The uncomfortable future of competition

by Dave

Business Standard

Globality – This book from three Boston Consulting Group (BCG) consultants suggests that the future of competition is far more complicated and unpredictable. Companies in the BRIC countries may certainly be emerging strong contenders to the hegemony of western multinationals, but they’re not the only ones. Whether it’s Mexico, Chile, Egypt, Hungary or Chile, potential world-beating corporations, their research shows that the spread of globalisation has meant that competition can emerge from pretty much anywhere. This is what the authors call “globality”.

“Globality is not a new and different term for globalization,” the authors write, “it’s the name for a new and different global reality in which we’ll be competing with everyone, from everywhere, for everything.”

These “challenger” corporations, as the authors call them, are in a wide variety of industries, from the conventional (steel, textiles, mining, telecom, consumer electronics) to the less common (pianos, baby strollers, cosmetics, paper packaging).

This kind of congruence between labour cost and innovation provides a unique challenge to western corporations because, unlike the earlier contract manufacturing operations that made millionaires out of local entrepreneurs, these challenger companies are building their own intellectual capital (as opposed to simply pinching it).

India and Brazil, for instance, are patently emerging as strong bases for value engineering. US household goods major Whirlpool developed an affordable washing machine for developing markets from its units in Brazil. This was not a stripped-down version of a US product but a machine designed from scratch with a smaller payload capacity and other specs suited to the developing country consumer. In doing so, Whirlpool ended up creating a market for low-payload washing machines.

The authors also write about the Logan, jointly produced by French car-maker Renault and Mahindra & Mahindra. Though the product has not yet moved the market significantly, the authors describe how Renault by teaming up with M&M was able to develop the model at 15 per cent less than the project cost. Indeed, M&M has already established its reputation as a value engineer having achieved this feat earlier with the Scorpio.