By Gweon Seung-wha
Behind the recent emergence of the ``polycentric world,’’ the new feature of the evolving trend of globalization, lies the diversification of consumer demands and desires propped up by the rise of emerging economies and their purchasing power.
If multinationals for example went into China to churn out products with the ``Made in China’’ label in the past, they now seem to be more eager to manufacture goods ``Made for China’’ targeting the world’s largest market itself.
Business opportunities are now distributed more evenly than at any time in history ― from mature markets to emerging and even underdeveloped markets. And many enterprises are forced to do businesses at a multiple number of markets at the same time.
By nature, different markets have different conditions for business and, therefore, an enterprise doing business across borders should be able to allocate its capability and resources more properly to different markets. In other words, differentiated strategies for each local market are the key factor of success or failure.
What priorities, then, should corporations focus on to win in this polycentric world? They are advised to focus on the following four priorities: redefine global and local; develop a polycentric approach to innovation; rethink relationships with government and tax authorities; and build leadership teams with strong global experience.
First, enterprises should be able to live up to the needs of local markets by redefining the concepts of global and local. While they are encouraged to roll out business and operating models more ``globally,’’ they should take a more ``localized’’ approach based on the differences between markets.
Next, companies need to develop open and diversified approaches to innovation by redeploying and creating strategic hubs for research and development (R&D) activities, particularly in emerging markets. Cosmetics goods developed for Chinese consumers might turn to be popular, or unpopular, with the Indian.
Third, it is essential for the companies doing business abroad to build cooperative relations with the government and regulatory authorities of the local market. Changing laws and regulations must be taken into account, as compliance has surfaced as one of the major business risks in the wake of the latest financial crisis.
Lastly, companies need leadership teams with both strong global experience and local market knowledge so they can respond to demands in different markets at varied speeds of operation. If a fast decision-making is vital in emerging markets, differentiated strategy is crucial for efficiency and incremental growth in mature markets.
Succeeding in this rapidly changing business environment requires agility and know-how. It means taking a more networked approach to innovation ― through decentralized innovation hubs or new external partners. And it requires creating and nurturing diverse leadership teams with strong global experience.
We are now entering a new chapter of globalization, dubbed the polycentric world. Corporate players will not be able to adapt to the new ``rule of game’’ without world-class capability and strategies and, at the same time, in-depth knowledge and understanding of local markets.
Gweon Seung-hwa is the Country Managing Partner of Ernst & Young Korea.