Are we just about beer, prawns and sunny beaches?

When IBM Chief Executive, Sam Palmisano, called on major corporations to become ‘globally integrated enterprises’, some companies believed it sounded the death knell of the twentieth century multinational.

While some historians trace the multinational back to the days of banking under the Knights Templar in 1135, the structure we know today emerged when nineteenth century firms set up sales offices abroad to gain access to local markets and resources, with big business establishing mini versions of itself across the globe. And for decades, it was a very successful model.

However, what looked like efficiency has become redundant. Multinationals simply replicated or duplicated their businesses in every country. Each multinational outpost developed its own models for distribution and supply chain optimisation, procurement and marketing.

And while these corporates traditionally built factories overseas, they tended to base high-end functions such as research and development in their home countries.

With technology dismantling geographical borders, the goal of world class and sustainable competitive advantage can no longer be achieved in isolation. Everything is connected, the barriers that once blocked the flow of work, capital and ideas is diminishing and work can move to the place where it is done best.

New model corporations, built on collaborative innovation, integrated production and outsourcing to specialists, are beginning to reshape geopolitics, trade, leadership, workforces and education. Big business has realised that a more integrated approach to organising business activity is inherently more profitable and benefits both developed and developing worlds.

Today, the globally integrated enterprise can locate functions anywhere in the world, based on the right cost, skills and environment. IBM now has more than 50,000 employees in India and plans for further expansion there. And while India is now IBM’s second largest operation outside America, head of procurement has moved from New York to Shenzen in China.

China and India are already moving up the value added chain. One study suggests that between 2000 and 2003 foreign firms built 60,000 manufacturing plants in China. While some of these factories are directed at the local Chinese market, others target the global market.

The shift from multinational corporation to globally integrated enterprise has meant the ‘where’ and ‘who’ of production have changed. In the past, companies usually produced goods close to the market that purchased them. Today, enterprises are spreading strategies, production capacity and management around the world in order to be close to markets and customers.

Dutch banks open savings accounts for customers in New Zealand. American radiologists send x-rays to Australia for interpretation. Customer service centres in India handle telephone billing enquiries for English customers. Around the globe, economic activity is embracing shared business and technology standards and plugging into a truly global systems of production.

Australian business leaders across the spectrum of industry – from technology to tourism and from mining to manufacturing – need to decide on our nation’s value proposition. Is Australia just about beer, prawns and sunny beaches or do we need a more sophisticated value proposition to compete on the world stage?

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: