Back to Don SullCommitting to a global mindset is only the first step in globalization. Just because the owner is committed to going global, there is no guarantee that the rest of the organization will follow along. Samsung’s Chairman Lee declared a “Second Foundation” in 1987, but found the group had made little progress six years later in moving towards global competitiveness. To commit the organization to globalization, Lee divested businesses, shook up management and made bold public declarations to global leadership in electronics.
Decisive actions to give the global mindset teeth serve several purposes: They convince employees and external stakeholders that top executives mean business, and that globalization is not simply the management fad of the month. Commitments trigger a sense of crisis, but also that management has a way forward. Finally, these actions can help the company make a clean break with the past, and prevent the company from relapsing into the status quo. Like the general who burned the bridges behind his advancing army, retreating from the battle was no longer an option. Below are a list of examples of how companies have committed to a global mindset.
o Bet Big on Focus: It is hard enough to go global in a single industry, but spreading management attention and scarce resources across multiple sectors is reckless. Consider CEMEX, which twenty five years ago was a family-run group with businesses in mining, tourism, petrochemicals and cement. Today it is the third largest cement company in the world. CEMEX’ CEO, like Chairman Lee at Samsung, realized his best chance in going global lies in focusing on a single business. Similarly the China International Marine Containers Group (CIMC), has carved out a global leadership position in shipping containers by avoiding the temptation to diversify into unrelated businesses, and instead extending the breadth of its product line and depth of intellectual property in its core business.
o Bet Big on Acquisition: Focus was not the only big bet CEMEX made. In 1992, CEMEX, spent about US$ 1.8 billion to acquire two large Spanish cement companies almost equal in size to the company’s Mexican operations. These acquisitions allowed CEMEX to raise funds in Mexico, retaliate against European players in their home market, and learn more about global expansion. Chinese firms have recently begun to do the same with Lenovo buying IBM’s personal computer business.
o Bet Big on Partnership. Sometimes owners give up partial control of their company to gain scale and access to global markets. Consider the Modelo Group which grew from a small brewer in Mexico to one of the top five beer makers in the world with revenues of over $4 billion. Modelo sold a large stake to Anheuser-Busch, which allowed it to protect its Mexican market from Budweiser itself and gain access to a great distribution partner in the USA for its beer.
o Bet Big on Brand: When Modelo decided to enter the US market, many doubted its ability to complete in the most competitive beer market in the world. From 1990 to 1996, however, Modelo increased its marketing budget eight-fold to launch the Corona brand in the US, eventually making Corona the most popular imported beer in the US.
o Change Headquarters and Official Language: Today Bunge is the largest soy bean producer in the world, and among the largest food companies. To signal their commitment to globalization, the top executives relocated the company’s headquarters from Brazil to White Plains, New York in 1999 and make English its official language. Firms can move gradually in this direction by building market research and design centers, research and development laboratories and manufacturing plants outside their home country.
o Bet Big on a Leading Global Customer: When Brazil ended trade protection in the auto industry, 19 of the top 20 automotive parts suppliers went out of business or were acquired by multinationals. The only survivor was Sabo was which succeeded in globalizing its operations by committing to serve General Motors. While its competitors choose to serve less demanding local customers, Sabo early on committed to supplying the most demanding customers in the world, which forced the company to achieve world class standards quickly. When protection ended, Sabo was prepared while its competitors were not.
o Bet Big on Technology: Brazil’s Embraer is today the fourth largest airplane maker in the world. After its partial privatization in 1994, Embraer executives decided to bet the company on the launch of the ERJ 145, a regional jet. This project involved investments of over $800 million, and allowed Embraer to win 40% of the global market for regional jets. Embraer funded its large investment by entering into “risk-sharing” partnerships with sub-system suppliers. Huawei has also bet big on technology, with nearly one half of the company’s employees engaged in research and development and a commitment to invest 10% of revenues in R&D annually.
