Popular in Course
Popular in Business
This 10 page Class Notes was uploaded by Frankie O'Conner on Wednesday October 28, 2015. The Class Notes belongs to VSB1002 at Villanova University taught by JamesBorden in Fall. Since its upload, it has received 27 views. For similar materials see /class/230559/vsb1002-villanova-university in Business at Villanova University.
Reviews for BusinessDynamicsII
Report this Material
What is Karma?
Karma is the currency of StudySoup.
Date Created: 10/28/15
Tomorrow s Gl bal Giants Not the Usual Suspects by Pankai Ghemawat and Thomas Hout Changes in demand market power and business models are starting to produce surprising winners in big emerging markets 80 Harvard Busmess Revwew i November 2008 i hbrorg ESTERN COMPANIES39 INTEREST in emerging marketsespecially China and lndiaisreaching a new level of intensity Usual suspects such as IBM and Unilever of course are aggressively expanding their presence there but so are nippy newcomers like Orbea a 100 million Spanish manufacturer of ultralight carbon ber bikes At the same time developing countries are pulsating with companies that think of them selves as the next multinationals pushing outward from their home bases to establish global presence if not dominance What will happen when these two wave trains collide head on Which kind of multinational 7 established or emerging e is eventually going to prevail globally It depends So far the evidence strongly suggests that industry characteristics will sort the winners from the losers At least in China established MNCs continue to dominate knowledge and brandintensive businesses whereas Chinese companies hold an advantage in industries where production and logistics matter most and are successfully moving outside the home market But is industry always destiny Can a company break the pattern It can if it rides rapid customer growth in a large Guy Billout Tomorrow39s Global Giants Not the Usual Suspects market manages cost convergences or carves out new space by reworking the industry s value chain Our purpose here is to explore ways to take advantage of such opportunities We describe how some established multi nationals in production and logistics oriented businesses have started to beat localplayers at their own game and how some emergingmarket challengers are outperforming their supposedly more sophisticated competitors in knowl edge and brandintensive industries From their experiences we have drawn strategic and management lessons that will enable you to make the right de cisions for your company awhether as the CEO of an emerging multinational struggling to compete in a eld domi nated by giants or as the leader of an established multinational faced with apparently insurmountable disadvan tages in costs and local knowledge Exploiting Segment Evolution In emerging markets established multi nationals typically take the early lead in the highend consumer and high performance industrial segments and local companies do so in the lowend and lowperformance segments But as the economy develops both customers and competitors evolve Some customers want more or fewer features services b lPBEi l in emerging marketsWestern multinational corporations typically dominate RampDe or brandeintensive industries whereas local players usually Win in businesses vvhere logistics or production savvy is key Butsmartcompanies can break that pattern There are a number otvvays to overcome industry disadvantages For instance established MNCs can compete on costs or develop uncone ventional partnerships and aspiring MNCs can parlay core strengths when making overseas acquisitions or use local knowledge to create targeted offerings at home Both types of competitors face organizational challenges Estabe lished MNCs need to be more responsive to local customers Without losing the advantages of global knovvehovv Aspiring MNCs must compensate for their relative inexperience in crosseborder coore dination by tapping the expertise of giants evvhich can mean collaborate ing With them or even hiring avvay key personnel and was the rst search engine there to selfcensor its servers winning good will with the government Dangdang adapted to China s poor creditcard pay ment infrastructure by developing the best cashsettlement system Today US based sites are now in the unusual po sition of ghting to regain a leading position Knowledge of customers also helps you spot opportunities to bundle an cillary services and products in which you do have an advantage Perhaps the most striking example is provided by Suzlon Energy Asia s largest and the world s fthlarge st wind turbine maker Founded in 1995 in India Suzlon now competes internationally in a capital intensive technologically sophisticated industry Demand for wind energy is growing rapidly in India putting power generators under pressure to provide it fast Suzlon leverages its local knowl edge and networks to offer an endto end turnkey approach to selling It helps to acquire permits for wind farm land to deliver and maintain the farms and to sell the power generated Pro ts from these parts of the business can be higher than from the turbines them selves Despite Suzlon s current product problems its bundling strategy remains a huge plus But market evolution does not always bundles and price options and the number of segments up and down the market grows The MNC or local competitor that can quickly follow 7 or better anticipate ethis segment evolution will be well positioned to invade others territory Being close to the market can make up for product related weaknesses especially if local customers have unique consumption habits Google and eBay were early leaders in search and auction in China but have been overtaken by 10 cal sites Baidu and Taobao even though Google has more global content than Baidu and eBay screens counterfeit prod ucts better than Taobao Amazon similarly trails Dangdang in ecommerce China s governmental interference with some of the USbased websites plays a role in this reversal but local competitors have also reacted more quickly to changesin Chi nese internet behavior and have more successfully navigated the practical problems of delivering services in an emerging market Baidu noticed Chinese users comfort with a busier screen and a free advertisingdriven model It marketed it self cleverly by placing its logos on ATMs throughout China 82 Harvard Business ReVievv l November 2008 l hbrorg favor the local company Established MNCs can apply pressure by aggressively moving into new fastgrowing segments Otis Elevator the industry leader globally has dominated China s el evator business from the start of the highrise boom Elevators are a midte ch industry in which local contacts and ubiquitous service presence usually win the contract Such an environ ment should have favored Chinese companies but Otis arrived early and beat the locals in building out a service network Procter 8 Gamble Nokia and several Western banks are also extending distribution deep into China s countryside PampG is the country s largest advertiser has used lowercost local practices and materials and regards itself much like Toyota in the United States as a local player that can follow growth nearly anywhere PampG China now offers products de signed for different local market segmentse in laundry deter gents for example an advancedcountry formulation for the premium tier a modi ed product for the second economy tier which won t pay for water softeners and perfumes and a very basic product created from scratch for the third rural tier where it has set its sights on the traditional segment leader Diao Pai PampG China has been so successful because it can do things Chinese com petitors can t yet do It has the ability for example to send local product develop ers to global RampD facilities to work with experienced technical specialists on cre ating better segmentspeci c products for China Consequently PampG which is already the overall all segments com bined leader in China in nearly all of the 16 product categories it competes in will most likely continue to increase its presence in the country s lowertier segments where local companies have always held an advantage Established multinationals can also use technology and capital to accelerate segments growth The laborintensive television set business offers an example Over the decades it followed a classic pattern of competitive advantage mov ing from highcost to lowcost countries In recent years atscreen technology gave established multinationals a new highprice highperformance product segment as Chinese producers swarmed the market for costdriven conventional TV sets The likely scenario was that the Chinese would control conventional TVs and the Koreans and the Japanese would dominate at screens until the pace of technology advances leveled off at which point the Chinese would dominate both But Samsung Sharp and others surprised Chinese producers with vicious atscreen price competi tion which collapsed the demand for conventional TV sets much faster than anticipated bottoming out Chinese pro ts and accelerating the grth of the atscreen segment MNCs trying to adapt and innovate IDEA IN gt PRACTICE MULTINATIONAL COMPANIES FROM developed and emerging econo7 mies alike can gain a competitive advantage by mOVing outside their industry comfort zones When new segments emerge Established MNCs should proiect vvhere grovvth Will be and go there leverage their global capabilities and use price and brand to accelerate the shift of demand EXAMPLE By slashing prices on at screen TVs Samsung Sharp and others accelerated the segments growth and undercut demand for conventional TVs leaving Chinese producers high and dry Emerging7marlltet MNCs should explOit local knowledge ride home7 product strengths into niche seg7 ments overseas and av0id entering high7cost games they can39t Win EXAMPLE Ecommerce site Dang dang edged out Amazon in China by recognizing the country s poor cre ditcard payment infr astruc ture and developing the best cash settlement system When cost structures can converge Established MNCs should mirror the best local players39 cost structures as closely as possible hire local talent and internationalize senior manager positions E XAM PL E IBM and Accenture are ramping up operations in India and absconding with much of the local talent by paying more for it 7 simul tane ously lowering their own costs and raising those of Indian rivals Emerging7marlltet MNCs should antiCipate losing their cost advan7 tage over time build capabilities to compete at the next level up and use core operating strengths to acquire and turn around distressed businesses overseas EXAMPLE Chinese auto parts com any Wanxiang has used the mate rials design and factory manage ment knowhow it gained in China to acquire and revive a number of US producers When the value chain can be rearranged All MNCs should place parts of the value chain in their most advan7 tageous locations partner with speCialists and make new start7ups as multinational as possible in their operations and management E XAM PL E Bharti Airtel has built up the large st mobileservices oper a tion in Indiaby specializing in a small part of the value chain 7 cus tomer care and the regulatory interface 7 and outsourcing most everything e se in a big emerging market have to display tactical imagina tion to compensate for the local relationships native com panies naturally enjoy As a result a number of established companies have embarked on rather unexpected partnerships Ogilvy China broadened its understanding of consumer needs by working with the Communist Youth League of China an organization of 70 million people The Indianabased diesel engine maker Cummins faced a shortage of welltrained en gineers in India so it teamed up with Maharshi Karve Stree Shikshan Samstha7 a 112year old women s educational insti tution in Pune 7 to create a new women s engineering college It would be nice if there were a formula for exploiting seg ment evolution across the globe a way of rolling ou to other markets lessons learned in earlier wins However every upset of a multinational or a local company in its customary domain is fairly distinct A competitor can build crossborder networks share learning transfer experienced people and in centivize new departures but in fact the tactics used by Baidu hbrorg l November 2008 l Harvard Business ReVievv 83 Tomorrow39s Global Giants Not the Usual Suspects l6 8 RED Intensity ratro of R843 to sales Hui Industry Still Matters China39s Industry Landscape Although rt39s possrble to buck your rndustry never underestrmate rts power So far rndustry characterrstrcs have been very accurate predrctors otwhether domrnantglobal players are establrsheda or emergrngamarlltet multrnatronals as the data from Chrna rndrcate Establrshed MNCs lead rn busrnesses wrth a relatrvely hrgh percentage of revenues gorng to RampD and advertrsrng and Chrnese companres lead rn those wrth lower percentages orereeam w netwurkequrp Sernrmrrducturequrp Sernrcurrdurtur Plrutugraplrrc equlp Srlrcurrluurrdrre OChernrcal Oinergeneratruneqmp OAum C l l GDP 2 km W ODreeer engrrre 232ml 33 Oneaudaaer Arman AMetal autu part ASbrpprrrg currlarrrer rem mutur Cuntrart PC manufacture Wrecerver Nlalurapplrarrce Elevatur r Prarru Cement Steel ADaW OPerxurral curnputer Q Madem pharrna Mubrle phurre Packaged ultware Advanced currxurner electrurrrc 03pmquot apparel wee Indule Leadership Pallems Establrslred MNCS Atoear ChrrreseComparrres OverseasClrrrrese Comparrres O SegmentrDeperrderrt Perxurral care Carburrated beverage Arrearmyaeveradee r 4 ESTABLISHED MNCs lead rn rndustrres that are brand rntensrve and rn those wrth raprdly changrng technology and customerdemands That39s because these rndustrres reward new technology and product de velopment depth of knowledge about customers and drfferent applrcatrons brand manage ment and the abrlrty to manage across borders 7the strong surts of MNCs from developed countrres Apple and Sony for rnstance are at the top rn advanced consumer electronrcs Procteramp Gamble and L39Oreal rn personal care products John son amp Johnson and AstraZeneca rn modern pharmaceutrcals r Advertising Intensity 8 ratro of adv to sales ACHNESEOWNED COMPA NIES typrcally wrn rn rndustrres where a relatrvely hrgh propora tron of cost structure and caprtal goes to productron and logrstrcs and where product functronala rty desrgn and customer needs change less frequently These rndustrres reward low costs rn labor and materrals and the abrlrty to manage largeascale productron facrlrtres as well as local polrtrcalapower struca tures rareas where the Chrnese companres are strongest For example l larer and Rongsheng are leaders rn home applrances Baoshan and l lualrng rn coma modrty steel llengnru and ler rn darry products r Mine 0 WINNERS IN SEGMENTED BUSINESSES wrth no overall leaders depend largely on rndustry segment trarts Vollltsa wagen General Motors Honda and Toyota lead rn hrgheraend fully featured autos whereas Chrna39s Chery and Geely lead the lower end And desprte uawer39s rrsrng strength as a challenger rn hrghaperformance telecom and lP networllt equrpa ment Errcsson AlcatelaLucent and Crsco head up most cuttrnga edge segments whereas Chrnese companres control the more mature product areas Sources DTl39s ZEIEIE R80 Scoreboard UK SDlrorrfeld ampAssocrate3 ArtSales report lDrKs Clrrrra lrterature Search authors analysrs 84 Harvard Busrness Revrew l November 2008 l hbrorg PampG Otis and others were location speci c and grew from the management teams particular combinations of imagina tion and aggression Managing Convergences in Costs Cu I 39 market challenger 7 and this change is accelerating a race up the value ladder For example early Indian and Chinese suc cesses overseas by companies such as India s Bharat Forge in auto forgings and China s Haier in compact home appliances have usually come in industries where lowcost niche prod ucts differentiate a brand But established multinationals and other factors are eroding that cost advantage which in turn is pushing emerging players to respond with highervalue offer ings and better customer service and to move their production bases to other lowcost emerging markets The softwareservices industry provides a good example of this competitive dynamic The Indian company Tata Consul tancy Services TCS has always had a pretty clear pro t for mula inexpensive Englishspeaking software engineers disci 1 1 A z 39 1 394 1 investment In addition TCS has low defect rates and delivers services on budget But its engineers compensation has gone up 15 a year over the past three years other Asian companies are trying to steal its customers and it needs to understand its overseas customers better Further IBM and Accenture are aggressively building up their Indian operations hiring tens exporter observed several years ago that his company s RampD productivity was only onesixth of IBM s the benchmark s so he pushed Huawei s RampD up to 10 of sales a level at that time unheard of in China Another Chinese hightech player Lenovo saw this hurdle and deciding that the RampD route was too risky bought IBM s personal computer business But as Chinese and Indian companies evolve in this way they necessarily dilute their initial cost advantages At the same timeIndia s and China s openness to foreign investment allows incumbent multinationals to lower their own co st base s So as locals move up the ladder established MNCs can move down it Accenture and IBM aren t the only ones investing heavily in Indian operations Nokia Samsung PampG Siemens and others are localizing cost structuresmoving management decision making to China and India and bringing more opera tions to those countries Consider the cellphone business In 2004 Ningbo Bird looked ready to displace Motorola and Nokia the early lead ers in China Ningbo Bird had a low cost base a broader distri bution network and most of all designs that were hot among China s young smart set Nokia for which China is easily now the largest single market reacted aggressively across the board It developed new far more appealing cell phones for the Chi nese market and in order to sell them radically expanded its sales and distribution network and developed proprietary IT platforms to help guide eld sales and marketing And it ex panded its Chinese production facilities neutralizing any cost Cost advantage no longer automatically stays With the emergingmarket challenger and this change is accelerating a race up the value ladder of thousands of soughtafter Indians by paying more thereby lowering their own costs while raising those of TCS TCS and the other Indian leaders are responding by invest ing in US and European operations to get closer to and defend their r 39 39 39 L uci Lire worldThey are also acquiring new lowcost capacity in locations outside India such as Latin America and they have greatly expanded their education and training pipelines in India The speed of this process varies by industry In software ser vices and auto parts the Indians move to highervalue offerings has been fast in pharmaceuticals where technical and regula tory demands are severe and labor cost advantages are smaller it has been far slower Huge hurdles sometimes appear espe ciallyinhigh 39 39 39 indu trie Ren 7henu ei rhp CEO of Huawei China s leading telecom equipment producer and disadvantage against local competitors After two years Nokia was on top again and Ningbo Bird had fallen back The limits to a costarbitrage advantage are even clearer when an emergingmarket multinational tries to enter devel oped markets as the US experiences of Haier illustrate The company tried to follow up its success in compact refrigerators with entry into midsize refrigerators However these were too bulky to ship ef cientlyithe ocean freight costs wiped out China s cost advantage over US producersi so Haier built a factory in South Carolina to serve the US market It shipped into its US factory components from lowcost highquality sources all over the world such as compressors from Brazil and electrical parts from China The problem was that US produc ers could do the same thing 7 buy the bestvalue components from all over the world and ship them to the United States hbrorg l November 2008 l Harvard Busmess Revwew 85 Tomorrow39s Global Giants Not the Usual Suspects or Mexico for assembly So Haier gained no cost advan tage in the United States or Europe for any product made there which is why its US market share in midsize refrigerators is only 3 If Chinese and Indian companies are to compete with established MNCs glob ally they have to learn how to aggregate their knowl edge about designing inno vating and managing across borders Even the most prof itable emerging multination als to date have not worked this out and indeed Chinese companies are especially challenged here because of a lack of experienced inter national executives That said there are lesserknown fo cused product companies 7 such as CIMC in marine shipping containers Wanxiang in auto parts and Pearl River Piano 7that followed up success in exportng from China by acquiring and reviving foreign companies using materials design and factory management knowhow gained in China Wanxiang has rolled up a num ber of small troubled Midwestern auto parts producers in the United States and rationalized production among them It now has equity positions in more than 30 companies worldwide CIMC turned around a maker of truck trailers in Indiana Pearl River purchased a faded upmarket German piano brand and retooled it These are unglamorous small steps up the ladder taken by leveraging managem ent and operating strengths The strategy of going abroad and seeking turnaround opportuni ties differentiated these companies more than their Chinese industries allowed Reworking the Value Chain A growing number of emerging players are building global leadership positions in their industries by creating focused vertical businesses They are spotting opportunities to pull apart and recon gure existing value chains in order to de ploy capital more ef ciently Rather than dominate a well de ned industry they concentrate their efforts on the gaps and pockets around the edges and across the boundaries often collaborating with instead of competing against established multinationals The differentiation and pro t potential of these businessesvaries 7 but again many do offer potential for signi cant value that savvy companies can parlay into global leadership 86 Harvard Busmess Rewew l November 2008 l hbrorg Some companies simply specialize in a limited part of the value chain and out source the rest That is how Bharti Airtel has built up the largest mobileservices operation in India 7 and the fastestgrowing one in the world in terms of subscrib ers 7 despite initially trailing betterfunded competitors Its recipe radical outsourc ing of IT services to IBM and of the development and management of its telecom network to Ericsson Nokia and Siemens These changes freed up Bharti s capital made its cost structure much more variable and allowed the company to target pric ing levels of 15 to 2 cents per minute versus levels as high as 20 cents per minute in ad vanced markets all of which fueled rapid market grth and penetration Bharti has used the capabilities it concentrates on 7 customer care and the regulatory interface 7 to enter busi nesses such as retailing where it is WalMart s local partner There are manufacturing examples as well Chinabased producers assemble most of the world s laptop and desktop computers and nearly all of that work is done by Taiwanese owned and managed factories 7 for instance Hon Hai Quanta and Asustek These engineering and manufacturing specialists are contracted by Dell HewlettPackard and other multina tionals Their business model is to do assembly and test work in China build huge scale Hon Hai is the biggest of these specialists with global revenues of 51 billion and net earnings of 23 billion and a Shenzhen campus that employs 270000 people and stick to a narrow valueadd focus adding less than 5 of the product s total cost These specialists also manu facture cell phones and other electronic consumer goods Specialization is a powerful tool It confers a competitive advantage over local companies For example the transplan tation of Taiwanese contract producers into China has made it more dif cult for local Chinese companies to scale up and progress technically The rise of specialists has also helped level the playing eld for established multinationals compet ing against emerging ones The incumbents can focus their differentiation efforts on their businesses front end mar keting design and on their underlying platforms systems customerconnected processes7areas where they already hold advantages The backdoor risk for established MNCs is that specialists eventually broaden their business and become effective competitors of their customers Acer in the PC busi ness for instance started as a contract manufacturer and is now a major global brand Some companies have differentiated by piecing together and managing value chains across developedworld compa nies from all sorts of industries seeking to enter big emerging markets Li 8 Fung the world s largest contract supplychain management rm manages frontend design marketing sales and corporate governance in Hong Kong and production in China Li 8 Fung can for example source product anywhere in the world for Western retailers that simply provide the brand or it can go further and manage the brand for the client as it does for Levi Strauss in Asia Management Challenges Established MNCs and emerging local players bring different management strengths and vulnerabilities to their markets Established MNCs work hard at coordinating actions and relieving tensions between the center and country organi zations They try out new management structures and ways of being more responsive to local customers without losing the advantages of global knowhow Their biggest shortterm vulnerabilities are slower movement and higher costs iboth company overhead and local operating costs 7 than local play ers have Longer term they face an even more dangerous set of trajectories A survey by the Boston Consulting Group con ducted before the recent slowdown in the West found that emerging markets accounted for 35 of the established MNCs anticipated growth over the next ve years but for only 15 of their employees and 75 of their top 200 managers As if this arithmetic weren t bad enough rapid turnover adds to the problems as do the dif culties of freeing up senior managers from other parts of the organization to work in economies that in the foreseeable future are likely to become as impor tant as the home market What management structures and mechanisms will help MNCs be r 39 w 39 I 39 39 been describing PampG in particular has worked effectively on the problem of decisionmakmg con icts between global product groups and local countryregion marketing and sales organizations Its approach can be summed up as follows I Decision makers are clearly identi ed for most types of situations IAll lines of the organization receive the same information on all aspects of the business I Senior people are colocated each product group has an of ce in each region I Explicit tiebreaking rules usually giving the global product unit the nal say prevent protracted impasses I In order to get promoted an executive must have worked for both a product group and a geographical organization Strategic alliances are an important factor in any com pany s global growth When deciding whom to partner uu We Ildve with and how smart companies focus on creating value of several kinds not just pro ts Cummins a strong player in both China and India enters into 5050 joint ventures with respected local manufacturers or large customers ifactories that become product sources across Cummins s global sales network in 190 countries Cummins is less interested in full management control than in nding good partners with the same values and longterm goals Its objectives in joint ven turing include a strong baseline engine demand from the partner a company that can help implement Cummins s ad vanced technologies a source of good management person nel and strong local standing including a network of proven suppliers Newer developedworld companies that do not have to contend with an organizational legacy are nding it easier to create and manage global value chains One example is WiChorus based in San Jose California and Hyderabad India The company wants to bring broadband access to the Indian countryside which lacks landline telephone cables by build ing simpli ed WiMaxbased systems of transmitters and base stations for cell phones It does its bleedingedge upstream de velopment work and sourcing of hightech components in the United States where the best engineers suppliers and intel lectual property protection are it carries out the downstream more routine network engineering sales and customer sup port mctions in India Starting out as a binational corpora tion has spared WiChorus the logistical and cultural strains older multinationals can have in moving activities from old to new locations Of course there is no magic solution to the problem of managing global enterprises There will always be coordi nation issues and con icts among product global customer and regional lines of the organization And the more people you insert into the system to lubricate it like the colocated product group people in the regions the more coordination and communication issues you introduce But the best MNCs continue to learn like PampG has that if they want to succeed beyond their usual segment strengths and if they want to de fend against challengers climbing the value ladder they need tighterknit fasterresponding global management mecha nisms and decisionmaking capabilities Newer multinationals from emerging markets tend to have a reverse pro le They have lower costs and are more fully adapted to the emerging market and the products around which they build an early global presence are the same ones that won them local leadership Their management structures are simpler in part because the founder is usually still ac tive and a powerful force in decision making This is true of almost all new multinationals in China and India Another key strength of many of these companiesiTCS Hon Hai Pearl River Piano and others 7 is their ability to manage very large workforces in one location something most Western companies gave up on decades ago They excel at organizing hbrorg l November 2008 l Harvard Busmess Revtew 87 Tomorrow39s Global Giants Not the Usual Suspects workers into cells and designing standard work ows and feed back Their overhead costs are low Their biggest vulnerability compared with incumbent MNCs is inexperience in coordination and con ict manage ment and alack ofdenth in 1 1 1 and channel knowledge A company making a narrow pro duct line in China and exporting to a few big customers in the United States doesn t need to change its management structure much But when it sets its sights higher 7 more products more services stronger global brand identityiit needs more cross overseas sales is up from less than 1 billion six years ago Sud denly the company has 12 RampD centers and more than 100 sales branches around the world This explosive growth com bined with a shift in sales emphasis from third to rstworld telecom companies as customers has introduced a range of new practices into Huawei s traditional topdown military style management They include less centralized decision making greater emphasis on leadership potential in selecting overseas managers more explicit training of overseas hires about Huawei s distinctive culture lest it be lost and earlier Some aspiring MNCs are getting smart about how to move into the global marketplace This often means experimenting with new management mechanisms and policies border coordination mechanisms and more learning ports in its organization Chinese companies nd this challenging be cause of the paucity of role models among older managers and the high turnover of managers in the current gold rush The turnover problem is a big one As one executive in China puts it Chinese organizations learn fast but also can forget fast Turnover is a signi cant problem in India as well particularly in hot sectors like information technology And as emerging players grow they soon face the same problems established MNCs do international coordination diminish ing usefulness of the center for deliverng products or services loss of product uniqueness and the need to tap more pools of talent around the world But as we ve seen some aspiring MNCs are getting smart about how to move into the global marketplace and this often means experimenting with new management mecha nisms and policies For example as Indian softwareservices companies US and European operations take on bigger more customized assignments they encounter longer sales cycles more complex customer requirements and greater pro t risks due to mispricing So their control systems are tracking more project characteristics and more performance and risk measures than before Because much of the actual work is done in India or elsewhere far from the project man ager at the client site mechanisms to coordinate and relieve tension in this relationship are critical One of the most dis tinctive of these companies Cognizant with most operations in India though it s headquartered in New Jersey closer to its clients solves this by putting two in a box 7 that is by mea suring performance and calculating payment for both the offsite workers and onsite client managers with the same formula Perhaps the Chinese company most dramatically stressed by globalization is Huawei whose estimated 115 billion in 88 Harvard Busmess Revtew l November 2008 l hbrorg identi cation of promising young engineers for the manage ment track Management shapes globalization and thereafter globalization shapes management A relentless focus on upgrading a willingness to engage in radical experimentation an outward focus and a coopetitive mindset that recognizes possibilities for co operation with MNCs while also imitating them tapping into their expertise by hiring away key personnel and even on occasion attacking them 7 these are all enablers for the aspiring MNC Competing for global leadership requires that companies learn to navigate in unfamiliar waters For incumbents the emerging MNCs represent the threat of displacement For the emerging challengers globalizing is new and risky But the greater openness today of both developed and de veloping economies to foreign trade and investinth means that the best opportunities for growth in sales and pro ts are increasingly available to companies of all origins Further ongoing changes in the location of market growth the shape of global supply chains and the emergence of new global business models suggest that the conditions are right for ag gressive global players to move outside their comfort zones Industry may have been destiny thus far but it is unlikely to remain so 6 Pankai Ghem awat is a professor at ESE Business School in Barcelona He is the author of Rede ning Global Strategy Crossing Borders in a World Where Differences Still Matter Harva rd Business Press 2007 Thom as Hout hyimbusiness hkuhk is a visi ti ng professor at the University ofHong Kong s School ofBusiness and lives in Boston He wasformerly a part7 ner at the Boston Consulting Group Reprint R08ll E To order see page l39 Ll nu Pun n u L i J grani permission u access or H An uni quot 39 39 LI through 39 quot 39 transmission 4 quot 439 usage contact permissionshbspharvard2du