Globalization: Are We There Yet? Do You Have a Real Strategy Yet?

Last Updated Jan 20, 2011 7:52 AM EST

What's the biggest story in business today? Here's a hint: It was the biggest story five years ago. And five years before that. And 20 years before that. And it will be the biggest story for the next 10 years and probably for 20.

If you're still guessing, the answer is globalization--and, in particular, globalization interacting with information technology. Theodore Levitt's famous article, "The Globalization of Markets," was published in 1983, the year Tokyo Disneyland opened and Lotus 1-2-3 was released for IBM computers. In it, Levitt wrote, "A powerful force drives the world toward a converging commonality, and that force is technology." He went on, "The earth is round, but for most purposes it's sensible to treat it as flat."

A decade later, I wrote an article in Fortune called "Welcome to the Revolution" that called globalization one of four mutually reinforcing trends--the spread of information technology being another--changing the world of business. "They cause one another and affect one another," I wrote; like logs on a fire, each causes the others to burn more brightly.

In 2005, Tom Friedman published The World Is Flat. At the time, he had not read Ted Levitt's article; he reinvented the phrase himself. He also rediscovered the virtuous (or vicious, depending on your viewpoint) circle between globalization and the spread of technology, arguing that "flatteners" like workflow software and the Web hadn't begun interacting with other forces like supply chains and markets till about 2000.

In a few more years, I am sure, someone else will make the same discovery: IT-enabled globalization is a big deal. It will feel new then, too, because big stories are like that. They're so enormous that we take them for granted and get caught up in the relative minutiae of daily headlines. Back in 1993, I remember wondering naively whether globalization was such old hat that there might be nothing new to say about it.

So here are some things you might know, but might not really know (with thanks to my colleague Paolo Pigorini for many of the items on the list):
  • Companies from emerging / high-growth-markets acquired 54 U.S. companies and made 243 acquisitions within developed economies in only the first half of 2010
  • Embraer of Brazil is the third-largest civil airline maker in the world and the market leader in regional jets
  • The world's largest consumer electronics maker is a Chinese company called Foxconn, with over $60 billion in revenues and almost one million workers. Among its products is the iPhone
  • The world's largest steel producing company is Arcelor Mittal ($65BN revenues), which began as an Indian company, Mittal Steel, and is run by an Indian management team
  • British icons Jaguar and Land Rover are now owned by an Indian automotive company, Tata Motors, which acquired them from Ford in 2008. Volvo, once advertised as "tougher than a Swedish blonde" -a phrase Don Draper would have loved-is owned by a Chinese company. Chrysler is owned by an Italian company
  • In 2009, 13.8 million motor vehicles were manufactured in China, which thus passed Japan as the largest auto-making country in the world. The same year, China also passed the US to become the world's largest market for cars
  • China's biggest passenger car maker is General Motors, followed closely by Volkswagen
  • China's civil airliner market is growing almost twice as fast as the rest of the world's and will likely require 4,000+ new commercial aircraft valued at $480 billion over the next 20 years
  • Four of the last five CEOS of that American institution, The Coca-Cola Company, have been non-American, including the current one, Muhtar Kent
And, of course, the beat goes on.

Now here's what strikes me as downright bizarre: Given all this, a remarkably high number of companies lack a strategic theory of globalization.

By "strategic theory," I mean:
  • A comprehensive, fact-based view of how their industry will change as a result of inexorable logic of technology and globalization. Will it consolidate, fragment, converge, die, explode?
  • A globally sophisticated view of competition. (Quick: Name the five largest banks, by assets, in Europe)
  • A view of the power of competitive forces. Will the industry become more profitable or less?
  • A clear and differentiated strategic intent--that is, knowing how you will make your share of those profits (ideally a disproportionate one)
  • An crisply articulated sense of the half-dozen capabilities at which the company must be world-class in order to realize its intent
  • A global operating model that--though it may creak and groan here and there--works well, keeps working better, and allows the company to make economically appropriate trade-offs between corporate and local initiatives
  • A global controls framework, talent management process, knowledge management capability, and information system.
"We're working on it," I hear people say. "It's complicated." "It takes time." True enough. But this story has been going on for three decades or more. How much more time do you need? How much more time will competitors let you have?

Photo courtesy flickr user Robert Couse-Baker

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