I just completed this book for a lecture I am attending this coming weekend by the author Anil K. Gupta. If you have been paying attention to the business world or if you have just been generally aware of changes in business with respect to globalization, most of the facts presented in this book will not be a surprise. If however you have had your head in the sand the past 5-10 years (the author makes the point that many executives are in this state still), then you will find this book a basic wake up call to the new global business ecosystem. While the book obviously focuses on China and India, the salient points are transferable to any developing nation. Here are some of my take aways.
The book follows a logical progression of the tales of both China and India are “Four Stories Rolled Into One”
- Megamarkets – The primary point here is to recognize that the markets are larger than just the cream at the top of the earning pyramid. In other words, if companies just focus on the top 2-3 percent of the population with large disposable incomes who want the products or services the company already provides, then there is a tremendous lost opportunity in potential markets in the long tail. The per capita income in these markets is decidedly low, however, the shear volume of the market makes the potential profits enormous. An example that is used several times is the under $3,000 car from Tata Motors. Where some saw a lack of demand, Tata saw an untapped market demand to satisfy through innovation.
- Cost-efficiency platforms – Labor cost savings in China and India are dramatic. In some cases 1 tenth the going rate in the US. One can not ignore the advantages of leveraging these cost efficiencies. But if that is the extent of a company’s global strategy, their advantage will not last long.
- Innovation platforms – China and India are becoming hotbeds for innovation, especially when it comes to business models and manufacturing processes. Tata’s $3000 car is an example of business innovation to meet an existing need. Instead of looking at the vast number of low earning Indians and assuming there is no market there for something as expensive as a car, Tata revamped the very notion that a car need be expensive. Serving existing needs as opposed to finding markets for existing products is key to success in these markets where there is vast collective wealth but low per capita income.
- Launching pads for new global competitors – Companies in China and India Are fast learning to build a strong hold on their home turf to use as a launching pad to the global markets.
Other key points
- Think China AND India NOT China OR India – Leverage the collective strengths of both countries such as services in India and manufacturing in China.
- Develop a network of global hubs – Just as a banyan tree has many trunks all serving the whole tree, it is necessary to think of the global business strategy in this way instead of the traditional hub and spoke structure.
- A quote which our leaders should heed
“If you accept the principle that when everything is connected, work moves…then the burning question for companies, nations, and for individuals is: “What will cause work to move to me? On what basis will I differentiate and compete? Economics? Expertise? Openness?” ~Sam Palmisano