Companies like Emirates airline have demonstrated growing success in the global aviation industry. On the other hand, even world-wide firms like eBay have difficulties competing globally at times. The technology pioneer for consumer-to-consumer (C2C) auctions online marched into China in 2000 with plans to dominate, purchasing the leading C2C firm Eachnet as part of that strategy. Within three years they failed.
Why? The logic of C2C auctions was fundamentally different in China than in the United States. In China, cultural differences shape how people transact, with a more permissive view regarding counterfeit goods. Key governmental relationships to enable internet commerce are also essential. eBay did not anticipate these differences since they experienced great success in the United States and elsewhere on their original model.
Creating a corporate strategy that can deal with cultural variations requires an analysis of the “logics of competition” that prevail in a given place. Such “logics” revolve around four factors: institutions and regulations, market trends, cultural characteristics, and technology. Varying combinations of these factors can produce entirely different competitive environments across the world—but they follow patterns. Discerning those patterns is key to competing well.
Facebook has mastered the logics of competition region by region by attending to language differences. Once focused in the United States, the social media company has exploded globally. Facebook has succeeded by allowing users to translate their own content, letting users communicate in the language they are most comfortable regardless of where they are physically. Firms that can adapt to different ways of competing are more likely to succeed globally. Hyundai is an exemplar of this. When the South Korean auto manufacturer expanded to the United States decades ago, they made notoriously bad cars by American standards. Now they make some of the highest-quality automobiles sold in the country. What happened?
Hyundai entered the United States with a logic of competition that was suited to its markets in Korea, where lower-priced, lower-quality vehicles prevailed. When they experienced the shock of trying to inject that strategy into the US market, instead of folding they established a world-class, global technology development platform that incorporated quality manufacturing processes and continuous improvement.
Putting systems and practices in place that capture lessons learned in new, unfamiliar regions is the kind of leadership that wins in the global context.
Information technology firms in India have done this well. Twenty years ago, they were primarily cleaning up computer code for American companies. These firms have since learned the logic of competition prevailing on the world stage and adapted accordingly. Now they provide high-end business process and information technology consulting to companies in London, New York, and other major power centres.
The world itself is an innovating system. Products are being improved by technologies originating in one country and incorporated into systems developed by another. The key to good global business is not to expect that your lessons at home will translate abroad, but to figure out how markets, culture, technology, and institutions combine—and how your organisation must adapt to compete under those conditions.
The writer is Thomas M. Siebel Professor of Business Leadership, Strategy and Organisations at the Graduate School of Business, Stanford University. He will be speaking at the Stanford Executive Summit in Dubai on November 5. Views expressed by the author are his own and do not reflect the newspaper’s policy
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