Innovation Location Matters

Topics: Globalization, International trade, Harvard Business School Pages: 21 (6834 words) Published: May 8, 2013
Going Global
Lessons from Late Movers



March-April 2000

Contrary to popular wisdomj companies from the fringes of the world economy can hecome glohal players. What they need is organizational cofifidence, a clear strategy, a passion for learning, and the leadership to bring these factors together.

by Christopher A. Bartlett and Sumantra Ghoshal





South African president Nelson , Mandela recalls his dismay when he boarded an airplane and found that the pilot was African. With shock, he realized his reaction was exactly what he had been fighting against all his life. Mandela was discussing racism, but the same involuntary reactions surface in commerce. Consider labels such as "Made in Brazil" and "Made in Thailand." Someday they may be symbols of high quality and value, but today many consumers expect products from those countries to be inferior. Unfortunately, that perception is often shared by managers of tbe local companies that are striving to become global players.


Going Global; Lessons from Late Movers

That's just one reason why companies from peripheral countries find it so difficult to compete against established global giants from Europe, Japan, and the United States-the triad that dominates global commerce. And when they do compete, the experience of emerging multinationals often reinforces their self-doubt. Consider Arvind Mills, an Indian garment manufacturer that in the mid-1990s found a niche supplying denim to leading Western apparel companies. As Arvind's overseas sales grew, its stock soared on the Bombay Stock Exchange, and the company's CEO confidently declared that the company was well on its way to becoming a powerful global player. But within a couple of years, Arvind had become a victim of the fickle demands of the fashion business and the cutthroat competition among offshore apparel makers battling for the shrinking U.S. jeans market. Stories such as Arvind's are told and retold in management circles. The moral is consistently negative. Companies from developing countries have entered the game too late. They don't have the resources. They can't hope to compete against giants. Yet despite the plausibility of such stories, we believe they are condescending and represent the counsel of despair. Indeed, there is plenty of evidence of an altogether different story. After all, companies like Sony, Toyota, and NEC transformed the cheap, low-quality image of Japanese products in little more than a decade. Is that type of turnaround still possible? Tofindout, we looked at companies that, unlike Arvind, have successfully built a lasting and profitable international business from home countries far from the heart of the global economy. We studied 12 emerging multinationals in depth. They operate in a wide range of businesses, but they are all based in countries that have not produced many successful multinationals-from large emerging markets like Brazil to relatively more prosperous yet still peripheral nations such as Australia to small developing countries like the Philippines. And while these companies are distinguished by strategic, organizational, and management diversity, they share some common traits. Most notably, each used foreign ventures in order to build capabilCbristopber A. Bartlett is the Daewoo Professor of Business Administration at Harvard Business School in Boston. Sumantra Ghoshal is the Robert P. Bauman Professor of Strategic Leadership at London Business School. To discuss this article, join HBR's authors and readers in the HBR Forum at 134

ities to compete in more-profitable segments of their industry. The evolution into more-profitable product segments can be clearly tracked on what we call the value curve. All industries can be seen as a collection of product market segments; the value curve is a tool used to differentiate the various segments. (For an example,...
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