Can Asia become an economic Superpower? - Rajat Gupta

JAIPUR: ‘Asian companies would have to change their mindsets if they are to emerge as global champions’ was consulting guru Rajat Gupta’s verdict this morning.

 

Moving away from much discussed brands, Gupta, senior partner – worldwide, McKinsey & Company, USA widened the scope of the discussion to the possibilities of Asia as a region emerging as an economic superpower. Gupta argued that becoming a large supplier of skilled resources or creating a large consumer market in itself was not enough to bring about this transition. In his opinion, for Asia to justifiably earn this distinction, the region would not only need to make a significant contribution to the world economy, it would also require the emergence of not few but several successful global companies.

Drawing attention to the need for Asian companies to become global leaders, Gupta cautioned that with the globalisation of the world economy, the players would increasingly have access to the best resources the world has to offer. “At the same time however, the risks will increase because they would now have to compete with the best in the world. With this will dawn the realisation that their ‘global strategies’ are in reality, little more than expansion tactics,” said Gupta. He further warned that if locally successful companies such as Tata Motors in India, Hang Seng Bank in Hong Kong or Legend in China do not go global their arena would be captured by established global giants. He then went on to define globally successful companies as those which show outstanding market performance, have significantly outperformed the market in terms of returns to share holders and have more than doubled their share of total world market capitalisation in the last ten years.

Before going on to recommend what companies could do to become global, Gupta looked at the following reasons why many Asian companies had met with limited success in this endeavour -

* Low global competitiveness with limited focus on operational excellence and excessive government protection and support.

* Local workforce and management culture with no experience of handling diversity.

* Lack of organisational sophistication.

* Limited global ambition with senior management unsure of prospects

Admitting that there were no standard recipes or shortcuts to success, Gupta emphasised on the need to have a strong and stable home market position, develop high quality operations by building on local comparative advantages and identify one’s distinctive capabilities as essential prerequisites before embarking on the globalisation journey.

Citing the example of HSBC, Samsung Electronics and LG Electronics – three Asian companies he called as truly global champions, Gupta demonstrated that the journey to global championship involved the following three key elements:

* Working out the winning formula which required a staged build-up of capabilities and matching them with markets.

* Grooming a cadre of global executives who can seamlessly operate in multiple markets and transfer capabilities across borders; executives who can not only spot opportunities in markets but also marshal resources to capture them.

* Mastering the matrix organisation by developing a global organisation structure, building a strong corporate centre and integrated corporate processes and setting up ‘soft processes’ for fostering a collaborative culture that would include defining shared values and beliefs.

Gupta concluded by saying that what was required was a complete shift in the attitude. Selecting attractive markets, hiring experienced locals, or setting up an international division to handle international efforts without finding solutions to the cultural issues will not suffice. Asian companies will need to secure their home markets, develop world class capabilities, select markets that leverage these capabilities, groom executives from within the organisation to be their trusted lieutenants, moving to a global organisation structure and implementing strong integration processes. Asian companies, he said, would need to move from a ‘going global’ to a ‘becoming global’ mindset.

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