Finding opportunity in globalisation
Posted by Grant Brewer on 01 May 2005
Globalisation is here to stay. South Africa picked a challenging decade to start transforming itself after 1990 because it was a decade of increasing globalisation; and the effects of a more open world couldn't be avoided. This doesn't mean that the global playing field is level – it is frequently anything but level; just ask the Department of Trade & Industry! Traditional international leaders such as the US and Western Europe remain dominant and are able to ensure the trade rules often favour themselves. The challenges and failures of the world trade organisation talks is evidence that globalisation isn't fair and that the global community isn't yet mature enough to compromise effectively and provide a better life for all people in the world. The challenges are evident, but globalisation isn't going away anytime soon so there is nothing to gain by complaining about it.
The global economy will change dramatically over the next twenty to fifty years as China and India grow – at some point in this time frame these economies will overtake the US economy. At present the US economy, at $11tn, is about three times the size of Japan's (which is the next biggest economy) and five or six times the size of China and India together (using market exchange rates to value GDP) – but China is currently growing at more than double the pace of the US economy. By comparison, South Africa's economy is valued at about $165bn.
From the relative size of economies it is clear that South African organisations need to find their place within the global economy – and they need to drive the action themselves, since South Africa is a relatively small player in the global marketplace.
Finding a place in a competitive world
It is tempting for South Africa to see itself as a victim of globalisation – whether as a result of European farm subsidies, trade barriers or the flood of low cost imports from China. A smart strategist will step back from such a victim's mental model and search out a competitive place in the global economy for their organisation as an extension of the organisation's local strategy; usually isn't possible to have a global strategy that differs widely from your local strategy.
Knowing the competition
The famous warrior philosopher, Sun Tzu, provides some advice for sound advice for leaders thinking about their global competiveness:
"If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle." – Sun Tzu, The Art of War.
Understanding the history, culture and character of the competitors is import to developing a competitive global strategy. South African organisations are frequently better acquainted with the US and Western Europe than with the future dominant economies in China and India. As Sun Tzu points out – it would be unwise not to know these countries.
China frustrates many industries in South Africa because of the increasing number of low cost imports entering the market from China. The initial response is often that China's communist government simply abuses is labour in order to artificially drive down prices and protect its markets. This is a simplistic view that is incorrect.
Even a shallow investigation into China's cultural history reveals that the strength of its industry and bureaucracy dates back more than two thousand years to the development of the philosophies of legalism and confucism, both of which contributed to a disciplined and hierarchal system of civil service. In addition, China has always seen itself as relatively self contained. It is a large and geographically isolated country surrounded mostly by sea, large deserts or impassable mountains. The famous Silk Road trading route that was established between China and Europe centuries ago was used to bring valued goods such as jade and horses into China, but the majority of goods were heading the other way. China has always exported heavily. It is also interesting to notice how much importance China has placed on education in its history. The country has maintained a system of examinations from its early dynasties around 500BC that schooled its people and developed them into the strong civil service that organised and managed many industries and interactions with other countries. In China, the scholars have long been amongst the most powerful group of people.
These characteristics of China make it evident that the current Chinese system of government and its unique version of capitalism may not be that different to their world under different emperors over the last millennium. To be sure, government driven capital investment and growth; a large labour market and lower labour costs contribute to their current competitiveness, but the platform for their success doesn't appear to be a recent phenomenon.
Another example is provided by Sri Lanka, where the export of people to work as housekeepers in the Middle East is one of the largest sources of foreign exchange earnings for the country. It is so important to the country that there is a government ministry devoted to managing the recruitment, allocation, contracts and payment of the few million people that are sent on two or three year contracts to work overseas. The Bureau of Foreign Employment, as the ministry is known, has been making inroads into France and Italy over the last year or two. In South Africa, we have a similar potential labour force but perhaps our national character and apartheid past keeps us from seeing the possible opportunities of exporting our labour in a similar fashion.
The key to innovative strategy is to see the opportunities when others see barriers. To recognise an opportunity, strategists need to understand the landscape they are working in and understand the motives and characters of the other players – that knowledge is gained through experience, reading and conversation; not usually through spreadsheet analysis or budgeting. Strategy is still both an art and a science. Understanding your organisation's context is something of an art and it remains as a foundation of good strategy and a necessity if you are to find your organisations place in the global marketplace.
Finding opportunity in globalisation was published as Strategym #26 in May 2005
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