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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. 
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.
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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:
- 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.
- 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.
- 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.
- 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.
- 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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