October 12th, 2003

Predicting the future, Part 2: “local industry”


I wrote about Outsourcing in Part 1 of Predicting the future a month ago and I thought it is about time I write a sequel. So here is Part 2: “local industry”.

Like Part 1, lets look at industry revolution and how railroad changed the business landscape. Railways bring people closer together and allow goods to travel further. Where you used to do business within 30km, you now do business 300km away with equal ease. Companies faced not only competitions from the same town but from other similar companies other towns.There is also one significant difference between industry and information revolution. While industry revolution produced and traded physical good, information revolution produced and traded “virtual” goods (e.g. intellectual property). And in cases where physical goods are traded, distance is no longer an issue with the advancement of transportation.

As Internet brings people even closer together, that someone in US can bid for goods in Europe competiting with someone from Asia over the Internet, the mental geography of locality is no longer relevant.

There is no local industry: a plastic manufacturer in US who used to sell plastic bags to Wall-mart now competes with plastic manufacturers in China.

Businesses who still think they are a “local company” and hence shield from global competition is in for a rude shock. Having a global strategy is not only critical but the only choice for survival.

We will also see the emergence of a truely “global company”. Global company differs from multinational company (MNC) in that it functions and operates across multiple nations as one single entity. For example, Dell has its designing, maufacturing, accounting, marketing, logistic, sale scattered across the globe.

And as companies pushes for globalization, they will demand lower cost of doing business and barriers to be removed across countries. This will leads to more free trade agreements signed between governments, and hence, standardization of business rules. The markers between the different economies and markets will become fuzzy and it will be indistinguishable.

To quote Peter Drucker, “There is only one economy and only one market“.

Comments are closed.