Emerging patterns of Internationalisation - Empirical evidences

Transcription

1 Emerging patterns of Internationalisation - Empirical evidences Naveen kumar M.Sc Doctoral Candidate Logistics and Supply Chain Managment Demartment of Management and Engineering Linköpings Universitet Blog: naveen.kumar.rangaraju@liu.se

2 Agenda for today Emerging economies in the global context India the country to note Case study illustrations Global companies operation in Asia Auto companies from India going global Indian IT Companies going global The bottom of the Pyramid globalisation impacts Medical tourism Lessons learned for internationalisation Food for thought Discussion

3 Global Scenario Low growth rate associated with developed markets Emerging economies missed Industrial revolution but... Increasing talent crisis developing globally Work disintegration & simultaneous global optimisation Increasing purchasing power in emerging markets Global clusters developing India is a global IT services hub & China is a global Manufacturing hub Focus on Asian tiger and Chinese Dragon

4 Evolution of World economy Source: Angus Maddison, The World Economy: Historical Statistics, OECD 2003

5 Global triad Previous global triad Europe USA Japan New global triad China India Other emerging economies

6 Reshaping world trade Sources: WTO International trade statistics

7 Share of world output Sources: IMF World Economic Outlook September 2006 database

8 Resource consumption Sources: BP Handbook of Energy Statistics 2006, Various

9 Share of intra in total merchandise exports of selected Regional Trade Agreements, 2007 Source: WTO 2009 statistics report

10 Mergers and Acquisitions A changing trend Source: KPMG Mergers & Acquisitions monitor

11 Spiky World Population distribution Source: The world is spiky Scientific citation

12 Contributions of Emerging markets

13 Indicators of Emerging market Population & its demographics GDP & its growth rate Talent availability Strong domestic market Trade links & its growth rate Commodity & Resources consumption Foreign Direct Investment

14 India The country to note Population Billion Over 65% below 35 years old and over 50% below 20 years old In 1991 a full scale economic liberalization happened after freedom from 1947 Middle class consumer market of about 300 Million Healthy market growth of about 8% now and global participation Highly entrepreneurial & reverse brain drain

15 Measures of change *Structure of employment % Manufacturing 12% Services 21% Agriculture 67% Number of registered cars (Millions) , , ,2 Number of mobile telephone subscribers (Millions) , , ,3 Number of players Telecom Auto Airline(Dom)1 8 Source:*Economic intelligence unit 2004, Mckinsey analysis Marketing Logistics Research Group R.Naveen Kumar

16 Trade analysis - product type High Growth High Volume

17 Outsourcing and Offshoring on the rise

18 Reasons to outsourcing have changed Source: Duke University/Archstone Consulting Offshoring Research Network 2004, 2005, 2006 survey

19 Research & Development in India

20 Typical Evolution of MNC in India Global Sales & supply Market entry Activity Market testing Develop Supply Base Sourcing Time

21 Indian Autocompanies Local and global impacts

22 Engineering the Tata Nano Supply Chain 3T s of the automotive industry Taylor Toyota Tata The 2500 USD car - Cost as a value Supply chain design was based on target costing, eliminating waste and redundancy Innovative design both within Tata Motors and also from the supply network 97 percent of its parts are locally sourced even from Western automotive suppliers in India Heavy focus of value engineering

23 Indian Automotive Industry High-skill sectors accounts for almost 40% of the manufacturing output of India Small car manufacturing hub of the world Dominated by around 500 key players, which contribute more than 85 percent of India's production Low cost automation, skills in process, product and capital engineering add to the competitiveness

24 Drivers of the flattening world Based on Tomas freidman 2007, The world is flat

25 Drivers of Growth in IT sector Availability of good IT infrastrucutre Bubble burst and reverse brain drain Technical and english language skill of people Matched with liberalisation of India Wage & Productivity advantage Ability to hire and train people Always a global outlook Constant learning from customers

26 Evolution in IT sector Source:Ernest and Young Analysis -2006

27 IT Companies Statistics

28 Indian IT Companies Revenue ( ) 4,56 Billion USD 3,21 Billion USD 3,28 Billion USD Profitability 22% of revenue 29% of revenue 21% of revenue Workforce 85, , , 000 Workforce growth rate 36% 29% 26% Source:IBEF 2007

29 New areas for IT Companies in India Knowledge process Outsourcing, Legal Process Outsourcing, Games Process outsourcing, E governance, Animation and multimedia development CAD, CAM, prototyping, product development and testing Electronics and integrated systems development Business process reengineering and process development Pacakges and value added services IT Manitenance, systems development & customer relationship management hub of the world Expansion of IT & related services in to various industry segments

30 Bottom of Pyramid (BOP) Potential Potential of BRIC, Indonesia, Mexico, Indonesia, Turkey, South Africa & Thailand represents 90% of the developing world Affordability & Access are critical factors influencing BOP decisions

31 Successful case companies at BOP

32 Assumptions of the Bottom of Pyramid cases The poor are not our target consumers because with our current cost structures, we cannot profitably compete for that market. The poor cannot afford and have no use for the products and services sold in developed markets. Only developed markets appreciate and will pay for new technology. The poor can use the previous generation of technology. The bottom of the pyramid is not important to the long-term viability of our business.we can leave Tier 4 to governments and nonprofits. Managers are not excited by business challenges that have a humanitarian dimension. Intellectual excitement is in developed markets.

33 Bottom of Pyramid- how companies capture the adv? Source: C.K.Prahalad & Start L Hart 2002

34 Aravind Eye care hospital - Lessons for Medical tourism Demand Dr. V - A man who has saved 2,4 Million eyes Wall Street journal India as a country has about 20 Million blinds of which 80% are curable and about 80% of the population lack health insurance Worlds largest provider of Eye care services Examine 1,7 millions patients and operate 0,25 million annually Target of a million surgeries a year with a network of 100 hospitals Value Delivered ¾ of the surgeries were done for the poor free of cost The institution is self sustainable for finance High process quality delivered The inspiration came from McDonalds

35 Aravind Eye care hospital - Lessons for Medical tourism Eye care facilities Education & Training Women & Child care Hospital network Mission: To eradicate needless blindness by providing appropriate, compassionate & high quality eye care for all Community Outreach program Research Eye bank Making technology affordable Based on case study from C.K.Prahalad 2006

36 Aravind Eye care hospital - Lessons for Medical tourism Insights from Aravind eye hospital Quality & productiivity rates much higher than National average of UK 2600 surgeries per doctor - National average of ,000 paid surgeries & 126,384 free surgeries Inhouse lens manufacturing Now exported globally

37 Lessons for Medical tourism Western countries are sometimes expensive and time consuming in medical processing Cost reduction achieved by volume increase and absorption of Technology The demanding nature of domestic market Globally recognised talent available in India at Indian cost Dental surgeries, Cosmetic replants, Heart and Knee surgeries This will create a price pressure on the global system Cost for Surgery, Source:

38 Transitions managed Planned economy to an open market economy Creating value by institutionalisation Low cost provider to a high value provider Local management to global integrator Production focus to brand focus Fast follower to a leading innovator Automation to humanisation

39 Truth be told (1) of 2 Companies in India and China are following the trajectory of companies from Japan and Korea in the past but at an even faster pace Demanding domestic market and increased global exposure necessitates top notch products Companies from Emerging market increasingly become global companies through acquisition. Both growing middle class and the bottom of the pyramid participate in the economic engine Emerging market economies are leveraging each other to compete globally Indian Auto component firms, software firms making inroads in China Chinese companies setting up operations in India

40 Truth be told (2) of 2 Environmental stress created by the emerging market economies will be a driver for revising the changes in the industry Business needs to take care of the BOP Typically selling globally starts with a cost benefit, stays for quality and to retain the future, it needs innovation More development will come from the global supply base Evolution of global sourcing, offshoring, outsourcing and crowd sourcing Marketing Logistics Research Group R.Naveen Kumar

41 Food for thought How can Multinationals compete against the companies from emerging markets? In emerging markets In global markets against companies from emerging markets What will happen to the so called poor in the globalisation process - Can they participate in the global economy? If so illustrate how? What factors will affect the level of globalisation of emerging market economies? How will the roles of managers of tomorrow be different considering the impact of emerging market economies? Marketing Logistics Research Group R.Naveen Kumar

42 References Billions of Entrepreneurs by Tarun Khanna, Emerging Giants Building world class companies in developing countries, Tarun Khanna and Krishna G. Palepu, Harvard Business Review, The fortune at the bottom of the Pyramid, C.K.Prahalad, 2006 Bangalore tiger by Steven Hamm Or just Google and help yourself learn

43 Further reading

44 Thank you