Seen through this lens, the story of Sony and Samsung, rather than being the tale of one company’s decline and another’s rise, is one more illustration of a general tendency for high performance to fall over time. Thus, some years ago Sony was praised not only for its strategic vision but for its ability to devise organizational processes to execute that strategy; some years from now, when a new generation of technology or a different competitive context is in place, Samsung may well be eclipsed by a new rival. Although we may justifiably applaud Samsung for its recent successes, we should bear in mind that the same elements that lead to success may sow the seeds of failure when the competitive context shifts.
The Global Context
The battle between Sony and Samsung highlights the increasingly global nature of competition, a subject ably addressed in Redefining Global Strategy: Crossing Borders in a World Where Differences Still Matter, by Pankaj Ghemawat, professor at IESE in Barcelona. (See “Pankaj Ghemawat: The Thought Leader Interview,” by Art Kleiner, s+b, Spring 2008.) To the current crop of authors who assert that the world is now “flat,” this title is a cogent reminder that global strategy concerns choices that are made in a more complex world.
Ghemawat argues that the world is better described as “semiglobalized,” and claims that it is precisely the differences among countries that provide opportunities for any global strategy to create value. National differences, he says, exist along four dimensions: cultural, administrative, geographic, and economic. Further, the importance of these dimensions can differ by industry. For example, geography and culture may matter little in the semiconductor industry, but for the food industry the implications of these two dimensions are massive. Once these national differences as they exist in a given industry are understood, firms can identify ways to add value through the dispersion and coordination of global activities, whether by adding revenues, decreasing costs, managing risk, or leveraging expertise.
Ghemawat describes three ways that multinationals can deliver the benefits of a global strategy: by capturing benefits of scale through aggregation; by securing benefits of local adaptation; or through a mix of both, called arbitrage. Readers familiar with the work of Christopher Bartlett and Sumantra Ghoshal, notably their landmark book, Managing across Borders: The Transnational Solution (Harvard Business School Press, 1989) will find similarities here — aggregation and adaptation are similar to global integration and local responsiveness, respectively, and arbitrage has a ring similar to the notion of transnational management. Yet by offering an updated framework to analyze global strategy, Ghemawat’s work is useful and practical. Indeed, it is the best treatment on the subject of global strategy to appear for quite some time, and is a much-needed antidote to the simplistic treatments of flat-world management that are currently in vogue.
Redefining Global Strategy is a reminder that an effective strategy is not a blueprint that can lead to guaranteed success. Rather, strategy is making choices that will improve the chances of success — and having to constantly make new choices to differentiate oneself from rivals in a bruising competitive terrain that is well described as Red Queen competition.
If the fortunes of Sony and Samsung, and other global companies, are subject to the inexorable logic of Red Queen competition, what are the implications for corporate strategists? Is any success, however brilliant it may seem today, fated to regress to some industry mean? Inevitably, the discussion comes back to words like agility and resilience, and to the ability of a company to force itself toward renewal so that it might thrive in new contexts.