This document discusses how new entrants from developing economies are challenging traditional ways of thinking about global competition. It provides examples of companies like Electrolux, Cycleurope, Mars, Haier, Tata, and others that have adopted strategies like acquiring local brands, centralizing production, focusing on emerging markets, and developing more affordable products to become successful global competitors. The writing warns that established firms must rapidly change their mindsets and strategies or risk losing significant market share to these new competitors, as growth is increasingly occurring in less developed markets with customers seeking more affordable options. Change must happen now for companies rather than waiting for some point in the future.

1. HOW NEW ENTRANTS
INTO THE GLOBAL
ECONOMY CHALLENGE
TRADITIONAL WAYS OF
THINKING ABOUT
COMPETITION
Ivo Zander
Anders Wall Professor of Entrepreneurship
Uppsala University

2. GLOBALIZATION 1.0

3. Attitudes and drivers of globalization
Transportation and communication costs Tariffs
120
100
Average
80 freight costs
60 Air transportation
40 Cost 3 min.
20 call
0
1930 1940 1950 1960 1970 1980 1990 1913 1950 1990 2012
1870 1914 1945 2013
Deregulation Liberalization of FDI

4. Outward flows of foreign direct
investment ($ bn.)
1970 1980 1990 2000 2010
UNCTAD (2012)

5. Electrolux in the White Goods Industry
Electrolux’ strategy in the
white goods industry
1. Expand through foreign acquisitions
2. Retain leading local brands
3. Centralize production to few locations:
Close local production, transform
acquired companies to sales subsidiaries
4. Centralize production of components
5. Coordinate global purchasing for increased
bargaining power

6. The ideal long-term structure
Product A
Product C
Product B
Components

7. Electrolux in the White Goods Industry
Product strategy
1. Locally supplied
2. Globally supplied according
to local standard
3. Group standard
1. Locally manufactured products according to market demands
2. Acquired brands, centrally manufactured according to local demand
3. Strategic products, centrally manufactured with global standard

8. Cycleurope in the Bicycle Industry
Cycleurope in the bicycle industry
“I invited all product managers to a
group meeting concerning saddle
designs. We all gathered in one room,
and there were 650 different models
presented!”
Tony Grimaldi

9. Mars in the Chocolate Industry
Mars brand strategy
“We have over the last 10 years invested a lot in
making our brands truly global. We changed things
like Marathon in the UK to Snickers. We changed
Raider to Twix and we did that not just on a
European basis, we did that on a worldwide basis.”

10. Cables
What are the options?
“The cable industry became more international
because some leaders decided to go
international. They drove the industry behind
them.”
Alcatel manager

11. The mental map of competition

12. Game over, or…

13. GLOBALIZATION 2.0

14. Ispat in the Steel Industry
Lakshmi Mittal

15. Ispat in the Steel Industry
Ispat – key components of strategy
Exploits emerging DRI and mini-mills technology.
Targets underperforming, state-owned plants that
are up for sale, primarily in developing economies.
Uses dedicated, international task-force to re-
structure new plants.
Builds on the founder’s dedication, attention to
detail, and involvement.

16. Ispat in the Steel Industry
How to turn around a steel plant
SWAT team Liquidity fix Debug Product mix Integrate Prune
Remove Reestablish Bring in Shift to Form Close or sell
most existing credit with Mittal production of regional off noncore
managers suppliers to technicians higher-value groups to subsidiaries,
and replace assure a to improve goods such boost from catering
with Mittal steady flow of operations as cold- purchasing to hotels.
executives raw materials. such as rolled steel power and Gradually
to get the End barter rolling mills and prevent cut back
company arrangements and blast galvanized plants from staff,
running on a that beget furnaces. sheets. Try competing possibly
commercial corruption Rework to sell to end with each through
basis and destroy maintenance users rather other for the buyout
quickly. cash flow. schedules to than same programs.
reduce middlemen. customers.
downtime.
Business Week, December 20, 2004

17. Ispat in the Steel Industry
Organization and profitability (2002)
LNM Holdings Ispat International
Ispat Nova Hut Ispat Unimetal (France)
Ispat Sidex Ispat Germany
Iscor Ispat International (Britain)
Ispat Karmet Ispat Sidbec (Canada)
Ispat Annaba (Algeria) Caribbean Ispat (Trinidad)
PT Ispat Indo (Indonesia) Ispat Inland (U.S.)
Ispat Mexicana
Revenue: $ 3.8 billion
Net profit: $ 564 million Revenue: $ 4.9 billion
Net profit: $ 49 million

18. Haier
Zhang Ruimin

19. Haier
The Haier Group - key components of strategy
1984 Technology alliance with Liebherr Company of Germany.
1991- Domestic acquisitions and diversification into new product
areas: freezers, washers, microwaves, heaters, air-
conditioners, TV sets, mobile phones.
1996 Joint venture established in Indonesia.
2000- Joint ventures in Philippines, Dubai, Iran, Algeria, Jordan,
Pakistan, and Bangladesh.
2006 World largest market brand share for refrigerators, 4th largest
among global white goods manufacturers.

20. Haier
Innovation at Haier
China Washing machine model that serves the purpose of
washing both clothes and vegetables.
Small-sized washing machines for humid regions.
Indonesia Flexible-voltage appliances.
United States Refrigerator model with fold-out table aimed for
students. Wine cellars.

21. Tata
$ 28 bn
$ 5 bn
Ratan Tata

22. Tata
Select Tata acquisitions
2000 Tetley Group (United Kingdom, USD 434 million)
2004 Daewoo Commercial Vehicle Company (Korea, USD 102 million)
2005 Teleglobe International (United States, USD 239 million)
2005 Brunner Mond (United Kingdom, USD 111 million)
2006 Eight O’clock Coffee Company (United States, USD 220 million)
2007 Corus (United Kingdom/Netherlands, USD 12 billion)
2007 Ritz-Carlton (Boston, United States, USD 170 million)
2008 Jaguar, Rover (from Ford, USD 2.3 billion)

23. New entrant characteristics
Assimilation of technology that is increasingly up for sale in
international markets.
Entry via geographical regions and/or industry segments not
emphasized by established multinational corporations.
Flexible and entrepreneurial decision making by one dominant
owner, owner family, or CEO.
Supported by national governments.
Gradual movement into more value-added activities and
segments.
Ultimately, buy out parts of established multinationals, if not entire
operations.

24. They have a plan
“It almost disgusts me to see how some of our
competitors in China work on strategic plans that
extend 20 years into the future, while everyone
here’s looking at the quarterly reports.”
Carl-Henric Svanberg, CEO Ericsson

25. THERE IS ONE MORE
THING

26. Frugal innovation, ‘Jugaad’

27. TV sets
China’s market for TV sets
Premium Good-enough Low-end
Leading vendors: Leading vendors: Leading vendors:
Panasonic, Philips, Hisense, Skyworth, Konka
Sony TCL
Share of market: Share of market: Share of market:
13% 62% 25%
From Gadiesh et al. (2007)

28. LOOKING INTO THE
FUTURE

29. Annual average growth rates
(real GDP, 1980-2010)
UNCTAD, Handbook of Statistics, 2011

30. UNCTAD, Handbook of Statistics, 2011

31. World population, 2010
(millions)
1,025
5,545
UNCTAD, Handbook of Statistics, 2011

32. MNCs from select developing economies
UNCTAD (2006)

33. Growth in outward foreign direct
investment ($ bn.)
1970 1980 1990 2000 2010
UNCTAD (2012)

34. Changing distribution of outflows
of foreign direct investment

35. WHAT DOES THIS MEAN?

36. The writing is on the wall
√ Established managerial mindsets are geared
towards competition in the developed
market economies
but
√ Growth is in traditionally neglected and
unfamiliar markets
√ Existing products are too sophisticated for
the main market segments
√ ‘ Wrong’ institutional framework

37. Three choices
Rapid change of Vigorous protection
mindset and strategies of premium segments
Concerted efforts to
promote new business
formation

38. It happens now, not some time in
the future!
Market shares that are missed or lost today are going
to be very hard and costly to regain in the future.

39. “Change before you have to.”
Jack Welch