Business Case Studies, Executive Interviews, Pankaj Ghemawat on Global Strategy

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Executive Interviews: Interview with Pankaj Ghemawat on Global Strategy
January 2008


Pankaj Ghemawat
Anselmo Rubiralta Professor of Global Strategy at IESE Business School
the Jaime and Josefina Chua Tiampo Professor of Business Administration at the Harvard Business School.


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    Second, both China and India are very large countries with a great amount of internal variation. For example, both countries' coastal regions are significantly more vibrant than their hinterlands, suggesting application of the CAGE framework at the intranational level. Thus, glass manufacturer St. Gobain has overtaken longer-established foreign competitors in India by focusing on the coastal south rather than the north.

    Third, many analyses of China vs. India focus purely on economic dimensions, particularly the points about larger markets and higher labor productivity in China.

    But my analysis reminds us to take a broader perspective, which leads to an unexpected discovery: India's comparative closeness culturally and administratively to the United States. Not coincidentally, these are the two most overlooked dimensions of my CAGE framework.

    The fourth point is a logical extension of the third. Presumably, India should look more attractive than China as an investment destination in industries that are more sensitive to cultural or administrative distance. Software services provides a good example. Culturally, software services is a business in which speaking English is particularly important and in which the Indian diaspora in the U.S.-variously reported to account for more than a third of the workforce of technology companies in Silicon Valley, and to run 10 percent of new technology ventures there-has been directly helpful. In addition, geographic distance from the U.S. matters less and less, especially since the shift towards offshore development, and India has also been economically advantaged by virtue of its much larger graduate talent pool. The result: India accounts for more than 60 percent of offshored software services, versus less than 10 percent for China. In other words, it is, for most purposes, useful to focus on a particular industry in having this kind of discussion as opposed to looking at the economy-wide level.

  • What would be the new guiding principles of globalization in the light of continous obliteration of traditional thinking?
    My book offers tools to identify crosscountry differences, craft strategies tailored to the complex world of semiglobalization, and assess the economic value created and captured by cross-border activity. I also suggest a five-step road map for getting started applying these concepts in your own company:

  1. Performance Review: Assess current performance of global operations. Disaggregate performance along geographic and other dimensions. And take the cost of capital into account. If your company is like most I have studied, performance varies widely and there are many units that are producing negative economic returns.
  2. Industry and Competitive Analysis: Understand trends in industry concentration, market share, trade, and foreign investment. Are competitors standardizing products across countries? What does the rate of real price declines say about minimum targets for productivity improvement? How does industry profitability vary across countries and does it relate to scale at the global, regional, national, or plant level? How do economic profits in different countries get distributed among suppliers, competitors, complementors, and buyers/ intermediaries: where's the INTERVIEW 7 money? And finally, don't forget advertising, R&D, and labor intensity ratios and their implications for selecting among the strategies involving adaptation, aggregation and arbitrage.
  3. Distance Analysis (CAGE Framework): Prioritize the aspects of distance that matter most for your industry and company. Complement single-country analysis with evaluation of distance at the bilateral/ multilateral level.
  4. Articulation of Key Value Components (ADDING Value Scorecard): Parse the sources of value embedded in the strategy and quantify where possible. Use the ADDING Value Scorecard: adding volume, decreasing costs, differentiating, improving industry attractiveness, normalizing risks, and generating knowledge and other resources to gain a comprehensive handle on value creation possibilities. But be careful to avoid double-counting.
  5. Development and Assessment of Strategic Options (AAA Strategies): Identify at least two serious strategy options, document them carefully, and analyze them in terms of the full range of value creation and value capture dimensions.

1. Global Expansion Case Study
2. ICMR Case Collection
3. Case Study Volumes

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