strategy+business is published by PwC Strategy& Inc.
 
or, sign in with:
strategy and business
Published: May 6, 2013

 
 

The Flat World Debate Revisited

The danger of Friedman’s flat-world thesis is that it could cause executives to misinterpret the trends they observe in their own businesses and make potentially serious strategic errors. Instead of pursuing an aggressive localization strategy, for example, executives from multinational firms often decide to “wait it out” in emerging markets such as China and India. They hold the mistaken belief that demand-side and supply-side conditions will soon flatten and converge with those in developed markets. They may, for instance, believe that China’s retail environment will consolidate relatively quickly; as a result, they may fail to invest in localized distribution channels that are more appropriate for today’s market conditions. In reality, such consolidation is highly unlikely to occur within any reasonable planning horizon. And the impact of such wishful thinking is far from trivial. It could result in missed profit opportunities, and could also cause multinationals to fail to check the advance of competitors from these emerging markets until it is too late. 

The world is still far from flat today, and, in many industries, it’s likely to retain its curvature for quite some time to come. Executives should be wary of relying too much on Friedman’s superficially persuasive, but seriously flawed, evidence. Instead, they would do well to adopt a more analytical approach for evaluating how flat their world actually is, now and in the future. This will require a deep, fact-based understanding of the specific flatteners in each of their businesses, as well as a careful consideration of whether to ignore, adapt to, or try to shape those drivers.

On balance, Ghemawat wins the argument hands down.

Author Profile:

  1. John Jullens is a partner with Booz & Company based in Shanghai. He co-leads the firm’s engineered products and services practice in Greater China. He blogs at www.johnjullens.com.

 

 
 
 
 
Close
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.

Close