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In global era companies must eat or be eaten
www.chinaview.cn 2007-06-06 08:43:10
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    BEIJING, Jun 6 -- With the 2008 Beijing Olympics looming, there is a growing sense of expectation among Chinese citizens. Many wouldn't be surprised to watch the Olympic squad increase its medal count next year, because in the wider economic and geopolitical sphere, China has already become a force to reckon with.

    "The world is moving from an era of geographically concentrated economic power to one characterized by multiple centers of economic and business activity," according to Accenture, a management consultancy, in a report called the Rise of the Multi-polar World.

    As the world's fourth-largest economy, China plays a major role in ushering in this new multi-polar world.

    The concept

    What exactly is a "multi-polar world"? It's not a radical departure from the current globalized business world. Instead, according to Accenture, a multi-polar world is a new phase of globalization, in which the developing world plays a greater role in economic activity.

    Accenture believes the multi-polar world is comprised of five key dimensions:

    Talent has become a global commodity fought over by multiple competitors.

    While FDI continues to flow from developed to developing markets, emerging economies are becoming an increasingly significant source of outward investment.

    Both developed and developing economies are competing for natural resources worldwide.

    Emerging economies are becoming important consumer markets in their own right.

    Finally, thanks to the emergence of new clusters of innovation, many emerging markets are fast moving up the value chain.

    There is no better place than China to illustrate the five dimensions of the multi-polar world.

    Take the globalization of talent and capital flows. China has the second-largest share of science and engineering graduates in the world, but it is also important to look at the demand side-both multinational and domestic companies are competing for talent in China.

    China has long been a premier destination for foreign investment, but China's own overseas investment is also striking: The value of overseas acquisitions completed by Chinese companies almost doubled in 2006, after more than tripling 2005.

    The implications

    What, then, does all this mean for companies operating in China?

    Accenture points out that for CEOs of multinational corporations operating in China, as well as senior executives of Chinese companies, the rise of the multi-polar world raises fundamental questions about leadership, organizational structures, geographic strategy, operating models, people and values.

    To achieve high performance, multinationals should look to deconstruct their innovation value chain, stratifying locations by their suitability for different stages of the innovation function and by their competitive advantage in new and emerging industries.

    "China could simultaneously be a location for basic manufacturing in cars, contract research in pharmaceuticals, and advanced research in emerging areas such as biotech and nanotech," Accenture notes in the report.

    The same holds true for Chinese companies: to be a successful company in a multi-polar world, Chinese companies must develop the ability to adjust its market focus and positioning for sources of competitive advantage.

    Many Chinese companies with global ambitions are looking to Lenovo for inspiration.

    Lenovo, which acquired IBM's personal computer business in 2005, is one of a new breed of global companies, driven by the emergence of the multi-polar world. Lenovo is based in New York, trades on the Hong Kong stock exchange, conducts research in North America and Japan and is led by a management team that includes a mixture of U.S. and Chinese executives.

    In the sports world, China has plenty of world-class players, including basketball player Yao Ming and track star Liu Xiang. Similarly, in the business world, a growing number of Chinese companies are becoming world-class players of the Fortune Global 500, 19 are from China. But they face hurdles along the way.

    "Chinese companies don't know much about what to do to become a global brand," Zhang Ruimin,CEO of Haier Group, recently told the Asian Wall Street Journal. "They think of foreign companies as Olympic competitors and of themselves as local players," he added.

    That mindset is dangerous, according to Zhang. He believes companies in the age of globalization must eat or be eaten - they must either become international companies or be acquired by them.

    That may be worrying to some. However, every cloud has a silver lining. The same forces that have driven the globalization trend - open markets, technology and corporate strategies - are also setting the stage for Chinese players to compete on the global market. All they need to do is act fast.

    Mark Purdy is senior economist and manager in the Policy & Corporate Affairs Group at Accenture. Andrew Sleigh is the China lead for Accenture Policy and Corporate Affairs

    (Source: China Daily)

Editor: Sun Yunlong
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