R. Siisi Adu-Gyamfi of Textron presented on “Profitable Growth in Emerging Markets.” With China now the 10th largest economy in the world (as of last week, he said), it’s an important trend for manufacturers.
The strategies he outlined, adopted by various companies (not all do all of these, but typically focus on one main one) were:
- Enter the New Market
- Move Some Production Abroad
- Disaggregate the Value Chain
- Re-engineer the Value Chain
- Create New Markets
He presented the case study of Carrier air conditioning going to China, and reducing its cost base by 47 percent. Profits from that effort led Carrier to get into creating New Value Propositions for New Customers (e.g. commercial refrigeration) and New Markets (Vietnam, Indonesia, etc.)
Sales have nearly tripled since 1993, and profits have gone from $10 billion to $911 million, and Carrier is now the largest business in this category.
Siisi’s call to arms for globalization:
- Use facts – not intuition
- Abandon incremental thinking – stop thinking small
- Use global assets effectively and efficiently
- Tailor your best practices to local conditions
- Aim for higher quality
- Learn from others – where have they succeeded and failed in globalization?
Ten years ago, 9 of the 10 most highly valued companies were U.S. companies. In 2006, it was 6 of 10. What will it be 10 years from now? Maybe three?
Businessweek says the EU will decline from 31 percent of the world economy to 25 percent in 2025 to 15 percent in 2050. The US will hold relatively steady, but by 2050 China will be the largest economy, and India will be bigger than the EU.