CeMAT ASIA: Global Logistics challenges into emerging markets

What alternative strategies should be adopted to balance the extent of localization versus integrated globalization in order to succeed in these unpredictable and individually unique markets?  Should they stay more local, relying more on local partners and supply chain relationships, or should they be integrated into global operations and scale? What options will be available?

As is so often the case in running a global business, there is no one right answer. Given the emphasis on growth and the pressure on organizations to meet financial targets, expansion into BRIC (Brazil, Russia, India, and China) and emerging markets may be inevitable. Companies taking a “one size fits all” approach to expansion, however, are setting themselves up for disappointment. 

In interviews with more than 250 senior executives of Asian companies, we found that only 28 percent said their revenues and profits from international markets had fully developed in line with expectations over the past three years.

While 90 percent of expanding Asian companies who responded to the study remain strongly committed to international expansion, only 31 percent said they have the right operational capabilities to support international operations. Executives also indicated that a major concern was the “human side” of international business: securing talent, building a global mindset, and managing cross-cultural communications.

Ideally, companies operating in BRIC and emerging markets will rely upon decentralized operations, running at critical mass and tailored to the local market. They will employ global best practices when possible, with emphasis on flexibility and responsiveness over global standardization and scaled efficiency. 

It’s also worth remembering that, when companies such as Panasonic, Samsung, and Toyota started their international expansions, they based their competitive advantage in large part on lower production costs. Over time, they shrugged off these low-cost origins and became known for innovation and premium products.

The same scenario is playing out today with other Asian companies as they globalize, but at a much faster pace. In our study, a majority of executives said low-cost operations were a primary driver of competitive advantage today, but only a small minority thought it would still be an advantage in three years’ time.

The extraordinary variations among emerging market countries suggest the need for multiple supply chains, each tailored to the specific needs of regions and communities and supported by locally developed capabilities and talent. Each supply chain should be flexible enough to accommodate rapid change. 

Most organizations place a high value on integrated operations, but in BRIC and emerging markets the emphasis may shift from “integrated” to “dynamic.” This means creating fluid, responsive ecosystems of processes, people, and technologies. Decentralized operations can allow companies to deal more effectively with a range of issues including cross-border challenges, differences in taxation, geographic obstacles, technological variations, and discrepancies in the labor market. 

Every company, and every market, is different, so organizations must deal with the real, rather than the ideal. They need to think about each developing country as an independent ecosphere, a micro-supply chain with its own variations. 

Stages of localization maturity

Depending upon company ambitions, the current levNIKE AIR JORDAN