Globalisation promotes competitiveness

Tags: Op-ed
Globalisation promotes competitiveness
Bloomberg
TECH TOOLS: In India, the presence of global IT consultancy firms ensured that Indian firms fight for the best talent, and compete on both price and differentiation, and help them to develop better technology driven solutions
It is a simple and non-controversial fact that globalisation promotes competitiveness. The incumbent local players are forced to upgrade their processes, continuously revisit talent management policies, and redouble efforts to realign product and marketing strategies to market requirements. Once global companies set foot, local firms have no choice but to embark upon sophisticated approaches to remain relevant. One reason for China’s rapid rise as the world’s largest exporting nation is its open arms policy to foreign firms in establishing manufacturing plants leading to upgradation of skills, competences, and capabilities across the value-chain. For instance, Foxconn produces more than 70 per cent of iPhone and other Apple products in China. The country has benefited tremendously from this relationship and there are now hundreds of other companies offering equivalent products at one-tenth the cost (most low-end smartphones selling in India are imported from China).

Competitiveness means a country’s ability to export products successfully in the world’s toughest markets; it can also mean getting an increasing market share in the expanding pie. There can be no better example than the Indian IT services industry which started as a low-end, cost-arbitraging back-office such as hospital records transcription services for the developed world. Today, it is a strapping $100 billion industry with many Indian companies holding their heads high amidst global giants and listed even on NASDAQ. Leading Indian IT-BPO firms such as Wipro, TCS, Infosys have created their own niches for value-added services. The presence of global IT consultancy firms like IBM, HP, Cadence, Accenture in India has ensured that Indian firms fight for the best talent, and compete on both price and differentiation, and help them to develop better technology driven solutions to client related issues, access latest organisational thinking, and most importantly, understand how innovative firm-level cultures are created. Often this has been achieved through in-house innovations, or by going global and entering into research collaborations.

In fact, it is one industry that has given a sense of pride to the youth and brought recognition to India’s brain-power. Such respect is reflected in the leadership positions that Indians are entrusted with even by global leading-edge companies such as Intel and Microsoft. Imagine if this industry was ‘protected’ by the government in the early 1990s by preventing global competitors from entering India. Would it have been able to compete on the high-end services? What kind of talent would we have had in that case? In terms of national competitiveness, would the country have been the world’s centrestage as a “one-stop shop” for all IT-related software and services?

The automotive sector in India is a big customer of IT products and services. Using CAD-CAM software, many Indian auto companies and auto ancillary companies have been able to adopt enterprise resource planning (ERP) implementation as well as customer relationship management (CRM) frameworks. This has led to better business effectiveness and efficient lower-cost supply chain management. In addition, usage of analytics software from Microsoft and Oracle, among others has enabled the Indian auto companies to launch better sales promotion programmes and develop newer customer-friendly products. Healthcare, especially medical hospitals, in India have benefited in a surrogate manner unlike the IT industry which has been a direct beneficiary. Government hospitals in India are always under heavy pressure in terms of doctors, infrastructure, and facilities — the demand for services far outstrips supply. Yet it benefits from globalisation in terms of equipment, education of doctors, prescriptive drugs, research papers, and cross-fertilisation of ideas. Presence of hospitals with medical colleges is essential for real-time case-studies and dealing with patients. Each case if different and has varying degrees of difficulty.

Foreign investments in India’s higher education system can create similar seeding effects for innovation diffusion across the whole value-chain. This could be in the form of corporate-sponsorships or direct investments in research and teaching institutions. India has historically lagged behind in sponsored research, and wherever in few cases corporations have provided funding, not much research has resulted. The presence of foreign universities can start a new phase of funded collaboration. The IIIT experiment in India has by and large been a good experience, where multinational computer hardware, software, and services companies have come together to provide umbrella funding for these institutes. Though the universities have not resulted in new product innovations, these have been successful in creating a high-talent pool of graduates in the country who are almost job-ready because of world-class industry linkages. An article in Nature mentions that subsequent work on an invention can be more valuable to sponsors than exclusive access. For instance, IBM is said to disclose innovations on the periphery of its expertise without patenting them, resulting in many non-IBM patents resulting from the disclosed innovations.

Ask any international player and he will admit without demur: playing with superior players is always a challenge, but also very rewarding. Playing on different turfs and different geographies is crucial for acquiring new skills and mastering new strokes. The other side of the coin is also true: one will quickly become irrelevant playing with only inferior players.

arunkumar@mydigitalfc.com

(The writer is a professor of strategy and corporate governance, IIM-Lucknow)

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