The global economy is undergoing a sea change. While American markets languish and deficits snowball, the global market has continued to grow in size and importance. Whether it is for technology or consumer products, the global market is now the best place to grow sales and profits. To fully realize the potential of these opportunities, executives must undergo a paradigm shift, strategically analyze data and build alliances before the first dollar changes hands.
"The $500 billion current account deficit and the trillion-dollar-plus U.S. budget gap are not sustainable and can't be financed much longer," says Dr. Glen Taylor, director of MBA Programs for Global Innovation at California State University, East Bay. "If we keep printing money to cover our debts, it will lead to inflation, devaluation of the dollar and diminished purchasing power, so our future depends on global expansion."
"To sustain growth and allow the next generation of Americans to have a better life, we have to rethink globalization, identify opportunities and be contributors to the global economy, rather than consumers," says Dr. Yi Jiang, associate director of MBA Programs for Global Innovation at California State University, East Bay.
Smart Business spoke with Jiang and Taylor about the process of identifying and making the most of ripe opportunities in the global marketplace.
What prevents U.S. executives from capitalizing on the best global opportunities?
Taylor: U.S. executives need a changed mindset and a different approach to analyze and select global opportunities, because our country is no longer the dominant market in the world. Our loss of supremacy means that we need to learn how to do business in other countries that don't always comply with our culture and business practices. We must put ourselves in their shoes and see things from their perspective in order to identify and capitalize on the best opportunities.
Jiang: We've had a tendency to view globalization in simplified terms and think of other countries as a resource for outsourced services and cheap labor. But when executives apply a different perspective to the analysis process and develop innovative products and solutions, they stand the best chance of succeeding outside the U.S. For example, PepsiCo recognized an unmet need in India, and capitalized by identifying itself as a provider of well-being services, rather than a supplier of food and beverages. The CEO’s paradigm shift and innovative marketing approach has led to greater success than simply transferring the U.S. strategy to another culture.
What's the first step in the identification process?
Taylor: The first step is demographic analysis, but unless executives take a deep dive into the data, they may overlook emerging trends and actually target the wrong customers. For example, a superficial analysis of Chinese demographics reveals no net population growth, but an in-depth study shows that social change is underway and people are urbanizing at the fastest rate in the world, adding tens of millions of new global consumers each year. This creates unprecedented demand growth for all kinds of products and services. The country's rising affluence has made the Chinese auto market the largest in the world, the largest market for mobile communications technology, and the largest market for consumer products and services of all kinds.
Jiang: Don't take a cookie-cutter approach to the analysis process, because each country has regional and generational differences that create unique opportunities. While cultural and generational differences often drive demand on the consumer side, U.S. executives must consider dynamic industry cycles and a county's openness and resources before attempting to position each country in the holistic picture of global strategy.
What's the next step?
Jiang: After analyzing the data, travel to the country to experience the culture, validate your hypothesis and establish strategic business partnerships and networks. You'll need seamless collaboration to understand the cultural nuances and build a supply chain. Infusing yourself in the culture will help you identify additional opportunities, since the best ideas often come from prospective partners, suppliers and customers.
Taylor: Meeting people is an important part of the evaluation process, and business relationships are like a marriage, so prospective partners must get to know each other before making a commitment. And your travels may yield additional opportunities, especially if you view things with an eye for the innovations being developed in other markets. Even though the U.S. may not be able to compete in labor-intensive manufacturing, we have endless opportunities to develop and export intellectual property, and there’s an unmet need for clean tech infrastructure in many parts of the world.
What else must executives do to succeed in the global marketplace?
Jiang: Remember that global opportunities and situations are fluid, so what seems like a great idea today may not work tomorrow. Conduct extensive scenario analyses so you are prepared to perform under a variety of circumstances, and keep your finger on the pulse of prospective customers by garnering feedback through open source social networking.
Taylor: There's every reason to be extremely optimistic about our future, if we make changes in the way we conduct business and get our deficits under control. The key is to search out opportunities in global markets to develop innovative products and services that build on our strengths while embracing new ideas from other countries
Dr. Glen Taylor is the director of MBA Programs for Global Innovation at California State University, East Bay. Reach him at firstname.lastname@example.org. Dr. Yi Jiang is the associate director of MBA Programs for Global Innovation at California State University, East Bay. Reach her at email@example.com.