Anil gupta presentation slides [compatibility mode]

The Quest f
Th Q t for
Global Dominance
ANIL K. GUPTA
The INSEAD Chaired Professor of Strategy
The INSEAD Chaired Professor of Strategy
INSEAD – The Business School for the World
1 Ayer Rajah Avenue, Singapore 138676
Email: anil.gupta@insead.edu
Web: www.anilkgupta.com
Web: www anilkgupta com
Tel: +65.6799.5381

__________________________________
Anil K. Gupta, The Quest for Global 1
Dominance. July 2010. All rights reserved.

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

__________________________________

The Changing Global Landscape
Th Ch i Gl b l L d

__________________________________

Declining Coordination &
Transportation Costs
Average Air Cost of Three-
Transportation Minute Call Consumer
Revenue/ from New York Price Index
Passenger Mile to London (1990 = 100)*
(US $)* (US $)
1960 0.061 45.86 23
1970 0.060
0 060 31.58
31 58 30
1980 0.115 4.80 63
1990 0.134 3.32 100
2000 0.146 0.30 132
2007 0.130 0.00** 159
*U.S. data **Using VOIP (e.g., Skype)
Sources: U.S. Bureau of Transportation Statistics, IMF World Economic Outlook 1997, other

__________________________________

Widespread Economic Liberalization
p

1992 1996 2000 2004 2008
# of Countries That
Changed Their 43 66 70 103 55
Investment Regimes
Total # of Regulatory 77 114 150 270 110
Changes
Ch
Changes favoring 77 98 147 234 85
liberalization
Changes reducing 0 16 3 36 25
liberalization
Source: UNCTAD, World Investment Report 2009

__________________________________

Emergence of
“Complex” Globalization

__________________________________

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

Source: World Development Indicators 2010, The World Bank.

__________________________________

Aftermath of
Aft th f
the Great Recession
Annual GDP Growth Rates (%)

Country* 2000- 2008 2009 2010P** 2011P**
2007
World 3.1 3.0 -0.6 4.2 4.3
US 2.7 0.4 -2.4 3.1 2.6
Japan 1.7 -1.2 -5.2 1.9 2.0
Germany 1.1 1.2 -5.0 1.2 1.7
France 1.7 0.3 -2.2 1.5 1.8
China 10.2 9.6 8.7 10.0 9.9
India 7.8 7.3 5.7 8.8 8.4
Russia 6.6 5.6 -7.9 4.0 3.3
Brazil 3.3 5.1 -0.2 5.5 4.1
*The world’s top 12 economies also include U.K. Italy, Spain and Canada
**IMF W ld E
World Economic O tl k April 2010
i Outlook, A il

__________________________________

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

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

__________________________________

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

__________________________________

New Mega-Markets:
Simultaneously Rich-and-Poor

GDP (US$b) GDP/Capita (US$)
19889
56184
19510
46724
14204

5762 12852
3860
2911
1217 1068 4268

2008 2025 2008 2025
Note: 2025 projections not adjusted for inflation
inflation.

__________________________________

Emerging Economies:
Five Stories Rolled I t O
Fi St i R ll d Into One

1. Mega-markets & mega-growth (but
micro-customers)
i t )
2. Platforms for global cost reduction
3. Global hubs for innovation
4. Springboards for the emergence of
new global competitors
5. New sources of capital (esp. China)

__________________________________

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

Costs and Benefits
s
1900 1950 2000 2010

__________________________________

Designing Global Strategy:
Foundational Ideas

__________________________________

Globalization –
A Multidimensional Concept

Globalization of
Capital Base

Globalization of
Organization &
Mindset

Globalization of Globalization of
Value Chain Market Presence

__________________________________

Why Go Global?

GROWTH
Imperative?

EFFICIENCIES LEARNING
Imperative? Gains?
Go
Global?
CUSTOMER DE-RISKING
Imperative? Gains?

__________________________________

Industry Characteristics Matter
Multidomestic Globally Integrated
Industries Industries

Hair-cutting Semiconductors
Hospitals Pharmaceuticals
Supermarkets Tires
Globalization as a Globalization as a
discretionary option strategic imperative

Size of advantage High
Hi h
Low
from globalization

Local Bulk of market share in most Global
players countries is captured by players

Multi- Implications for global strategy Globally
domestic integrated
operations operations

__________________________________

Industry Characteristics Matter

“The planned sale is in line with the strategy set out by Lars
p gy y
Olofsson, 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:
Globalization of Market Presence

__________________________________

Key Q
y Questions

1. Choice of markets?

2. Entry strategies?

3. Extent of local adaptation?

__________________________________

Wal-Mart: Ch i
W l M t Choice of Markets
fM k t

__________________________________

Prioritization Across Markets

Strategic Importance:
• Market size
• Growth rate
• Learning value (leading edge
customers, products, and/or
technologies)
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)

__________________________________

Wal-Mart: Entry Strategies
W l M t E t St t i

__________________________________

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

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 integration
with global network
• Risk of asymmetric learning by partner is low
• You
Y are short of capital
h t f it l
• 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 portfolio
Product features
Service features
Pricing
Advertising (theme vs. execution vs. media)
Branding & logo
Distribution channels
• In dynamic markets, revisit your decisions at least
once a year.

__________________________________

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

__________________________________

Global O ti i ti
Gl b l Optimization Of
Individual Value Chain Activities
Activity
Architecture
A

Capabilities A F A Coordination
At the Locations
th L ti Across L
A Locations
ti

A - Highly optimal
A F - Highly suboptimal

Choice of
Location(s)

__________________________________

Alternative Activity
Architectures

• Concentration in one location
• Differentiated but global centers of
excellence
• Regional 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

Value Proposition: Examples:

•Cost reduction • Production of Nike shoes
in Vietnam
•Access scarce talent • Microsoft: Speech
p
recognition lab in China
•Access locally
embedded knowledge • Texas Instruments:
Software development in
•Reduce risks India

__________________________________

Building World-Class
World Class
Capabilities At the Locations
June 2004
“The World's Hottest Computer Lab
Microsoft'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 the
true Asia,
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;
work h d to survive; then work even harder
k harder t i th k h d
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 from
Coordination 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.”” –
Annual Report 1998
A lR t

__________________________________

Globalization of the Corporate Mindset

__________________________________

“The culture of Coca‐Cola has moved from being an
“Th lt fC C l h df b i
American company doing business internationally to an
international company which happens to be
headquartered in Atlanta … We were global when global
q g g
wasn’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 Goizueta
CEO, Coca‐Cola
Beverage Digest, 1991

__________________________________

Globalization of Corporate
Identity and Mindset

Carlos Ghosn
CEO, Nissan & Renault
“There are no German or American
There
companies. There are only successful
or unsuccessful companies.”
Thomas Middlehoff
Chairman, Bertelsmann AG
Indra Nooyi The Wall Street Journal, 1998
CEO, PepsiCo

__________________________________

Are You A Global Company?

“International” Company:
International “Global” Company:
Global
• “Domestic” vs. • “HQ Country” seen as
“International” mindset one of many markets
• Foreign markets seen • All major geographies
as “add on” to domestic viewed as “domestic”
market markets
• Products and services • Products and services
are invented first for the could be invented in
domestic market and any geography
then ported/adapted for
• Market-centric rather
foreign markets
than product-centric

__________________________________

Globalizing the Young Venture:
Additional Considerations

__________________________________

Whether or Not
to Globalize – Early & Rapidly?
• Global mindset
Organizational • Past globalization experience
• Acquisition/alliance capabilities
Capability
• Global coordination capabilities
+

Early & Rapid • Need for local adaptation
• R&D intensity
• Scale economies
Globalization? • Need for local infrastructure
• Customer globalization + - • Regulatory barriers

Industry Industry
Imperatives Constraints

__________________________________

Whether or Not
to Globalize – Early & Rapidly?

72
# of countries
“entered” in
first 5 years

22

7
3

__________________________________

Additional Challenges
for 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 p
foreign locations
4. Limited or no experience in managing cross-
cultural conflicts
5. Direct and indirect costs of coordination
become unsustainable

__________________________________

Guidelines
for Young Globalizers

1. Understand the industry imperatives and
constraints thoroughly
2. Don’t let global expansion distract you f
from
maintaining dominant position in strategic markets
3. Leverage existing relationships
(customers, suppliers, partners, investors)
( li i )
4. Resist the temptation to globalize too many
activities at the same time add complexity in a
sequential rather than parallel manner
ti l th th ll l
5. Over-invest in integration capabilities (including
early formalization of processes)

__________________________________

Thank you!

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

__________________________________

Anil gupta presentation slides [compatibility mode]

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