

Ex: Thermax, an Indian manufacturer of small boilers. Meet the highest international technical standards but also had to develop a fundamentally different design concept.

Pushes from home are indispensable, but if companies are to use international expansion to move up the value curve, they also need to invest in the management capabilities of their overseas units to provide pull from abroad.