New World Disorder

http://www.time.com/time/magazine/article/0,9171,1851159,00.html


Thursday, Oct. 16, 2008
New World Disorder
By Harold L. Sirkin

Imagine 100 companies from Former Third World countries with a combined revenue in the trillions of dollars--greater than the total economic output of many countries--competing with U.S. companies for space on the world stage. Imagine several hundred such companies. Now imagine thousands.

You are looking at the future, when U.S. companies will be competing not only with European, Japanese, South Korean and Chinese companies but also with highly competitive companies from every corner of the world: Argentina, Brazil, Chile, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Poland, Russia, Thailand, Turkey, Vietnam and places you'd never expect. And you can anticipate that future versions of the World Economic Forum's Global Competitiveness Index will be reflecting more rapid ascents and descents than it has in the past. The current financial crisis may only serve to speed up the process.
In the past year alone, for example, Brazil, Russia and China have all moved up in the country rankings and are now lodged in the top half of the list, while the United Kingdom has fallen. One of the biggest gainers from last year to this year is Montenegro, rising from 82nd to 65th place, just behind Turkey and Brazil.

This is the future world of what we call "globality," a world of hypercompetition in which Americans--and Swiss and Japanese--compete with everyone from everywhere for everything. And not just for customers and market share: they'll compete for energy and raw materials, skilled and unskilled workers, knowledge, patents, financing, suppliers, partners, even potential acquirers.



Global competitiveness has been a buzzword in Washington, on college campuses, in union halls, in corporate boardrooms and in the media for decades. What is different in this new era is the scale and speed of the coming challenge, which will see hundreds of companies from developing countries charging at us relentlessly, from all sides, like a modern version of king of the hill. Are we ready?

Most of the world's future economic growth will take place in developing nations, and our growth--and Western Europe's and Japan's--will largely be based on theirs. Do we understand these economies? And are we ready to compete for the business of the billions who live there and are just now starting to move up from poverty to life as consumers--consumers who would love to buy U.S. products because of their quality?

My colleagues and I have examined more than 3,000 companies from developing countries and have identified 100 companies from 14 countries with the near term potential to become global leaders. China is home to the greatest number of global challengers, with 41; followed by India, with 20; Brazil, with 13; and then Mexico, Russia and Turkey. Together, these 14 countries accounted for 17.3% of the world's total economic output, or gross domestic product, in 2006.

Some of the challenger companies have already achieved great success. Among the 66 Asian companies on our list, China's appliance maker Haier has been so successful in the U.S. market that it's investing $100 million in a new factory in Camden, S.C. (And you thought U.S. factories couldn't compete with Chinese factories.) India's Suzlon Energy is among the world's top manufacturers of wind turbines, a renewable-energy technology with a limitless future. And Hong Kong's Johnson Electric is the world's largest producer of small motors.

It's much the same in Latin America, where Mexico's CEMEX, with nearly $21.7 billion in revenue last year, is one of the largest cement producers in the world. Brazil's Embraer is the leading manufacturer of regional jets in the world.

And in Russia and Eastern Europe, Gazprom, based in Moscow, is the world's largest natural-gas company, providing 25% of Europe's natural gas. Another major player in Europe is Turkey's Vestel Electronics, the largest supplier of televisions on the continent.

These are some of the more prominent success stories: companies from everywhere competing with us for everything. Hundreds of other challengers that are relatively unknown today are ready to join them.

To meet this challenge, the U.S., or any other country that wants to remain in the game, can't afford to repeat past mistakes. And the worst mistake of all is complacency--to dismiss the challengers as a nuisance, as the U.S. did Japan in the 1960s, rather than view them as serious competition. You can see the results of complacency when you look at the Big Three U.S. automakers.

In the new world of globality, the new rule is that there are no rules. Just because U.S. companies have always done something a certain way doesn't mean they should continue to do so. Companies need to be fast and flexible and understand their markets and customers as never before.

The road going forward is like an eight-lane highway with no access and egress signs, no directions, no lane markings, no speed limits, no police and no one knowing if they should drive on the left side or the right side of the road. You make your own rules and do your best to get to your destination. In the world of globality, you can't wait for someone else to set the rules.

I like to tell the story of a Chinese manufacturer that was getting feedback about its washing machines' clogging up drains. The company investigated and found that the machines worked just fine but that rural consumers were using them to wash potatoes. What would an American company do to solve this problem? Call in a p.r. firm to tell consumers that washing vegetables voids their warranty? The Chinese company had a better idea: it added a vegetable-wash cycle to its machines. We call this innovating with ingenuity--and no government program can teach this.

Global competitiveness in the era of globality--where the new rules are no rules--requires new ways, new thinking. This is a battle that any nation dares not lose.

Sirkin is a senior partner at the Boston Consulting Group and a co-author of a new book, Globality: Competing with Everyone from Everywhere for Everything

World Economic Forum Who's Got the Edge

Each year the World Economic Forum handicaps 130 countries in the global-competitiveness race. Here are the top 50 [This article contains a table. Please see hardcopy of magazine or PDF.]

2008 2007 1 United States 1 2 Switzerland 2 3 Denmark 3 4 Sweden 4 5 Singapore 7 6 Finland 6 7 Germany 5 8 Netherlands 10 9 Japan 8 10 Canada 13 11 Hong Kong SAR 12 12 United Kingdom 9 13 Korea, Republic of 11 14 Austria 15 15 Norway 16 16 France 18 17 Taiwan, China 14 18 Australia 19 19 Belgium 20 20 Iceland 23 21 Malaysia 21 22 Ireland 22 23 Israel 17 24 New Zealand 24 25 Luxembourg 25 26 Qatar 31 27 Saudi Arabia 35 28 Chile 26 29 Spain 29 30 China 34 31 United Arab Emirates 37 32 Estonia 27 33 Czech Republic 33 34 Thailand 28 35 Kuwait 30 36 Tunisia 32 37 Bahrain 43 38 Oman 42 39 Brunei Darussalam n/a 40 Cyprus 55 41 Puerto Rico 36 42 Slovenia 39 43 Portugal 40 44 Lithuania 38 45 South Africa 44 46 Slovak Republic 41 47 Barbados 50 48 Jordan 49 49 Italy 46 50 India 48
Source: World Economic Forum's Global Competitiveness Report 2008-2009; for the full report, go to www.weforum.org

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