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COVER STORY
Global
TradeArea (AFTA) and the&Pacific Eanomic Cooperation(APEC)fonun. Third, we wiUlookintowaysmwhi&mmp&may gainalargermarketshare.Anotherquestion Ihopetoanswerishowcompanies~an&tainmorepmfitsttuoughshategicallianas,~t venhves, p-ps; and through what wemight call,relationshipmarkehg.Finally,
Ihopetobn&yad~the~tion:'~tisthefu~Lorglobal~iness?"andprovi& youwithsomefneca~6andpredictionsthatmightassistb~pactitione~)inmaldng choiczsinthefuture.
-wasunhappywithitseconod;iclotmmparedtothe~nitedstatedandhersfefoundtheneeh
m Asia
to pin NAFTA.Global envy is also why Poland, theCzech Republicand Hungary want to pin the European Union Envy iswhy thePhilippines,Indonesiaand o h m i n theASEAN w o n want to form a gmuping that will resemble North America's f mbadeagreement Envyalsomeansthedesiretopossess~adv~.LaokatthereasonswhyCanada joined the United States in the initial freebade arrangement Canadawanted to get away irom an ~mericanlaw called "dumpmg" -which kiindusby park~e, is alsoh w n & "iniw~"301"or"su~er301."Canadaioined theUnitedStatesbecauseCanadawantedto po&&an equal advantagein the US 'market ' firmswantdtobe treated asequalsemf American firms in the US =vwelv, Amencan
firmswantehtobe~tedasequalsofCanadianfinnsintheCanahmarket Mexico, quite naturally, did not want to be left out and Ms;ican firms d-dedthatthevbetreatedaseaualsdAmericanandCanadianfirmsin the larger ~ o r t h k c a market. n ' Enw,therefne. isa desireto wsseaseaual advantam. Chilewants to bin N A ~while : C h is in ~outh'~maica;this onmhyYdesperatelywank to pin NAFTA to gain equal acress to the American market for its primary
'tunrrels, radrcahs and highways. ~nother words, global envy also meamtometalltheinfrastrucim?thatmanersandamliestodevelwmmt and industdalization Enw also ltleans to acouiexe to the market economv. And what better systems,
Asia is where thefuture is at, saystheauthor of Winning Worldwide..
.
BY DOUQUS U M O N T SENIOR LECTURER, KELl.OQQ GRADUATE SCHOOL OF MANAQEMENT NORTHWESTERN UNlVERSlTY
..
-
resovcesadthe
I I I
have.
and intperationwithin the b ' l h a i l a n d . Indc-China,ASEAN Asia-Pacific market~my In a nuldwll. thisall constitutes elobal mw. Disrontent trnned into sales, pmfrtrandburdnessoppahlnities,~~&eadvantageandw~~ able dewbmumt It is a desire toDartifioate a u d v in themaim markelsof the world. 'Global envy is to Get t& i n f r a k & d r e s o k and the managerial capability that other nationshave. It also meampining thestruggle to create a worldwide global market economy. - --. .. . ... -
-J1
irsuesthatIwouIdliketoputbeforeyou.meseare: What is @obalenvy? How can vou reinvent vow firms; How can iou gain mok market share; Howcanyouinaeasepdits;and6naUy, What is the future of global business?
Recently a report from the Economic Policy Institute in Washington listed 11socalled "success stork" llw list induded Mexico, Poland, POILU@, Turkey,Aushalia, Chile, Colombia,Indonesia,New Zealand, SouthKorea and Spain I could add to thislist a few o k of my own candidates, most nolably Thailand a d Malaysia. n a s e on this list are countries that have "seen the future." They have, in the wads of World Bank officiak, govanedthemarketwell by udngtotheirktadvantagetheresourceavailabletothw. T h e nations' techmaats and economists have cwted mapoIkie8 that result in low inflation Thqr have invested heavily in educationand &. 'Ihqr have amnuaged,~~andrewaz.dedinvestmen6-~dothcand~-in manufaaunnea n d ~ ~ . . A n d t h e v h a v e m u e h t t o m n a l i z e ~
sha~inthegiobal-~ca~o'm~mind,these~the~~rules~the&aea~ low inflatioc invest heavilv in infrastructue. educaiion and lmhhz and.- find wavs to down-plane &~~.umptim'This is the new @&I dty. . r
llwfirst irst'"What is global envy?" is to me, about suaes stories. For the second
concan.Iwill discusshow toeinvent firmsinlight of &tingcommonmarketfreehade
m a r t s ; ie.. the North American Free Trade Agreement (NAFTA), the ASEAN Ffee
IlwelwkfuramomentatEast Asia,andasktheaue3iion."WhatroledcxstheUnited I would say that theunited stab is a large and iqxutant player in
!?dates have to
m L 1 9 9 4 * T H E W MANAGER
15
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C O V ER S T O R Y
the global economy and remains the main enghe of the global economy. yy'hatis the role of laoan? The recession and the problems we currentlv see in the Japaneseeconomy are merely transitory Japan is a strongcompetitor,and like theUnited Staiesrcmains a strong engine of the global economy. What is the role of NAFIA? NAFIA is a very important building-block in the global rnarket economy.l€t me just give you one example.NAFIlls accessionclaus€is opento any country in the world that agreesin principle to free trade. It is not simplv for the countries of North America. NAFIA is open to any country in the world that agr€esto fr€e trade.Itis oDento thecourtries ofAsia and the Pacificand to the Europeancountriesaswell. Thosenationswho wish to join NAFlAmust agreeto fiee trade - no tariffs, no non-tariff Byagreeing barriers,nor onerousrestrictions. to thesestipulations,nationsgah accessto the whole US market, Canada and other countries that have chosen to participate in the agreement. NAFIA is important to Asia's future and is oDento all thos€ who wish to seekmembership. Wehave then the tieersof the 198Os: South \orc4, rarwdr, rrong Kong ano >mgaPore. Wehave thenew tigersof the 190s: Thailand, Malaysia and southem and coastal China. And we have the emerging tiger cubsfor this decadeand the next : Indonesiaand the Philippines and perhapt India. And then perhaps,in the 21stcentuy we will have Vieham and the RussianFar East joining in this greatexperimentof change.The Philippines will be poised for take-off,ready to join Indonesia and ready to participate in this great growth opporhurity that we cwrently seein the Pacific. Heie is my abbreviatedeconomicforecast. Seeif you agreewith me. . South Korea ioins the Gn)up of Seven and competes against Japan ior market snare; o Mexico and Korea join the OECD . Malaysia, Thailand and coastaland southem China becomeimDortant internal domesticmarkets for the saleof products made elsewhere in the resion and elsewhereh the world. What arc the hottest ercwth markets? Again Korea - and this is greater Korea Koreaplus China's Zhandong province,plus the RussianFar East. That region is going to boom. GreaterChina - not just Guanzhao and Hong Kong and South China - but Shanehaiand other industrial zonesare also going to take-off. We are toin8 to seelots of new Japarese investment and lots of new Singaporeaninveshnent in that area. And then there in all those Chinesecompanies from Beijing trading on tie st(rckexchange.Wecall them the red-chipcompanies; Chinese.ownedcompaniesfrom the Chinese '16
mainland that are trading on the stockexchange.Who would have thought of this iust a couple of years ago? Then there is also lndoChina, Vieham and Thailarld. Other growth areas include Singapore, Johore Bahru and Batam, the islands off hdonesia. These areasare the hottest growth markets in the world economy today. But remember, if we nameareasoutsideAsia,we would have to include Northem Mexico as a hot growth market. [n the United Statestoday,the fulltime attention of many CEOsis how to find ways to invest money in Northem Mexico; and how to tie Northem Mexico, Central Mexico to the greaterNorth Americaneconomy.Capital is mobile,socapital goeswhere tiere is opportunity and Asia todaycompetesaEainstNorthem Meico as well as the other hot resions of EastAsia. So what is global envy? It is a farsighted forecastof where you can put your money, where you caninvest,where you canincr€ase market share,where you can get mor€ profit ald where you can be more successful.
What happened after that was what happens to any leading product - another product came along and knocked Molson down anotch.Mexico's Coronabeerbeganselling its beer by saying d1atit was not a good thhg to be reminded of snow and slush and disagreeable weather. h otherwordg their advertising was direcdy targeted against Molson. Corona ads asked consume$ to think of the beachesin Acapulco and Mexico - evoking all the sun and firn. The message was "Drink Corona beer " After this media onslaught, Molson slipped to the mrmber three position and Coronatook its placeasthebeerof choice.My point is: these companies' advertising campaignswere tailored to theAmerican market. Molson choseto caDitalizeon tlrc machismo and good-guy attributes ass{xiated with the Mounties and Corona cho6eto capitalize on the sun and fesrflatmosohereof Mexico. When lapanesefirmsiome into theUnited States,they invariably pick a brand name Americans or English-speakhg consuners can pronounce. For instance,Sony picked a brandnamefor its portable cassetterecorders and transistor radios that is English: Walkman.This namewaspickedspecifically by SonysoAmericanswould useit and could pronounce the na-rneof their prcduct For the Korean comparfes, it's sli8htly different. Samsung,Daewoo, and Kia have first looked to the various cultural rninorities in the United Siates- to the Korean Americans,the Asian Americans - to gain acceptanceof their product. Thesecompaniesbegan by selling to theseminorities and expanding into a wider community in the United States; finally captudng a sizablemarket sharc. There are manv examples of successfi Asian firms. I will give youlust a few.Thereis in Japan a group which is responsible for putting togetheran EastAsia Purchasingnetwork which includes firms in Hong Kong, firmsin Thailand,firmsin Malaysiaand firms in Singaporewho buy and sourceprcducts in the United Statesand bring theseto department storesin EastAsia for distribution. This is all they do. This EastAsia purchasing network doesonJyone thing and doesit well sourcing products. Of the Korean firrns, Hyundai and Lotte havegiven up product diversification and are focusingon their corebusiness.Asoneoftheir
NAFTA ba r€rylmportntt hdrdi1€: tlck inthegfobd mafiet economy.
ReinventirgFims My second question, is how to reinvent firms? How to rcinvent firms in terms of free trade?In termsof NAFIA? ln termsof APEC? In terms of the Euopean Union and in terms of all tJreagreementsthat are circulating and enjoying theattention of govemmentstoday? Weat the KelloggSchoollook at decisions taken by executives in marketing and our prescription is to saythat you must tailor your decisions,tailor yourproducts and tailor your services to fit the various local culture rn whose marketsyou compete.Although there ai€ thos€who will tell you that itis aborderless world and that vou cans€ll the sameDroduct any place- any where,any time - we at the Kellogg Schooldon't believe that. Webelieve in tailorcd-marketing - marketing products specificallyfor the local,regionaland national economiesof the world. Beforetherewas freetradebetweentheUS and Canada,a companv called Molson Beer decided to expand outside Canada and export its products to theUnited Stabes. Todo so, ihe companyadvertis€dheavily in theUnited Statesusing imates that rcinforced pre-conceived images of Canada.Their advertising featuredthe RoyalCanadianMounted Police and they did very well, eventuallygoingon to becomethe number two seller of beer in the United States.
APBIL1994. THEASIANMANAGER
PEOPLEoo/,e?/ti,/e efforts to market the Pruton. I had geat confidencein the pruCuct then. I still do. oI y now I'm actually in a position influence the productb development."
DatukMohamedNadzmi MohamsdSalleh rotons's - I)eruhasaan Otomobil Nasional Berhad- new marr behind the wheel is Dattrl<Mohamed Nadzmi Mohamed Salleh,the former executivedirertor of Edaran OtomobilNasionalBhd (EON). tt was at EON that Nadzmi first grabbed the attention of Proton's b<lardof directors. Underhis leadership,EON, the solenationaldistributorof the ProtonSaga'sdistributol made Proton a runaway best-seller Nadzmi rcmembersthe uphill battleto promoteProton. "144:ren we first started out, we met stlont consumerresistance,but now we've manag€d to win wide acceptancefor our product. ln fact, the Proton Sagahaswon numerous awards in motor shows and is now exported to the United KinSdomand othercountries in Asia and Europe,proving its valuein the fughly competitive intemationalcarindustry." The decision to move from EON to Protonwas "the toughestdecisionin my careet" saysNadzmi,who nevertheless acceptedthe challengebecause he wanted to gain a firmer grounding in the automotive industry and becausethe new job provided some sort of continuity to his previous iob. SaysNadzmi,"l'm benefiting hom the fruits of my earlier
50
ohn Gage is the director of Scienceat Sun MicrosystemsComputer Corporation (SMCC). Also known asSur, SMCC is a world leader in client-server computing solutions that feature networked work-stations and s€rversthat store,processand distribute information. Among Sun's longest-servingemployl ees,Johnjoined the company shortly after its establishhdt in 1982and is instrumental to Sun's emerging fame in the global computer industry.
JohnGage At present,he is responsible for linking Sun to the world's scientific and technicalcommu, nities.John translatesSun's technicalknowledge into functional systemsthat even the layman can unde$tand. Says "One thing I like about my John, iob is that it canbe divided into two parts. The first involves being in the researchlab, talking to people who are totally focusedon computer'sand computer systemsand the second,involves marketing and talking to the end usersof these systems,which demands an entirely different mindset." John doesn'tappearto haveany
kouble adjusting and econciling his higNy-specialized, computer literate self to marketing expert that he is toutedtobe. "lt's not difficult" he says,"when you enjoy what you'redoing." amesh Gelli is the India's Global Tiust Bank'snew chairman. Prior to his appointment, Gelli was chairman of the Vysya ' Banl Ltd.- currently lndiats leading private bank. Gelli looks back to his long career with Vysyahave yet beenthe most rewarding and futfilling of my professionallife." During his tjermaschairman, Vysya roseto the top of India's competitiveprivatebanking industry and Gelli recelved numerous awards, including the covetedPadma Shri awa-rd, one of his country's most preshgiousawards made to deservingciviliars. Apart from his being chairman of Global Trust Banl, Gelli is on the board of various lndian managementassociations. oire of which is the AII India ManagementAss<riation, a key organization in propagatrng managementeducation in India. Celli vows to bring the same enthusiasmand dedication that helped him make Vysya mrmber one to his new job at Clobal Trust Bark. Indeed, India's membersof Lndia's banking ald busine.;scirclet are waiting for a repeatperformance.Will his new banl become Vysa'smain competitor? Watch this space. recentvisitor to Manila was Dr DouglasP Lamont a management expert on intemational marketing and author of the best-sliIleLWinfi B Wotldulide: Strutegies for Domiwti g Global Mn*ets. A senior lecturer in internationalbusinessat the Kellogg
Dr.Dougastamont Graduate Schoolof Management at Northwestem University, Dr. lamont was a principal speakerat the Asian Institute of Management's1994intemahonal maiagement conference held on global competitivenq;s and sustainable development. Thouth mostof his havels outside the United States regularlybrrrg him to Europe and SouthAmerica,Dr. Lamont confessesto an "affinity for Asia." A former army captairL Lamont saw duty during the Metnam War.His experience duiing that protracted conJlict has not soured his feelings for Vietnam or its neighbors.Every so often, Kellogg sendshim to Bangkokfor a six-week training program for Asian MBA studentsat Chulalongkom Univeniiry Thesevisits are much anhcipated,saysLamont, by his children who spent many of their summer vacationsin Thailand. A fi$t-time visitor to the Philippiruf Dr. tnmont managed to squez! a bit of sighb€eing alongsidean alreadyhectic rherlule ttnt hduded apparing on a moming talk showand speatingat AIM'S twGday conferl'l1ce. His travelsoutside Malrila bnutht Lamontto Subic Baywherehe met with vador-6 offcials of theSubicBayDevelo1> m€ntAuthority and conducted researcion the variousioint venturescuirently being established at the siteof the former U.S.military bases.
APBIL1994. THEASIANMANAGER
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he popular 193 repott, The EastAsian Miracle, published by the World Bank, is a rcfteshhgly - if a report by the World Bank can be called refreshhg .perhaps.startlingly Iranx would sound better straight-forward admission that the global economistsfinally sat down to try to rcallv undersiand why, "Fro;r 1965ta 1990the 23 economies of East Asia qrew faster than all other regions of the world." And why the high performing Asian economies, "are the on.[yeconomies(ever) that have high growth and declining inequality.Ther€port suggeststhat Asia hasdemonstrated a, "suDerioraccumulation of Dhvsicaland human capital," which accounts for much of the region's success. Our good friend L. Gordon Crcvitz - editor and publisher of the Far EasternEconomicRe' view - wrtJtern a 1993year-end summary,"Asia wason the mind of everyone from brokers Ditchlng mtitual funds to makirs of Swiss watches to auctioneers of Westemfineart."Andaswehave regularly noted in TfieAsianMan4ger,Vietnam and China were the hottest inveshnent prospects in the world. But none of this was on the minds of JamesDale Davidson and Lord William Rees-MoAg when thev revisedand uoda6J theirpoptilar 192book,rte Grcat Reckoning.Yiolence,psuedo-random phenomenon, non-linear liberaiism, self-replicatingmolecular machinei and iivins financial adviceand surviiat tioi to North Americans and Eunopeans werc on their minds. This takes only moments to glean.Thereareprecisely six refer€ncesto Asia. none to Singapore, Thailand and t-he
52
Philippines, two to Hong KonA and dne to Malavsia.fhere ai 15references- aird I meanreferences to China. Items like Japaneselabor costs beinR greater than they are in Chin{ Europeancommercein the Middle Ages being inferior to that in China, and experimental cancer therapy on ly costing about US$2,000 a day in Chinl. Really intriguing stuff . Asia does come up in some pretty interesthg ways. For instance,the authors suggest that demoqacy never took hold in Asia because the povertystricken masses never mad. mough money to affordguns.lf they had, they could hive demanded a voice in political affairs, like North American women. "It was only when cheap, effective pistols became widely availableafter the Civil War that women got the vote," Davidsonand Rees-Moggreveal. About hvo hundred pages and three references later, ihe authors provide another thought-provoking insight: Asian "govemments come and go like ElizabethTaylor's husbands."I know of severalAsian leaderswho will besurprisedby the thoroughnessof the authori' research. Of cours€, to b€ fair, they do note that they are reallv thinking in 500-veir cvclej. Which i; puzzling; bo. I\,iosrof the authors' wamings are directedat North American political states exclusively less than 250 years old in a region of the world whose history is substantially more vague than that of Asia. When the authors reach down to their readers' level to explain the information revolution, they suggestthat, "Perhaps the best way to understand how nanotechnology wouid work is
to think in terms of magic." And perhaps the best was to understand what this book is about is to compare it to a horror movie that promised to scarethe willies out ofyou but doesn't.You sort of keep watching the movie becauseyoucan't believeit. Mostly you can't believethat you keep watching it. Here'ssomeof the ways you are supposed to get scared: . Like all true revolutions, the Information Revolution is alsoa revolutionofpower Miniaturized technologies miniaturize institutions. In time, the microchip will destroy the nation-state. It will give small groups and even individuals the capacity to employviolencein waysthat coulctoverfu rn govemments and destroy large organizations. As if thesethingsneverhappenedbeforethe micochip. . The lawn mower of the Information Age will come in an envelope.It will not be pushed but planted. Genetic engineeringofgrass s€edwill producenew bpesof turf that . automatically grow to an optimum height - and then stop.Thenew bio-engineered grasswill require neither fertilizer nor insecticides.Itwill makelawn mowersobsolete. I, for one,don't mind giving
"'Asian governments,' wdtethe authoF, 'comeandgo like Elizabeth Taylor's husbands."'
up my lawnmower.Actually,I think this is a cuteidea. . As Jeffrey MacGillvray of the MIT Nanotechnology Study Group asks, "Whjt forms of human labor will still be of valueafterself-replicating molecularmachines provide material goodsin virtually ur imited quantity at almostzerocost?" Cee,no wonder Deng Xiaoping's beenlosingsleep. Evenif the autho6 wereconcemedaboutAsia,it would bea pretty gory scenariothey would paint: . Contrarytowhatyoumight suppose,the danger of sudden heart attack is greatest when the heart beats most regularly.Similarly,the danBerof(economic)systemfailure may be increasedin many casesby policiesthat aim to stabilizepresentconditions. But then the authorssuggest that it is precis€lythe irregularities which we must be on the watch for: r Youmay needto anticipate discontinuities in ordei to avoidbeingoverwhelmedby tnem. And you may need to avoid this book to avoid being underwhelmedas well. But the authors do deservecredit for putting forti some interesting ideas,mostly foLrndin chapter nine, "The Remakingof the Crxmopolitan Mind." But th.isis a best-selingbook, andforAsian managerswlio want to know what their customersin critical Westremmarketsare lookingforwad bandworryingabout the prirrcof admissionwill probably yield a rcaxrnableretum. I Davidson,JamesDale and William Rees-Moggrr, C,rd/ R..k,r,rl, (New Y'rl Simon & S.huster,lv92), .r90pp.
APRIL1994 . THEASIANMANAGEB
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