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The most competitive companies will bring together the best talents around the world and link them virtually with each other.
The forces of globalisation are reshaping our world, with ever-growing economic integration as well as increasing movement of people and knowledge across borders. Global trade accounts for around 30% of world GDPâ??four times its share in the early 1970s. Developing countries are an important part of this story. Their stock of inward foreign direct investment (FDI) totals 30% of their GDP, compared with 13% in 1980. Globally competitive transnational corporations have begun to emerge from China, India and Latin America. Haier (China), Tata Motors (India), Acer (Taiwan), Petrobras (Brazil), Cemex (Mexico) and the IT-services companies of India are examples. Thanks to them, the outward stock of FDI from developing countries has increased from 3% of GDP in 1980 to 10% today.
Globalisation and the information revolution have raised customer expectations. To satisfy them, companies will need to source capital where it is cheapest, produce where it is most cost-effective and sell where it is most profitable, without being constrained by national boundaries. This is the essence of globalisation. It leverages each nationâ??s competitive advantage to produce goods and services more efficiently. The development of a product or service might typically be split among countries, with experts in America defining the customer requirements; the British defining the product attributes; the Australians defining the technology architecture; the Indians doing the software development; the Germans or the Japanese doing the manufacturing; and the Taiwanese doing the packaging. This new business model will distribute high-quality jobs around the world and deepen international collaboration.
We have already seen the emergence of such a model in the IT-services industry in India, leveraging talent and infrastructure in different parts of the world. Development tasks are distributed across various locations. The work that can be done in value-for-money, talent-rich places such as India is maximised. At the same time, the effort required at the client site is minimised.
However, before this model becomes viable for all international trade, some significant challenges must be faced. Working among teams spread across various locations requires a process-driven approach and standardisation in key areas. Cross-cultural issues have to be handled well. Robust structures are needed to ensure that risks are tracked. Speed and responsiveness to business needs are essential, to allow continuous innovation. And effective knowledge management is at the core of an efficient collaboration.
For companies, the order of the day will be to look for talent wherever it is available and create international relay teams. These virtual teams will work in unison, for faster development and delivery. Harnessing such intellectual power will accelerate growth.
The companies that can overcome these challenges will delight their customers with the speed of their response and the value of their product or service. These firms will successfully blend the creativity of an Italian with the professionalism of an American and the focus of an Indian just to name a few nationalities. They can emerge from anywhere in the world, and they will be the true global contenders of 2005.
Source: Economist
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