Going Global

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Presentation given at the National Minority Procurement Conference in Detroit on May 6th 2009

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Going Global

  1. 1. Going Global Presenter: Benaud Jacob May 6, 2009 Conducting Business in a Global Marketplace SLIDE 1
  2. 2. Excerpt From a Great Mind “ Contrary to popular wisdom, companies from the fringes of the world economy can become global players. What they need is organizational confidence, a clear strategy, a passion for learning, and the leadership to bring these factors together” FROM THE AUTOBIOGRAPHY OF NELSON MANDELA, FORMER SOUTH AFRICAN PRESIDENT <ul><ul><ul><li>Nelson Mandela recalls his dismay when he boarded an airplane and found that the pilot was African. With shock, he realized his reaction was exactly what he had been fighting against all his life. Mandela was discussing social and cultural issues, but the same involuntary reactions surface in commerce. </li></ul></ul></ul>SLIDE 2
  3. 3. Acknowledgements <ul><li>Michael Porter (Competitive Strategy) </li></ul><ul><li>Christopher A. Bartlett and Sumantra Ghoshal (Going Global – Lessons from Late Movers) </li></ul>SLIDE 3
  4. 4. Topics <ul><li>Globalization – An Overview </li></ul><ul><li>Woes and Wows – An Analysis </li></ul><ul><li>Tips on Global Enterprise Management </li></ul>SLIDE 4
  5. 5. I. Globalization – An Overview <ul><li>Definition </li></ul><ul><li>Economic Process </li></ul><ul><li>Impact on Government Policies </li></ul><ul><li>Michael Porter’s Five Forces on Market Stability </li></ul><ul><li>Mindsets may need not facilitate going global </li></ul>SLIDE 5
  6. 6. I. Globalization – An Overview <ul><li>Definition </li></ul><ul><ul><li>a faster interconnection due to advances in transportation and communication </li></ul></ul><ul><ul><li>a borderless world as goods, services, cultural products and ideas travel across borders with relative ease </li></ul></ul>SLIDE 6
  7. 7. I. Globalization – An Overview <ul><li>Economic Process </li></ul><ul><ul><li>Government Role : Reduction of the role of governments in regulating trade and production and in providing services </li></ul></ul><ul><ul><li>The Market : Efficient and effective determinant of what should be produced and what would be consumed </li></ul></ul><ul><ul><li>Competition : Leads to rational production as countries produce goods and provide services that they can do competitively and simply import that which they cannot; producing growth that will benefit the society as a whole </li></ul></ul>SLIDE 7
  8. 8. I. Globalization – An Overview <ul><li>Impact on Government Policies </li></ul><ul><ul><li>Liberalization : The reduction and eventual removal of barriers to the flow of goods, services and capital from one country to another (e.g. tariffs or taxes on imported agricultural products such as beef, rice or corn) </li></ul></ul><ul><ul><li>Privatization : Total or partial sale of government-owned or controlled corporations or institutions to the private sector (e.g. managed water and electric companies sold to private businesses) </li></ul></ul><ul><ul><li>Deregulation : The removal of government intervention in setting or regulating the prices of goods and services regardless of whether this benefits the consumers or not (e.g. deregulation of the oil industry) </li></ul></ul>SLIDE 8
  9. 9. I. Globalization – An Overview BARRIERS TO ENTRY THREAT OF SUBSTITUTES BUYER POWER SUPPLIER POWER <ul><li>SUPPLIER POWER </li></ul><ul><li>Supplier Concentration </li></ul><ul><li>Importance of Volume to supplier </li></ul><ul><li>Differentiation of Inputs </li></ul><ul><li>Impact on inputs to Cost Differentiation </li></ul><ul><li>Switching costs of firms in the industry </li></ul><ul><li>Presence of Substitute Inputs </li></ul><ul><li>Threat of forward integration </li></ul><ul><li>Cost relative to total purchases in industry </li></ul>MICHAEL PORTER’S FIVE FORCES OF MARKET STABILITY <ul><li>BUYER POWER </li></ul><ul><li>Bargaining Leverage </li></ul><ul><li>Buyer Volume </li></ul><ul><li>Buyer Information </li></ul><ul><li>Brand Identity </li></ul><ul><li>Price Sensitivity </li></ul><ul><li>Threat of backward integration </li></ul><ul><li>Product differentiation </li></ul><ul><li>Buyer concentration v.s Industry </li></ul><ul><li>Substitutes available </li></ul><ul><li>Buyer’s Incentives </li></ul><ul><li>BARRIERS TO ENTRY </li></ul><ul><li>Absolute cost advantages </li></ul><ul><li>Proprietary learning curve </li></ul><ul><li>Access to inputs </li></ul><ul><li>Government policy </li></ul><ul><li>Economies of scale </li></ul><ul><li>Capital requirements </li></ul><ul><li>Brand identity </li></ul><ul><li>Switching Costs </li></ul><ul><li>Access to distribution </li></ul><ul><li>Expected retaliation </li></ul><ul><li>Proprietary products </li></ul><ul><li>THREAT OF SUBSTITUTES </li></ul><ul><li>Switching costs </li></ul><ul><li>Buyer inclination to substitute </li></ul><ul><li>Price performance trade-off of substitutes </li></ul><ul><li>DEGREE OF RIVALRY </li></ul><ul><li>Exit barriers </li></ul><ul><li>Industry concentration </li></ul><ul><li>Fixed costs / value added </li></ul><ul><li>Industry growth </li></ul><ul><li>Intermittent overcapacity </li></ul><ul><li>Product differences </li></ul><ul><li>Switching costs </li></ul><ul><li>Brand identity </li></ul><ul><li>Diversity of rivals </li></ul><ul><li>Corporate stakes </li></ul>AMOUNT OF RIVALRY SLIDE 9
  10. 10. Adapted from Exhibit 2.2 Porter’s Five Forces Model of Industry Competition I. Globalization – An Overview SLIDE 10 Threat of new entrants Bargaining power of suppliers Threat of Substitute products and services COMPLEMENTORS Complementary products Bargaining power of buyers
  11. 11. I. Globalization – An Overview <ul><li>Going Global? May Be… May Be Not … </li></ul><ul><ul><li>Global Sourcing : Makes our firm a global organization. We use these business units to meet low cost resource needs. </li></ul></ul><ul><ul><li>Following the Customer : Our customer operates in different countries and we support them globally, thus we are global. </li></ul></ul><ul><ul><li>Corporate Pride : You better understand, we are a multi-billion dollar firm and we are a global firm. We have been working globally because of our business connections all over the world. It’s not a concern if our firm is global or not. </li></ul></ul><ul><ul><li>Local Success : Because we are successful locally there is no need to go Global. Going global is an easy task. we will do it only and when it is absolutely necessary. </li></ul></ul>SLIDE 11
  12. 12. <ul><li>Going Global? May Be… May Be Not (contd.) </li></ul><ul><ul><li>International Presence : We think we understand the business culture in the countries that we are currently expanding and we know exactly how to get them buy our service/product offerings. </li></ul></ul><ul><ul><li>International Connections : We have family and friends in Australia, Brazil, China and India, so my firm can go global at any time. </li></ul></ul><ul><ul><li>Pride and Ignorance : I’m the CEO of my US firm and I’m from India. I understand the US culture and have the funds. Let’s just go global - what is the big deal? </li></ul></ul><ul><ul><li>Feeling Small : My firm is too small and as the CEO, I do not think we can ever go global!! why do you think every small firms like mine should think global? </li></ul></ul>I. Globalization – An Overview SLIDE 12
  13. 13. II. Woes & Wows - An Analysis <ul><li>Samsung </li></ul><ul><li>Arvind Mills </li></ul><ul><li>Ranbaxy </li></ul><ul><li>Jollibee </li></ul><ul><li>BRL Hardy </li></ul>SLIDE 13
  14. 14. II. Woes & Wows – An Analysis <ul><li>Disclaimer: </li></ul><ul><li>These examples are just to illustrate strategies from a educational point of view - that worked for some companies while analyzing similar strategies that did not work for certain other companies </li></ul><ul><li>These firms could be better (or worse) today as a result of their subsequent realization and global strategy initiatives </li></ul><ul><li>The information that is being presented in this session is strictly from public sources and should not be considered as any means to form an impression on any of the firms addressed in the subsequent sessions </li></ul>SLIDE 14
  15. 15. II. Woes & Wows – An Analysis <ul><li>SAMSUNG (Korean Electronics Manufacturer) </li></ul><ul><li>About 10 years ago: </li></ul><ul><li>Made quality products that matched Sony, Hitachi etc. </li></ul><ul><li>Products greatly accepted in home country, Korea </li></ul><ul><li>Faced competitive situation with going global </li></ul><ul><li>CEO and management personnel traveled to the US </li></ul><ul><li>Identified Samsung perception being “bargain junk” </li></ul><ul><li>CEO realized the need for a “changed” perception </li></ul><ul><li>A global strategy was put in place and implemented </li></ul><ul><li>Outcome Analysis (Observations): </li></ul><ul><li>Samsung is a world renowned global firm </li></ul><ul><li>Samsung is a brand name </li></ul><ul><li>Samsung products do not collect dust in retail stores (anymore) </li></ul>SLIDE 15
  16. 16. II. Woes and Wows – An Analysis <ul><li>Arvind Mills (Indian Garment Manufacturer) </li></ul><ul><li>About 10 years ago: </li></ul><ul><li>Perceived as a symbol of quality at home (still does) </li></ul><ul><li>Initial strategy worked great as a “quality” garment firm at home </li></ul><ul><li>Major denim supplier to 1990’s apparel firms in the US </li></ul><ul><li>Expanded rapidly providing quality products to global firms </li></ul><ul><li>Global competition increased dramatically </li></ul><ul><li>U.S jeans market continually started to sink </li></ul><ul><li>Outcome Analysis (Observations): </li></ul><ul><li>Lack of adequate R&D, marketing and distribution </li></ul><ul><li>Paralysis of management “will” (vision as 2nd class citizens?) </li></ul><ul><li>Arvind mills remains as a firm focused more on local markets </li></ul><ul><li>The global perception remains as “just another” garment company </li></ul>SLIDE 16
  17. 17. II. Woes and Wows – An Analysis <ul><li>Ranbaxy (Indian Pharmaceutical Firm) </li></ul><ul><li>In 1975, started its export business </li></ul><ul><li>Decided to go global as a bulk pharmaceutical provider </li></ul><ul><li>Gross margins increased 5% to 10% </li></ul><ul><li>Export business caused international sales and distribution costs </li></ul><ul><li>Did not justify business sense except from the pride of going global </li></ul><ul><li>In 1993, the CEO challenged the firm to be a research-based firm </li></ul><ul><li>Ranbaxy created a pocket of excellence in India and also abroad </li></ul><ul><li>A shift in management mind-set was established </li></ul><ul><li>Established close to 50% of its revenues from global markets </li></ul><ul><li>Implemented operational strategies from global learning </li></ul><ul><li>Outcome Analysis (Observations): </li></ul><ul><li>A straight forward strategy </li></ul><ul><li>Higher margin initiatives by selling branded generics </li></ul><ul><li>Knowledge and capability that helped penetrating the US market </li></ul><ul><li>Focus on R&D than manufacturing/promoting drugs </li></ul>SLIDE 17
  18. 18. II. Woes and Wows - An Analysis <ul><li>Jollibee </li></ul><ul><li>Philippines-based, fast-food chain </li></ul><ul><li>Used the entry of fast-food giant, McDonald’s, as training ground </li></ul><ul><li>Viewed operating systems at McDonald’s and used this knowledge to expand number of stores </li></ul><ul><li>Did not just copy McDonald’s management style, but also looked at ways to innovate </li></ul><ul><li>Looked for gaps in McDonald’s business model </li></ul><ul><li>Made a combination of efficient stores with consumer sensitive menus (Asian fast food) </li></ul><ul><li>Gained customer loyalty from existing customers and new customers through expansion </li></ul><ul><li>Shows how a late entrant into a market can adapt to the business models of its competitors </li></ul>SLIDE 18
  19. 19. II. Woes and Wows - An Analysis <ul><li>BRL Hardy </li></ul><ul><li>Australian wine company </li></ul><ul><li>Sold bulk wine directly for private labels </li></ul><ul><li>Fragmented producers, which kept them from building brand strength and utilizing distribution capability </li></ul><ul><li>Millar, managing director for BRL Hardy, stopped selling wine from one country or region </li></ul><ul><li>Instead of just Australia, sourced from France, Italy, and other countries </li></ul><ul><li>Offset vintage uncertainties, currency risks of sourcing from single country, and gained clout with retailers, due to strongly built brand identity </li></ul><ul><li>Same as Jollibee: though a late entrant, they were able to innovate and create a strong enough brand presence to take over the European market </li></ul>SLIDE 19
  20. 20. II. Woes and Wows – An Analysis <ul><li>Success Factors </li></ul><ul><li>Breaking out of the traditional mind-set </li></ul><ul><li>Devising Global Strategies </li></ul><ul><ul><li>Late Mover Strategy </li></ul></ul><ul><ul><li>Benchmark and Sidestep </li></ul></ul><ul><ul><li>Confront and Challenge </li></ul></ul><ul><li>Learning How to Learn </li></ul><ul><ul><li>Protect the Past </li></ul></ul><ul><ul><li>Build the Future </li></ul></ul>SLIDE 20
  21. 21. III. Global Enterprise Management <ul><li>Decentralized Operations and Global Control </li></ul><ul><li>Typical Cross Functional Entities Related to Going Global </li></ul><ul><li>A Sample Global Sourcing Engagement </li></ul><ul><li>Common Pitfalls </li></ul><ul><li>Sharing Explicit vs. Tacit Knowledge Collaboration </li></ul>SLIDE 21
  22. 22. INTERNATIONAL HEADQUARTERS CENTRAL CONTROL III. Global Enterprise Management SLIDE 22 DECENTRALIZED OPERATION (COUNTRY1) DECENTRALIZED OPERATION (COUNTRY2) BUSINESS PARTNERS CUSTOMERS Decentralized Business Unit
  23. 23. III. Global Enterprise Management CROSS FUNCTIONAL ENTITIES THAT IMPACT GLOBAL CULTURAL INTEGRATION SLIDE 23 TRUST & ETHICS <ul><li>Profitability </li></ul><ul><li>Economies of scale </li></ul><ul><li>Cross regional selling </li></ul>FINANCIAL REWARDS HUMAN INTELLECT <ul><li>Domain Knowledge </li></ul><ul><li>Domain Expertise </li></ul><ul><li>Innovation & Creativity </li></ul><ul><li>Cross Regional Selling </li></ul><ul><li>Global Standards </li></ul><ul><li>Global Presence </li></ul>GLOBAL MARKETS <ul><li>Technology Media </li></ul><ul><li>Enhanced Data and </li></ul><ul><li>Information Security </li></ul>TECHNOLOGY <ul><li>Common Language </li></ul><ul><li>and Terminologies </li></ul><ul><li>Channels & Processes </li></ul>COMMUNICATION <ul><li>Aggressiveness </li></ul><ul><li>Passiveness </li></ul><ul><li>Interpersonal Skills </li></ul>PERSONALITY <ul><li>Professional </li></ul><ul><li>Cultural </li></ul><ul><li>Personal </li></ul>TOLERENCE / FLEXIBILITY
  24. 24. III. Global Enterprise Management SAMPLE DELIVERY MODEL ILLUSTRATING GLOBAL SOURCING SLIDE 24 <ul><li>TRANSITION MANAGEMENT </li></ul><ul><li>Adjust Team Roles </li></ul><ul><li>Define Transition Plans </li></ul><ul><li>Address Transition Issues / HR, Communications etc. </li></ul><ul><li>Meet with Employees, Organization and Vendors </li></ul><ul><li>Physical Move </li></ul><ul><li>PLANNING PHASE </li></ul><ul><li>Planning Risks </li></ul><ul><li>Form Project Team </li></ul><ul><li>Train Project Team </li></ul><ul><li>Set Objectives and Goals </li></ul><ul><li>Align Offshore initiatives </li></ul><ul><li>Evaluate Vendors </li></ul><ul><li>COST/PERFORMANCE ANALYSIS </li></ul><ul><li>Measure Activity Costs </li></ul><ul><li>Evaluate Project Future Costs </li></ul><ul><li>Measure Current Performance </li></ul><ul><li>Benchmark Cost/Performance </li></ul><ul><li>Determine Specific Risks, Asset Values, Pricing Models and Goals </li></ul><ul><li>NEGOTIATING CONTRACTS </li></ul><ul><li>Plan Negotiations </li></ul><ul><li>Address High Level Issues and Deal Breakers </li></ul><ul><li>Service Level Agreements </li></ul><ul><li>Internal Communication Plans </li></ul><ul><li>Contract Announcements </li></ul><ul><li>GOVERNANCE </li></ul><ul><li>Adjust Management Styles </li></ul><ul><li>Create Governance Council </li></ul><ul><li>Communicate, Communicate, Communicate </li></ul><ul><li>Define/Design Reporting, Meeting Agendas, Meeting Schedules, Performance Reports etc. </li></ul><ul><li>Measure Performance </li></ul><ul><li>Confront Poor Performance Issues / Improvements </li></ul><ul><li>Relationship Management </li></ul>
  25. 25. III. Global Enterprise Management Common Pitfalls SLIDE 25 Financial setbacks Inadequate Quality Standards ILL Defined Processes Operational Inefficiency Incorrect caliber of workforce Unethical standards Global complexities Technology breakdowns Inadequate communication model Passiveness and aggressiveness Intolerance and lack of flexibility Inadequate conflict management
  26. 26. Question: What is the truest definition of “Globalization”? ANSWER: An English princess with an Egyptian boyfriend crashes in a French tunnel, driving a German car with a Dutch engine, driven by a Belgian who was drunk on Scottish whiskey, followed closely by Italian Paparazzi, on Japanese motorcycles, treated by an American doctor, using Brazilian medicines! Answer: Princess Diana’s Death Question: How Come? And this is sent to you by a Canadian author, using Bill Gates' technology and you 're probably reading this on one of the IBM clones that use Taiwanese-made chips, and Korean-made monitors, assembled by Bangladeshi workers in a Singapore plant, transported by lorries driven by Indians, hijacked by Indonesians, unloaded by Sicilian longshoremen and finally sold to you. That, my friend, is Globalization! SLIDE 26
  27. 27. Going Global Presenter: Benaud Jacob May 6, 2009 Conducting Business in a Global Marketplace THANK YOU!!! Contact: bjacob@SYNERJIX.com SLIDE 27

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