GLOBALITY: Competing with

Everyone from Everywhere for

Everything
October 2008

What do these companies have in common?

Globality presentation - Jim Hemerling BCG - October 08.ppt

All global leaders in their respective industries; all

from Rapidly Developing Economies
#1 batteries

#1 microwaves

#1 aluminum
engine castings

#1 marine containers

#1 iron ore & pellets

Globality presentation - Jim Hemerling BCG - October 08.ppt

#1 instant noodle &

flour processing

#1 piano
manufacturer

#1 baby
strollers

#1 small electric
engines

#1 polyester fiber

#1 LNG shipper

#1 regional jets

#1 third-party
engineering svcs

#1 nickel production

#1 gas producer

#1 oil producer

#1 ready-mix

Song Zenghuan Chairman and CEO, Goodbaby

Globality presentation - October 08.ppt

GLOBALITY
GLOBALITY is not a new or
different term for
globalization, its the name
for what comes next...

Globality presentation - Jim Hemerling BCG - October 08.ppt

A bigger world

"GLOBALISATION used to mean, by and large, that business

expanded from developed to emerging economies. Now it flows in
both directions, and increasingly also from one developing economy
to another. Business these days is all about "competing with
everyone from everywhere for everything", write the authors of
"Globality", a new book on this latest phase of globalisation by the
Boston Consulting Group (BCG)"

"...The age of globality is creating

huge opportunitiesas well as
threatsfor developed-world
multinationals and new champions
alike"

Source: Economist, 20 Sep

Globality presentation - Jim Hemerling BCG - October 08.ppt

Competing with Everyone from

Everywhere for Everything
Everyone

Everywhere

Everything
Resources
Resources
Talent
Talent
Ideas
Ideas
Customers
Customers
Distribution
Distribution
Partnerships
Partnerships
Technology
Technology
Capital
Capital

Globality presentation - Jim Hemerling BCG - October 08.ppt

This wave is more like a tsunami

Globality presentation - Jim Hemerling BCG - October 08.ppt

Why a tsunami?
Large
Large low-cost
low-cost labor
labor pools
pools and
and other
other resources
resources

Unique origins

Large
Large markets
markets
No
No 'legacy'
'legacy' assets
assets in
in high-cost
high-cost slow-growth
slow-growth countries
countries
Ideas,
Ideas, intellectual
intellectual property
property

Unprecedented
global access

Resources,
Resources, talent,
talent, capital
capital
Customers,
Customers, Markets
Markets
...
... all
all enabled
enabled by
by technology
technology and
and trade-friendly
trade-friendly policies
policies

Insatiable
hunger
Globality presentation - Jim Hemerling BCG - October 08.ppt

Food
Food
Success
Success
Recognition
Recognition
8

The seven struggles of globality

To survive, compete, and succeed in the age of globality,
every company will have to face and work its way through a
set of challenges and difficulties that we call the seven
struggles of globality. They are:
1.
2.
3.
4.
5.
6.
7.

Minding the cost gap

Growing people
Reaching deep into markets
Pinpointing
Thinking big, acting fast, going outside
Innovating with ingenuity
Embracing manyness

Globality presentation - Jim Hemerling BCG - October 08.ppt

1. Minding the cost gap

Globality presentation - Jim Hemerling BCG - October 08.ppt

10

1. Minding the cost gap a struggle for incumbents

Reasons Why foreign cos. with RDE Operations remain higher cost than local RDE-based competitors

l
Globa d
a
overhe n
tio
alloca

High-cost
expatriates

Pay taxes, or fail

to fully exploit
ways to avoid
them

Dont leverage
relationships
with government

Higher-cost
cities where
expatriates
like to live

Local employees
but do not follow
local work
practices

Subscale plants,
fragmented
procurement

l
Globa mental
n
enviro ety
af
and s ds
ar
stand

Dont
le
capita verage
l
too m like locals
u
sourc ch and
e
cost c from high
ountr
i es

Don't design
products locally
to leverage labor,
local materials,
and suppliers

Dont fully
leverage local and
regional incentives

Too much topdown R&D back

home in highcost locations

Global
compliance and
reporting
requirements

Don't get right vertical

integration or make
right make-versus-buy
decisions

Inves
ti
than n rather
acces
s R&
D

Continue to rely
on imported
materials and
components

Source: BCG research and analysis

Globality presentation - Jim Hemerling BCG - October 08.ppt

11

2. Growing people
Embraer builds own skilled,
local labor
Faced difficulty recruiting skilled talent
Many Brazilians lack education beyond high school
Foreign employees proved to have weak ties
Set up program to train specialized engineers
18-mth course using Embraer software and
equipment
100-150 extremely capable graduates obtain a
Masters degree per year
Program competitiveness enables Embraer to
select the best candidates
Training program has encouraged retention
Very attractive, especially to locals, as company
covers all expenses
Students motivated to further professional growth
with the company
<10% attrition of hired graduates

Globality presentation - Jim Hemerling BCG - October 08.ppt

12

3. Reaching deep into markets

Source: Company websites

Globality presentation - Jim Hemerling BCG - October 08.ppt

13

3. Reaching deep into markets the battle for

the RDE Mid Market
Typical MNC entry point
Global value
propositions,
technology, and
business models

Top
Segment

Middle Market

Low-end

Globality presentation - Jim

PODER.ppt
Hemerling BCG - October 08.ppt

Intense battle between global

companies moving down and
local companies moving up

Typical focus of local

competitors
Low cost local value
propositions, low-end
technology, and
business models
14

4. Pinpointing

Auto parts revenue growth

(Index)

Total market
2001

2002

2003

2004

2005

2006

Source: BCG Analysis; Bharat Forge annual reports; Bosch website

Globality presentation - Jim Hemerling BCG - October 08.ppt

15

5. Thinking big, acting fast, going outside

Value of cross-border M&A

Developing nations targeted by

developed nations

Developed nations targeted by

developing nations

US$ B

US$ B

200

200

150

150

100

100

50

50

0
1997

1999

2001

2003

2005

2007

1997

1999

2001

2003

2005

2007

1. Through Sep 10th

Source: Dealogic; AWSJ
Globality presentation - Jim Hemerling BCG - October 08.ppt

16

5. Thinking big, acting fast, going outside

New York
Finland
Sweden

The Netherlands
United Kingdom
Ireland
France
Switzerland
Spain

Norway

Panama
Houston

Jamaica
Puerto Rico
Dominican Republic

Mexico City
Nicaragua
Costa Rica
Colombia

Venezuela

Austria
Czech Republic

Latvia
Poland

Germany
Hungary
Croatia
Israel

Egypt

Bangladesh
United Arab Emirates

Taiwan
Philippines
Thailand
Malaysia
Singapore

Argentina

Globality presentation - Jim Hemerling BCG - October 08.ppt

17

6. Innovating with ingenuity

Globality presentation - Jim Hemerling BCG - October 08.ppt

18

Tata Group has become a global powerhouse

60%

# 1 Global player in international

voice (wholesale)
# 2 Global player in Tea products

38%
32%
24%

# 2 Global player in Soda Ash

27%

24%

% total revenue
36.0

2.5

3.2

4.7

2003

2004

2005

6.8

10.8

2006

2007

International revenue ($B)

Globality presentation - Jim Hemerling BCG - October 08.ppt

# 5 Global player in commercial

vehicles
# 6 Global player in Steel

2008

# 11 Global player in software

services

19

7. Embracing manyness
"Tata limits the number of interfaces as
they do not wish to overwhelm us"
Senior Manager of Jaguar-Land Rover
We work to embed ourselves in local
community wherever we go
Pat McGoldrick, CEO, Tata Technologies
We are an inverted pyramid unlike most
conglomerates driven by values rather
than strong central processes and
culture
Gopalakrishnan, Board Member

Globality presentation - Jim Hemerling BCG - October 08.ppt

20

Chuck Knight Chairman Emeritus Emerson

Electric Co.

Globality presentation - Jim Hemerling BCG - October 08.ppt

21

Emerson has moved a long way towards

achieving a globally advantaged business
% material sourced from
best-cost1 locations

% Hourly headcount in
best-cost locations

75

% salaried headcount in
best-cost locations

75

75

50
50

50

65

25

57

25

25
39

35

36
18

12
0

0
2000

45

50

2006

2010T

2000

2006

2010T

2000

2006

2010T

1. Emerson defines best-cost locations primarily as Eastern Europe, Asia ex-Japan, and Latin America
Source: BCG ValueScience, Company reports, BCG analysis
Globality presentation - Jim Hemerling BCG - October 08.ppt

22

Toward a global transformation

For most companies, competing in globality will entail more
than business-as-usual or incremental change; it will require
a global transformation. There are seven actions you can
take now:
Evaluate your competitive position
Shift mind-sets
Assess and align your people
Recognize your full set of opportunities
Define your future global shape
Encourage ingenuity
Lead your transformation from the front
Globality presentation - Jim Hemerling BCG - October 08.ppt

23

GLOBALITY Competing with Everyone from

Everywhere for Everything

Globality presentation - Jim Hemerling BCG - October 08.ppt

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