Thought Leadership

How globalization is helping companies leverage emerging markets for growth

Wim Elfrink, Executive Vice President, Cisco Services & Chief Globalization Officer, Cisco Systems, Inc.

Thomas Friedman in his book ‘The World is Flat’ captured the essence of today’s new era of globalization. Globalization has made our world smaller. As the markets for products, services, labor, and capital increasingly integrate worldwide, we are witnessing the increasing economic, cultural, demographic, political, and environmental interdependence of different locations around the world. History is witness to the evolution in globalization - from the late 15th century to the new millennium. Friedman suggests that this period covered the first two eras of globalization. The second era focuses on companies competing globally while the third will empower individuals to collaborate freely and compete globally.

My belief is that the global business is on the road to third era, where we are moving towards the full realization of the potential of strategic globalization, which will empower individuals to compete globally. Most transnational and multinational companies have made significant progress in their globalization efforts, with operations in several countries, offshoring certain processes or functions to countries with the capabilities and growth potential. While the recent globalization efforts has its roots in cost arbitrage, today successful companies understand the globalization can be a means for shoring up competitive advantage not only of lower labor costs but more importantly of diverse intellectual capabilities, growth and quality enhancement opportunities, and the ability to get products to market more quickly.

Globalization is a strategic imperative to most multinational corporations today. Emerging markets are clearly an important aspect of this strategy for several reasons. First, economic indicators such as GDP growth and FDI suggest that emerging markets like China and India represent high-growth potential. Second, I believe emerging markets are the future of the IT and telecom revolution and will seed future innovation in industry. For instance, take the wireless revolution sweeping the Asian landscape. The idea of wireless as a substitute for traditional wireline has been kicking around since the first cell networks were built 20 years ago. But only now is it being realized. The wireless markets in India and China are great examples of this. As the number of wireless subscribers exceeds wired subscriptions, more and more people who never before had used a phone are now using cell phones to communicate with others. Third, the needs of these markets are quite different. These markets present a different set of challenges and opportunities and companies are therefore innovating in their service offerings.

For instance, in the eighties, fast moving consumer goods companies introduced micro-selling methods to address the needs of Indian consumers. A decade later, Indian telecom service providers have innovated and are still exploring alternative infrastructure, handsets, billing systems, business models and marketing strategies. Companies across sectors have had to innovate in emerging countries like Brazil, China and India. It is clear that strategies customized and devised specially for these markets will likely prove applicable to other emerging economies. And when one looks at the economic indicators in these regions, it is clear that creating a strategic presence in such markets will help companies leverage learning on-ground to tap similar markets elsewhere in the world. The outcome of this - increased investment inflows as companies establish their presence in Asia, Latin America and Eastern Europe.

The debate sometimes unfortunately gets limited to India versus China, which in my opinion is not an "Either-Or" case. India and China are both important markets. Experts believe that these countries in fact complement each other and companies can leverage the unique strengths of each for competitive advantage. China is undoubtedly a winner if one were to consider its economic growth, prowess in manufacturing and urban infrastructure and development. What works in India’s favor? In addition to high economic growth, India is the world’s largest democracy and free market, offering a large talent pool of skilled, English-speaking talent. Its competence lies in R&D, design and services. With one of the fastest growing young populations, government focus on economic development, India’s culture of tolerance, diversity and partnership present investors with a strong growth proposition.

I believe that companies that succeed in the new era will have to take advantage of these emerging markets. Innovative use of technology is going to take the lead in defining economic development in these markets, helping these markets leap into a new era of communication and collaboration, transforming the way businesses and communities function. In fact, the new necessity of the 21st Century is ‘Collaboration.’ Collaboration will drive new market dynamics - we will see businesses operate in several markets leveraging any and every source of competitive advantage for business growth. Networking technologies will play a key role in enabling connectivity to bring people from diverse geographies across the globe to work together, and that is really the essence of globalization.

Wim Elfrink

Wim Elfrink
Executive Vice President, Cisco Services & Chief Globalization Officer
Cisco Systems, Inc.

 

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