by Kent Brittan

The Future of Globalization
While this new globalized environment requires additional technical and logistical skills than before, the principal impediment to success is, as always, one of attitude. If a large company or its supply base look at the world outside their home country as a threat, as too complicated to understand, or simply too difficult to communicate with, they will have problems. Many companies also worry extensively about the risks of doing business abroad, be they economic or political. It is good to think about these risks, but if a competitor is willing to run them, then doing nothing becomes an even bigger problem.

As to the future of globalization Bob Moffat of IBM put is this way:

“Globalization will evolve either one of two ways: as a threat or an opportunity. It’s going to be up for all of the players in the world economy to decide through their own actions who emerges having said globalization was a threat, and who emerges having said it was a great opportunity.”

“Now, don’t get me wrong; in reality, globalization is both those things. There are very real upsides and down sides, but like any endeavor, attitude influences choices. If you see globalization as a threat, you are going to approach it very differently than someone who sees it as an opportunity — and I’d argue have very different outcomes.”

“Globalization is not about chasing low cost sources of supply around the world; it’s about doing the right work in the right place at the right cost, making effective and efficient use of global capabilities. We think there are primarily three things that determine where and how work will flow. The first is economics: cost and profit potential, but costs aren’t the only factor. If they were, we’d see everything commoditizing and all work flowing in one direction, and that’s not what’s happening because of the second determinant– expertise. In a world where the means of production and distribution are increasingly available to anyone, the only way to differentiate your company is to have better skills, to have a better idea, to come up with a more innovative solution, to know more than the next guy, and to apply it more effectively. Finally, the other deciding factor is open systems and open approaches. They provide a level playing field, which stimulates competition, innovation, and the free flow of goods and ideas.”

“If you’re asking where all this ends, and if THE END means coming back home, I think in a global company home is a relative term; home is not one place, but where your clients are; where the conditions are ripe for innovation. Companies that decide to compete on the basis of expertise and openness, and move from a multinational to a globally integrated model will be able to harness innovation to drive growth.”

Mike Eskew talks about the growth in customers that globalization brings as well as the importance of proximity:

“While a large, ambitious national economy like China may begin its economic revival as a center for low-cost sourcing, it will likely evolve into higher-level plateaus. It has the will to do so, a commitment to education, and a growing middle-class consumer market. By 2020, China is expected to have 500 to 600 million people reaching middle-class standing. Given those dynamics, low-cost sourcing may well shift elsewhere in the world.”

“Before cost-competitiveness reaches equilibrium among developed and developing nations, it’s more likely that the factor of sourcing in proximity to the customer will grow in importance. That’s due to the increasing realization that many supply chain benefits go beyond cost savings.”
“As product lifecycles get shorter and shorter, for example, the need to source in proximity to a company’s major markets may increase in importance to achieve customer responsiveness.”

Keith Nosbusch sums up the meaning of globalization for his suppliers:

“The bottom line is those companies that can help us execute our growth strategy – that understand where we want to go and why – will be the ones that make the best partners and suppliers as we all take advantage of the opportunities our worldwide economy offers.”

None of us has a crystal ball that works, but when all short term signs point in one direction, it may mean that the long term will go in another. Given the advances in process improvement and information technology (and the necessity to get by with a declining population) in the Western world it is conceivable that operating costs in many businesses may diminish such as to make them competitive with current “low cost sources” when the importance of proximity is factored in. What would this “reverse globalization” do to what has been said above? Such thoughts are already in the minds of some and provide a piquant final note to close this discussion.

A Note from Bill Moon – Chair, WBENC Board of Directors

Dear Reader:

“Globalization” is an often used term in today’s business world. Many view globalization as an inevitable occurrence, others use the term with concern about the future of their own companies. Most comment from the “outside in”.

Our author Kent Brittan, former chairman of United Technologies International Operations poses a view of globalization from inside the corporation developed during his eight years as United Technologies Vice President, Supply Management. In that role he was in charge of the 2,500 worldwide person supply management organization procuring $16 billion of goods and services annually for a $40 billion corporation.

He says of the plethora of articles on this “trend”: “This information is often interesting, but does not usually explain why things are happening… The objective [of this paper] is to make it clear that large companies are navigating their way in the world of today with a different mindset and using a disciplined set of processes to make the right choices.”. In other words, corporations are viewing global business opportunities and challenges “from the inside out.”

The corporate members of the Women’s Business Enterprise National Council (WBENC) as well as its more than 6,000 certified women business enterprises (WBEs) have embraced globalization as a focus of analysis, education and expansion at the launch of our second decade. Along with the global extension of WBENC’s certification programs that will benefit women suppliers in the U.S. and around the world as well as their corporate clients, WBENC has commissioned this paper to provide new understanding of the global business environment. As IBM’s Bob Moffat says “Globalization will evolve either one of two ways: as a threat or an opportunity.” WBENC is committed to providing the opportunity for all of our constituents to find new and increasing opportunity in the business market place whether in the U.S., Asia or elsewhere around the globe.

On behalf of WBENC, I wish to thank our sponsors IBM and Superior Design International (SDI). We also give special thanks and recognition to Kent Brittan, former Chair of United Technology International Operations who has donated his time and extensive experience to the writing of this paper and to SDI’s CEO Carmen Castillo who provided considerable time in the development of the paper’s scope as well as the coordination of its design and content. I also want to thank WBENC’s President Emeritus Susan Bari who served as the internal editor and manager for this project.

We appreciate the input of contributors Bob Moffat, Senior Vice President, Integrated Operations of IBM; Mike Eskew, Chairman and CEO of UPS; Keith Nosbusch, CEO of Rockwell Automation; and paper co-sponsor Carmen Castillo of SDI.

Sincerely,

Bill Moon
Former Vice President, Global Sourcing
UPS
and
Cha
ir, WBENC Board of Directors

Appendix
Biographies
Kent Brittan, former chair, United Technologies International Operations
Carmen Castillo, CEO, SDI
Michael Eskew, Chairman and CEO. UPS
Robert Moffat, Senior Vice President, Integrated Supply Chain, IBM
Keith Nosbusch, CEO, Rockwell Automation