The article being reflected on today is called How emerging giants can take on the world written by John Jullens and appearing in the December 2013 version of the Harvard Business Review covering pages 121-125. The main purpose of the article is to enlighten the readers on the importance of an organization’s capabilities in domains such as innovation, brand management or operations in order to form a structure strong enough to sustain organizational growth in the short and long term. John Jullens elaborates on this topic by looking into an organization’s capabilities and how acquiring and fostering these may lead to significant profit margins for the organization. Hence finding a structure capable of achieving this has proven to be more than difficult and jullens emphasizes the importance of this last skill through the usage of examples BYD and Chery, 2 Chinese automakers whose success was short lived due to their failure to invest sufficiently in long term innovation.
Therefore, Jullens insists that if a company wishes to succeed in today’s market, it needs to achieve an “ambidexterity” that balances both solid foundations in innovation and operations with growth development and market seeking.
The author supports this statement by giving examples from the real world, which makes it really clear for the reader to understand the argument. He talks about companies that made the mistake of thinking that their business model would also work in other markets than their home market and could not find the balance with the aforementioned ambidexterity. Thereafter, he talks about companies that did learn how to deal with a maturing market and did manage to achieve this ambidexterity.
For instance, the author relates to the Chinese automakers Chery and BYD, who both fell in the first category (unsuccessful long-term strategies) and another automaker and a company that specialized in house appliances, who belong to the second category (successful long-term strategy). In the first part of the article, the author gives examples of the mistakes that were made by Chery and BYD, namely, not being able to create other firm specific advantages than just being able to produce at a low cost. In the body, the author gives a step-by-step system which he believes to be the best way to acquire these capabilities. In the last part, the companies Great Wall and Haier are discussed, which both followed the correct pattern in acquiring capabilities. The author concludes the paper by saying that he finds it difficult to say if this is the way for emerging giants to go. He states also that these emerging giants can learn a lot from the developed-world multinationals, who already know how to behave and manage a company in a developed market.
What is good about the article is the fact that the story is told on the basis of real-world companies. This leaves room for the author to support his points by telling what happened to companies who also struggled with the problems the author discusses. Thereby the author describes the stages that an emerging giant has to go through. He does so in great detail, so that the reader can also benefit from this. Lastly, in the conclusion, the author says that the article is not meant to advocate that the emerging giants should learn (too much) from the developed-world multinationals, which helps making the author’s point clearer.
This article, like most things, is not perfect and so, as much as it has its own strengths, it still has weaknesses too. The first weakness of the article is that the only companies used are Chinese companies. The author uses BYD, Chery, Great Wall Motors, Haier, Galanz and Wanxiang as examples to explain how the actions of these companies have helped Jullens in providing proof which back up his facts and writings. However, the article would be more persuasive if other companies were used from other emerging markets who had similar if not the same problems as the companies mentioned above. The use of these other companies would make the reader realise that all companies are at risk of being unprepared when the growth slows and the competition increases, and not just companies that were established in China.
The second weakness in the article is that Jullens assumes that all businesses aim to transfer internationally into other countries and be a successful and well renowned firm, globally. However, some businesses possibly just want to grow to a certain size, and once the business has reached that size then the owner will put it up for sale. In this instance, a company may just want to take advantage of this rapidly emerging market and then once the market matures and growth starts to decline, then the business is sold, which means that there’s no need to improve their capabilities.
The final weakness is that all the examples mentioned in the article, as well as in the first weakness stated above, are all manufacturing companies. BYD, Chery, Wanxiang and Great Wall Motors are all car manufacturers, Haier is an electronics and home appliances company and Galanz is a microwave oven producer. The problem with this is that there are no examples of any companies which operate in the service industry like information technology, hospitality, healthcare, professional services or banking. The use of examples from the service industry would give the reader a sense that the problem of not improving the businesses capabilities would impact each and every company, whether they are in the manufacturing or service industry.
This article has taught us how not to make the same mistakes as the companies mentioned, namely BYD and Chery. Both of these companies lacked the capabilities needed to compete against other emerging giants as well as large multinational companies which led to huge drops in sales for both BYD and Chery. Therefore, this has taught us that it is extremely important to lay down the correct foundations of the company as if not, it will lead to failure.
Because of the detailed description of the four stages, this article could benefit managers who read it and operate in emerging markets. For the managers who lead an emerging giant, the article gives a pattern to follow, which they could use in leading their companies. Also, for managers from the developed-world multinationals, this article brings a lot of interesting information. These managers could read the article and know what struggles their competitors have to deal with, giving them the chance to anticipate on the situation.
The article relates to the course of International Business in a way which emphasises the need to develop capabilities when the business is new and young. In IB, in order to be successful abroad, a firm needs to obtain and make use of location bound advantages through a process where a firm needs to follow the four phases of “seize the moment”, “build strength”, “scale and consolidate” and finally “move up and out”. The businesses must only aim to become a global firm once it has completed the first three phases, and that is just like in IIB where a firm should locate abroad once it has obtained location bound advantages which can be combined with the MNEs respective non-location bound FSAs.
To conclude, we can put forth the idea that a well-structured strategy that focuses both on strong foundations in areas such as R&D and operations as well as the growth pattern the organization follows in its market seeking expenditures is primordial to any organization’s success, especially those originating from emerging countries. Therefore we can admit that the article presents a certain value to the reader as it elaborates on the difficulties encountered by previous organizations and how they can be avoided through the fostering of a solid structure that takes into account periods of slower growth.
As the ultimate conclusion of our reflection, we would like to further inquire on the author’s perspective with this trio of questions:
– Which foundations should be recurrent in all successful MNE’s structure?
– Is there any bright future ahead for the likes of BYD and Chery who invested too naively in foreign markets?
– Will this difficulty sustain itself or will there be a steady answer to this problem in the not too distant future?
All references within this reflection come from Harvard Business Review. (2018). How Emerging Giants Can Take on the World. [online] Available at: https://hbr.org/2013/12/how-emerging-giants-can-take-on-the-world [Accessed 12 Nov. 2018].