The Marketing Exchange – April 10, 2003

• Introductions• Waves of Change

– Undercurrent (the invisible pull of change)– Crest (the visible turbulent waters)

• Swim with the Tide or Against It?– Implication for Your Industry and Company– Short-term vs. Long-term Acceptance and Impact– Your Reaction

• Next Steps

Agenda

Globalization is the Undercurrent Pulling Business to Change!

• Globalization ensures that small changes in far away markets increasingly impact local economies and organizations.

Globalization

Copyright – Prof.Jean-pierre Lehman, Prof. Of Political economy,IMD, Lausanne.

Historical Dynamics

The TONNE AGE (C1950-64) steel, ships, textile, construction

The KILO AGE (C1965-74) cars, consumer electronics, appliances

The GRAM AGE (C1974-90) micro electronics, robotics

The VACUUM AGE (C1990-) services, systems, media

Globalization - Competitive Paradigm

corporations compete for

market share

states compete for

investment share

Copyright – Prof.Jean-pierre Lehman, Prof. Of Political economy,IMD, Lausanne.

• Globalization is the inevitable outcome of the knowledge revolution.– It has enormous potential to transform the quality of lives of

people across continents and cultures.– It also presents challenges for those not willing to embrace

and plan for the inevitable.

Globalization – The Knowledge Economy

corporations compete for

brains

states compete to retain/attract

brains

Copyright – Prof.Jean-pierre Lehman, Prof. Of Political economy,IMD, Lausanne.

Globalization - Competitive Paradigm

• An explosion in technology and knowledge is creating a huge demand for talent.

– The twenty-first-century belongs to technology (biotech and infocom). It has already become the most important driver of economic growth and development.

– We have entered a new age - the knowledge age. The relationship between people and business in the industrial and knowledge age is fundamentally different.

Globalization – The War for Talent

World Population, bn

1750 1800 1850 1900 1950 1995 2050 2100 21500

2

10

8

6

4

Forecasts

12

Developing countriesDeveloped countries

* Source United Nations

• United States– Today, 20% of the population is above the age of 60 - in 25 years this will increase to a 25%.

– Within 15 years, professional workforce shortage will peak to 15 million. • Germany

– Roughly, a 25% are now above age of 60 and increases to 33% within 25 years.

– Within 15 years Europe will see a shortfall of a million professionals in IT alone. Germany is already facing a shortfall of about

200,000 engineers. • China

– Little better off, 10% are now above age of 60 and increase to 20% within 25 years.

– Estimated to need upwards of 1.4 millionmanagement graduates.

Demography – Who’s Positioned Well?

The Next Wave on the Horizon

India is Positioned at the Crest of the Wave!

• Area: More than 1/3 of USA

• Currency: Rupees (approx. 50/$)

• Coastline: >5000 miles

• Multi Cultural: 15 languages, over 200 variations, multi ethnic, multi religious

• Political Environment: The World Largest Democracy

India – A Snapshot

• India has a young population. – Just 7% of Indians are above the age of 60. In 25 years time only 12% will be

above sixty. – India will continue to be young and will see a swelling work force.– India has a large pool of scientific, technical and professional talent. – The educational and professional infrastructure built in the past has served

her well so far.

Demography is kind to this country

Strengths.1. Deep rooted democratic institutions2. High level of intellectual capital3. Partially insulated from high capital outflows and capital account convertibility.4. Resilience of the people and the economy5. Recognizes the need to be part of global economy and party to most 6. Well functioning judiciary and Capital markets.

Opportunities.1. Great opportunities in the software and internet revolution.2. 1.00 Billion market which by itself is a great opportunity and high market possibilities for products and services.3. High technology infrastructure as a base for developing ability to withstand global pressures 4. Credibility as a stable democracy that creates an atmosphere of Trust.

Weaknesses.1. High Level of Illiteracy and low level of health Services in many states.2. Highly politicized and narrow policies aimed at narrow political considerations.3. Regional and sectarian interests which are short term and myopic.4. Low need levels which lowers expectations.5. High emphasis on Religion, Caste and Traditional issues.6. Regional imbalances creating pull twds disintegration.

Threats.1. Social inequalities creates high level of friction between various groups and states which results in fight between haves and have-nots.2. India is not the best liked country in the world due to its straightforward and very independent stand on various issues- Threat of isolation by major powers.3. High level of illiteracy and health services in some states acts as a drag on increase in GNP- and proliferation of the fruits

of economic gains.

India – SWOT Analysis

India – A Deeper Dive

Imperatives for Business – Swim with or Against the Tide?

• Perception is that India is positioned well to play in the IT outsourcing/back office business processes. – Is this a sustainable position?

– Is this just a entry strategy into America’s big business?

– Can this model ever go front-office or customer facing? Why or Why not?

– Where do you see this model migrating to?

• Can India only play the low cost game or can they engrain themselves in value added positions within the value chain?

• Can this business model overcome inherent bias towards “built in America”?

Areas for Conversation

• Is there a two pronged approach for the India-based business model?– Compete (Faster, Cheaper, etc.)– Cooperate (Non-Core Business Process)

• Do these conflict?

• What are the limits of this model?• How should American companies participate in this model? Or what should they do to minimize its impact?• Is there any long-term competitive advantage to the India-based business model or will this be an eventual

chip to enter the game?– How is value created?– Who captures this value? Is it just passed onto the customer?

Areas for Conversation

• From your first hand experience in seeing this business model develop – what is the most exciting thing coming out of India that will have the greatest impact on the way companies conduct business?

• Our last marketing exchange discussed the migration of companies from a product focus to a solutions focus.– Solutions are responsive systems, based on customer needs. Where is the India

based model in the products-to-solution continuum?

Areas for Conversation