Lectura De Negocios Internacionales

How to Be a Truly Global Company
Many multinational business models are no longer relevant. Skillful companies can integrate three strategies — customization, competencies, and arbitrage — into a better form of organization.
by C.K. Prahalad and Hrishi Bhattacharyya

Photo illustration by Holly Lindem

During the high-growth years between 1992 and 2007, the globalization of commercegalloped at a faster pace than in any other period in history. Now, amid the chronic unemployment and anti-trade rhetoric of the postfinancial-crisis world, some observers wonder whether globalization needs a time-out. However, the experience of multinational companies in the field suggests the opposite. For them, globalization isn‘t happening rapidly enough. Whereas GDP growth has stalled in theindustrialized world, consumption demand is still expanding in China, India, Russia, Brazil, and other emerging markets. The 1 billion customers of yesterday‘s global businesses have been joined by 4 billion more. These customers reside in a much larger geographic area; threequarters of them are new to the consumer economy, and they need the infrastructure, products, and services that only globalcompanies provide. The problem is not globalization, but the way our current institutions are set up to respond to this new demand. The prevailing corporate operating model does not work well with the structural changes that have taken place in the global economy. Most companies are still organized as they were when the market was largely concentrated in the triad of the old industrialized world: theU.S., Europe, and Japan. These structures lead companies to continue building their global strategies around the trade-offs and limits of the past — trade-offs and limits that are no longer accurate or relevant. One of the most prevalent and pernicious of these perceived trade-offs is the one between centrally driven operating models and local responsiveness. In most companies, an implicit assumptionis at play: If you want to gain the full benefits of economies of scale — and to integrate common values, quality standards, and brand identity in your company around the world — then you must centralize your intellectual power and innovation capability at home. You must bring all your products and services into line everywhere, and accept that you can‘t fully adapt to the diverse needs anddemands of customers in every emerging market.

Alternatively (according to this assumption), if you want locally relevant distribution systems, with rapidly responding supply chains and the lower costs of emerging-market management, then you must decentralize your company and run it as a loose federation. You must move responsibilities for branding and product lineups to the periphery, and acceptdifferent trade-offs: more variable cost structures, fewer economies of scale, more diverse and incoherent product lines, and more inconsistent standards of quality. Some companies try to use strict cost controls to manage these trade-offs. They put in place a decentralized operating model with some central oversight, usually augmented by outsourcing. But this is a tactical move based onexpediency, rather than a global strategy. This approach leads to suboptimal results in today‘s complex world. Other false trade-offs are visible in the tension many companies experience between their current business model and the needs of the emerging markets they are entering. They wonder: • Whether to serve existing customers in their home countries or new customers in emerging countries. • Whether tomeet competitive quality standards demanded by consumers in wealthy countries or offer just the ―good enough‖ features that poorer customers can afford. • Whether to pursue a strategy of premium or discount pricing. • How to attract and retain resources and talent, which are perceived as draining away from emerging markets to the industrial world whenever employees are permitted to migrate. •...