The rush to go to “low cost producing economies” ( Read- BRIC+ Mexico) and to create a long term competitive advantage has proven to be short term and not really a sustainable competitive advantage for many branded product and service providers, especially in the developed , competitive economies.
The reality of availability of vast pool of “quality” engineers in India ,waiting to be leveraged has proven to be a myth- majority of graduate engineers from the Indian sub-continent , or those from China, dont come close to western benchmarks and thus cannot be deployed to extract the cost versus value advantage!
The answers perhaps lie in the successes coming out of the “low cost producing economies”- Embraer aircraft from Brazil has slowly but surely made a global mark as a successful maker of medium range, cost effective commercial jet aircraft, competing successfully against giants like Airbus and Boeing. So what can we learn from this example and many others like it?
Closer analysis reveals that the following factors may be crucial inputs for developing and deploying long term strategies for successfully transforming into a truly global enterprise
- Focus on people- Corporate are beginning to grapple with the harsh reality of skill gaps in their ranks today- and given the systemic faults in recruitment and engagement, skill gaps will only widen tomorrow. It may be prudent to invest in your existing work-force , as well as the work force of the future- a PPP (Public private partnership) model may be the long term strategic answer.
- Dont focus only on the low hanging fruit in developing markets- global players, enter , large, under exploited, under developed consumer markets, and immediately go for “quick wins”, by addressing the high end of these markets- and quickly get into a comfort zone, often “managing” (read- mis-representing the real potential of the market at the BoP) the expectations of the board and the shareholders. The real potential lies in the low income consumer groups in these markets; these markets are no doubt challenging to access and develop, but they offer tremendous, and real, long term business value to the serious global enterprise.
- Managing cost gaps- developing economies offer low cost upfront- but managing “hidden costs” in these economies is key to success- you need a mix of creative thinkers and number crunchers to successfully crack these markets.
- Prioritize and pin point- Old school of thought reeked of a herd mentality- “if my competitor is moving production to China, so should I”….gone are the days when that idea worked across the board. Critical evaluation of your markets and associated real costs ( including opportunity cost, sunk costs, economic costs etc) will often reveal that having your production in a “high cost” center, often provided strategic advantages, that far outweigh the obvious cost advantage of a low cost center.
- Innovation and innovating fast is the ONLY long term comparative and competitive advantage – the ability to copy successful western designs, and to make them cheaper and faster, was the innovation model of the Chinese economy- but over the last 5 years, the growth of real innovation in the Chinese economy has picked pace. Western enterprises, serious about going global will have to pick up their pace in the innovation space and go all out if they want to succeed.
- Embracing diversity in enterprises, markets, consumers and geographies- acceptance of the reality of the vast diversity of a global village will be key to your going global. This will commence from your enterprise, and then slowly move to regional operations and down the line. This will naturally foster a collaboration driven model where diversity in thoughts and ideas will create long term competitive advantage for the enterprise, which can then be leveraged by key decision makers to develop and deploy successful business strategy to take the enterprise, global.
- Think big , think fast and ACT fast- speed will be of the essence; if you as an enterprise, with global ambitions want to establish you markets in geographies across the globe, you will need to develop teams that are quickly able to roll out tried and tested GTM strategies from one geography to the next.