Winning in the global economy : a business leader's guide on leveraging global value webs and enhancing global index

257 Pages·2010·6.808 MB·English

by  Raj Seksaria, Sanjiva Dubey

abusinessleader’s guide on leveraging
global value webs and enhancing global index
WINNING
IN THE
GLOBAL ECONOMY

abusinessleader’s guide on leveraging
global value webs and enhancing global index
WINNING
IN THE
GLOBAL ECONOMY
RAJ SEKSARIA
SANJIVA DUBEY
Tata McGraw Hill Education Private Limited
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To
Today’s unconventional entrepreneurs and ...
tomorrow’s global business leaders

Preface
While everyone yearns to win, we know from the Olympics that
only a few who can pull further and faster than others will have an
opportunity to stand on the winning podium. So too, it is in business.
Those who have superior strategies and can execute them with discipline
are the ones to distance themselves from competition. In this book, we
attempt to provide these winning strategies and approaches that any
company of any size can use to chart a course towards success.
The history of winning against odds would have remained uneventful
and uninteresting if the first major economic crisis of this millennium
hadn’t descended upon us in 2008–09 and slapped almost all nations
and businesses hard enough to wake them up from their deep slumber
of complacence. What had gone wrong, and what is the new winning
formula in this brutal global economy? Why did world leaders like AIG,
GM, Nortel, Lehman Brothers and many others bungle and make a
beeline to file for bankruptcy? While one can blame several factors, such as
sub-prime lending, inflating balance sheets, and sheer manipulation by the
Wall Street, no single country or company has the solution to this crisis.
The crisis has resulted in global economic slowdown indicating that both
the solution to the crisis, as well as, the key to sustainable economic growth
has global dimensions.
However, the slowdown and the recovery process is not merely a part
of the usual predictive cycle of troughs and peaks that businesses and
economies undergo. The solution is no longer the traditional one. This
time, fundamental shifts are occurring in production and consumption
at the global level. Leaders of the affected G20 nations are now holding
regular summits to find ways to overcome the crisis and reinvigorate the
global economy and work in a concerted manner to that effect.
National borders are beginning to become meaningless in a world
that is increasingly based on global trade. Goods and services can now
be produced anywhere and delivered globally. What matters now is the
viii Preface
ability to produce them at the lowest cost, using the vast global resources.
As a result, large populations and pulsating economies across the world,
such as Brazil, Russia, India and China are witnessing upliftment in global
consumption and economic resilience despite the slowdown.
The book is about this very quest and presents to its readers the
unique and different pathways of Winning in the Global Economy.
The recent events, be it economic turmoil and the ensuing crisis of
consumer confidence and collapse of corporate giants, or even the spread
of pandemics like swine flu, point to the fact that the world has traveled
beyond historical concepts of managing economies and that geographical
boundaries are no longer relevant.
We begin with a broad inquiry into how globalization has led
to the emergence of a new world order in Chapter 1. It deals with the
causes and effects of the global imbalance in economic development and
argues that a new model of competition in the global economy has to be
adopted. Hence, a comprehensive new Global Index to measure business
performance globally is laid out. It also discusses how emerging global
value webs should and can be carefully engineered for success in the global
economy. The chapter outlines the key factors for winning in the global
economy and sets the stage for a detailed treatment of relevant themes in
subsequent chapters.
Chapter 2 describes how a new world order is emerging because of
dramatic shifts in markets, human resources and technologies that enable
the access to and harnessing of global resources as easily as the domestic
resources. As we gaze in our ‘crystal ball’, many things become apparent
with a startling revelation—no company can stay complacent if it has to
survive and excel in this emerging global order. In the global marketplace,
companies will need to respond in ways different from those in the past.
They will have to pay increasing attention to the localization of goods,
and leverage global human and natural resource pools. This will all be
a welcome shift whereby the world will be less and less economically
and digitally divided, creating opportunities for cross-country business
operations on an unprecedented scale across the world.
One of the key themes of globalization is the ability of the firm to
configure a superior value proposition by sourcing capability globally from
sources that provide it at the best value in terms of functionality, quality
and price. This theme is dealt with in detail in Chapter 3—Emergent Global
Models. In effect, the value chain the company has been used to so far,
now becomes an industry-level or global ecosystem-level value web. Just
as a spider has numerous paths connecting one place to another on its
web, so can a company traverse the value web, connecting with partners
and suppliers in different locations and customizing superior value of its
Preface ix
products and/or services for its customers in diverse marketplaces. Clearly,
one of the key enablers for such global value webs is ITEC (IT, Electronics
and Communications). ITEC allows companies to interface with diverse
sources of production partners, suppliers and consumer markets—which
otherwise would have been isolated islands—anywhere quickly. This also
enables them to dynamically configure capability by altering and shifting
capability providers as new ones emerge with better value propositions.
Chapter 4 is the core of the book and describes in detail how to measure
and enhance the Global Index of corporations and firms for success in the
global economy. Global Index is our simple and effective formula to deal
with the complex recipe of winning. This chapter deals with four primary
causal factors that companies need to focus on while defining their winning
formula.
When we know what our current Global Index is, and where the
deficiencies are, the next natural question is what should we do to remedy
them?Chapter 5 answers this question by explaining how firms can create
and sustain Global Value Webs that leads to the emergence of a value mosaic
and new global models and strategies for winning in the global economy.
In this chapter, we advise our readers to think beyond physical clusters and
recommend path-breaking strategies of globally dispersing national as well
as industry-level value webs.
Chapter 6—Technologies for the Global Age describes technology as one
of the prime tools for winning in the global economy. ITEC innovations
can be disruptive and constructive at the same time. Hence, we examine
how value can be created, particularly by increasing the information
content or ‘informating’ the business. This chapter discusses the theme of
optimizing the use of global resources through effective leverage of ITEC.
The next milestone of our winning pathways is dealt with in Chapter7
that dwells on the prominent vehicle of the new business operations
model, namely Strategic Sourcing and Partnering that can change business
models everywhere. Proper sourcing can provide a strategic advantage
since it allows a company to focus on its core capabilities and leverage
other essential resources pertaining to production and expertise from
other companies—in other words, something that it might not have the
expertise or the ability to invest in. While it can act as a force multiplier,
it must be done carefully since the products and services that are sourced
are also available to a competitor from the very same suppliers. Strategic
partnering all the way up to a joint venture are additional levers through
which key capabilities can be protected to ensure sustainable competitive
advantage. While sourcing, companies must ensure that they, in no way,
compromise the products, services, quality and customer care the company
may be known for.
x Preface
Chapter 8 details the principle of Dynamic Value Integration. This
chapter discusses how any firm, small or a large multinational, can extend
its Global Index footprint along eight strategic vectors by simultaneously
applying various strategies that include leveraging human resources,
technologies, partnerships and localization to build a unique competitive
position which gives it both global and local capabilities. With such a
positioning, a company can harness global resources to meet specific needs
of local markets and can shift resources dynamically to meet requirements
of price, response time and other unique requirements, such as localization
or local content in each market the company operates in, while maintaining
the leadership position in terms of product offerings, quality and value.
Chapter 9—Structuring for Global Success defines the strategic
structuring or processes for a company in terms of what they should manage
centrally versus what they need to have at the local level and what they can
source through partners. The specific industry dynamics and the position
of competitors define the key processes and how they should be structured
for optimal performance. This chapter details several processes that are
required to produce goods and services in a typical company and shows how
best to place them strategically so that the company can be responsive to
the global and local requirements, but at the same time maintain flexibility
and maneuverability and simultaneously leverage both economies of scale
and scope and valuable expertise of key partners. By a careful attention to
the prescriptions described herein, companies can forever put behind them
the issues of unstructured, static or sub-optimal processes and continue to
be at the cutting-edge of ‘dynamic global structuring’ that leverages all the
strategic levers and leaves behind all other companies.
Chapter 10—Leadership in a Multi-polar World provides the cementing
glue for all the principles, practices, processes and underlying organizational
structures meant to ensure that all parts of an organization operate
harmoniously to produce a beautiful symphony of quality products and
services to be delivered locally at the right prices wherever and whenever
customers demand them globally.
Leadership in the global economy has undergone more strains than
any other element of the management system and much of the prevalent
theories are unable to accommodate the changing scenario with the
emergence of new markets and new team compositions sourced from
global pools. Addressing this issue of the much-needed turnaround in
leadership roles, this chapter lays down the new action plan for CXOs of
global enterprises.
Certainly, in order to drive the desired performance, companies must
measure the right parameters for running business operations and take
quick corrective actions. Chapter 11—Global Management System provides