Globalisation's offspring - Poetic justice for the wests corps?

[Marco Polo]

I personally believe that it is banking to blame for globalism primarily. it is banks that own the whole damn lot! which buildings are always the largest?

http://www.economist.com/printedition/displayStory.cfm?story_id=8960441&fsrc=RSS

Multinationals
Globalisation's offspring

Apr 4th 2007
From The Economist print edition
How the new multinationals are remaking the old


http://www.economist.com/images/20070407/1407LD1.jpg
FOR as long as multinational companies have existed—and some historians trace them back to banking under the Knights Templar in 1135—they have been derided by their critics as rapacious rich-world beasts. If there was ever any truth to that accusation, it is fast disappearing. While globalisation has opened new markets to rich-world companies, it has also given birth to a pack of fast-moving, sharp-toothed new multinationals that is emerging from the poor world.
Indian and Chinese firms are now starting to give their rich-world rivals a run for their money. So far this year, Indian firms, led by Hindalco and Tata Steel, have bought some 34 foreign companies for a combined $10.7 billion. Indian IT-services companies such as Infosys, Tata Consultancy Services and Wipro are putting the fear of God into the old guard, including Accenture and even mighty IBM (see article (http://www.economist.com/printedition/displaystory.cfm?story_id=8956676)). Big Blue sold its personal-computer business to a Chinese multinational, Lenovo, which is now starting to get its act together. PetroChina has become a force in Africa, including, controversially, Sudan. Brazilian and Russian multinationals are also starting to make their mark. The Russians have outdone the Indians this year, splashing $11.4 billion abroad, and are now in the running to buy Alitalia, Italy's state airline (see article (http://www.economist.com/printedition/displaystory.cfm?story_id=8960619)).
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These are very early days, of course. India's Ranbaxy is still minute compared with a branded-drugs maker like Pfizer; China's Haier, a maker of white goods, is a minnow next to Whirlpool's whale. But the new multinationals are bent on the course taken by their counterparts in Japan in the 1980s and South Korea in the 1990s. Just as Toyota and Samsung eventually obliged western multinationals to rethink how to make cars and consumer electronics, so today's young thrusters threaten the veterans wherever they are complacent.
The newcomers have some big advantages over the old firms. They are unencumbered by the accumulated legacies of their rivals. Infosys rightly sees itself as more agile than IBM, because when it makes a decision it does not have to weigh the opinions of thousands of highly paid careerists in Armonk, New York. That, in turn, can make a difference in the scramble for talent. Western multinationals often find that the best local people leave for a local rival as soon as they have been trained, because the prospects of rising to the top can seem better at the local firm.
First, count your blessings

But the newcomers' advantages are not overwhelming. Take the difference in company ethics, for instance, which worries plenty of rich-world managers. They fear that they will engage in a race to the bottom with rivals unencumbered by the fine feelings of shareholders and domestic customers, and so are bound to lose. Yet the evidence is that companies harmonise up, not down. In developing countries (never mind what the NGOs say) multinationals tend to spread better working practices and environmental conditions; but when emerging-country multinationals operate in rich countries they tend to adopt local mores. So as those companies globalise, the differences are likely to narrow.
Nor is cost as big an advantage to emerging-country multinationals as it might seem. They compete against the old guard on value for money, which depends on both price and quality. A firm like Tata Steel, from low-cost India, would never have bought expensive, Anglo-Dutch Corus were it not for its expertise in making fancy steel.
This points to an enduring source of advantage for the wealthy companies under attack. A world that is not governed by cost alone suits them, because they already possess a formidable array of skills, such as managing relations with customers, polishing brands, building up know-how and fostering innovation.
The world is bumpy

The question is how to make these count. Sam Palmisano, IBM's boss, foresees nothing less than the redesign of the multinational company. In his scheme, multinationals began when 19th-century firms set up sales offices abroad for goods shipped from factories at home. Firms later created smaller “Mini Me” versions of the parent company across the world. Now Mr Palmisano wants to piece together worldwide operations, putting different activities wherever they are done best, paying no heed to arbitrary geographical boundaries. That is why, for example, IBM now has over 50,000 employees in India and ambitious plans for further expansion there. Even as India has become the company's second-biggest operation outside America, it has moved the head of procurement from New York to Shenzen in China.
As Mr Palmisano readily concedes, this will be the work of at least a generation. Furthermore, rich-country multinationals may struggle to shed nationalistic cultures. IBM is even now trying to wash the starch out of its white-shirted management style. But today, General Electric alone seems able to train enough of its recruits to think as GE people first and Indians, Chinese or Americans second. Lenovo's decision to appoint an American, William Amelio, as its Singapore-based chief executive, under a Chinese chairman, is a hint that some newcomers already understand the way things are going.
IBM's approach is possible only because globalisation is flourishing. Many of the barriers that stopped cross-border commerce have fallen. And yet, Mr Palmisano's idea also depends on the fact that the terrain remains decidedly bumpy. Increasingly, success for a multinational will depend on correctly spotting which places best suit which of the firm's activities. Make the wrong bets and the world's bumps will work against you. And now that judgment, rather than tariff barriers, determines location, picking the right place to invest becomes both harder and more important.
Nobody said that coping with a new brood of competitors was going to be easy. Some of today's established multinational companies will not be up to the task. But others will emerge from the encounter stronger than ever. And consumers, wherever they are, will gain from the contest.

[Neverwinter]

Source (http://www.iht.com/articles/2007/04/22/news/econview.php)
International Herald Tribune
New wave of multinationals poses competitive threat to U.S.
By William J. Holstein
Sunday, April 22, 2007

NEW YORK: A new wave of foreign competitive pressure is beginning to ripple through the U.S. economy, from companies in emerging markets like Brazil, Russia, India and China. These companies are seeking to become world-spanning multinationals - just as Samsung Electronics emerged from South Korea and Toyota sprang from Japan in earlier phases of globalization.

From Brazil, Embraer has become a big supplier of regional jets in the airline industry. Other Brazilian companies, like Braskem, Embraco and Natura, are also expanding in a variety of global markets. Russian companies like Gazprom, Lukoil and Rusal are using Russia's natural resources to leap into the United States and other countries. India is producing powerhouses in technology services like Wipro, Infosys Technologies and Tata Consultancy Services, and global competitors in manufacturing and pharmaceuticals. The world's largest steel company is now controlled by Lakshmi Mittal, an Indian living in Europe.

China may be the largest single source of new multinationals. Aside from Lenovo, which bought IBM's personal computer division, Haier is emerging in appliances, Huawei Technologies is competing against Cisco Systems to sell telecommunications equipment around the world and the Pearl River Piano Group is carving out a huge share of the piano market.

The emergence of these new multinationals is part of "the biggest shift in the global economy since the Industrial Revolution of the 18th century," says Antoine van Agtmael, the author of a new book, "The Emerging Markets Century: How a New Breed of World-Class Companies is Overtaking the World."

"We are seeing a rebalancing of the global economy back to where it was before the Industrial Revolution, when China and India were major powers in the world."

How is it that so many companies that once would have been content to operate in their home markets have so rapidly gained the expertise to manage complex multinational operations? One explanation is the new ease of global communication and air travel. Another is that the necessary expertise is available for sale.

"These companies are hiring people from anywhere in the world," said Peter Williamson, a professor at Insead, the business school, and co-author of "Dragons at Your Door: How Chinese Cost Innovation Is Disrupting Global Competition."

"They're engaging Ogilvy & Mather to do their advertising. They're using McKinsey for their strategy," he said. "There's been a very big shift in the ability to obtain knowledge that once would have been very slow to build up."

Estimates of the number of these new multinationals vary considerably. Van Agtmael's book identifies 25 of them. A study from the Boston Consulting Group last year named 100. Accenture, the consulting firm, says that there were 62 emerging-market multinationals in the Fortune Global 500 in 2005, up from 20 in 1995; it predicts that the number may hit 100 within 10 years.

Not all the would-be competitors will be successful, of course. Van Agtmael acknowledges that some will have to learn to focus on a few core areas where they truly excel, rather than engaging in a broad mix of activities as they have done at home. Western multinationals also have advantages in distribution, logistics and branding.

But clearly, enough of these new companies will succeed that Americans will feel it, with both positive and negative results. On the positive side for consumers, most of these companies have low cost structures and will be able to offer lower prices.

But there will be some pain as well. "A lot of people who felt that their companies or their jobs were protected because they were in the high-value-added or high-tech kinds of businesses used to think that the rise of these companies was irrelevant to them," Williamson said, referring to fields like architecture, design and pharmaceuticals.

But now, he said, "their companies are going to face competitors providing pretty much the same level of technology or design competence at a quarter or 20 percent of their price."

That means that American companies will have to look at their own operations with a "zero-base mentality," said William Green, chief executive of Accenture. Companies that do not design business models that are competitive with those of the emerging multinationals will simply be blown away, he said.

The emerging giants have different strategies, reflecting their strengths, says Harold Sirkin, senior vice president of the Boston Consulting Group, based in Chicago, and co-author of its 2006 study.

Some, particularly the Chinese companies, have mainly used cheap labor to undercut established companies. The emerging multinationals have not had time to establish brand names, as Sony or LG have done, but they will compensate for that. "They are either going to buy American companies and use their brands or develop their own brand names," says Sirkin, who regularly consults in China and India.

Others, like Embraer of Brazil, have learned to exploit a local base of excellent but low-cost engineering talent. Companies like Johnson Electric, which is based in Hong Kong and has the capacity to produce three million motors a day, have strong positions in a global product niche. And Russian companies have leveraged their natural-resource wealth to set up distribution channels and make acquisitions in the West.

Sirkin says that over the long run, the entry of the new multinationals into the U.S. market will be a "bigger deal" than the previous arrival of Japanese or Korean businesses, if only because countries as big as China and India are likely to spawn many important companies. "We'll see the next Toyota coming from China and the next Samsung coming from India," he said.

The new multinationals represent a far more complex phenomenon than a surge of imported products, which can be blocked or reduced by tariffs and quotas, experts say. These companies will be buying assets, and while political disputes may block some deals, as in the case of a Dubai group aiming to buy American ports or of Haier trying to buy Maytag, there does not seem to be any stopping of the broader trend.

The emerging multinationals will also be building new plants in the United States and offering services and products that are in great demand, like the IBM computers now sold by Lenovo.

But Sirkin is optimistic that the U.S. economy will continue to flourish. "There are a lot of imports coming in from China today, but what's our unemployment rate?" he said. "It isn't 43 percent. We've responded."