World 3.0 – Creating a flourishing global market Integration amidst protectionist tendencies

It has become a fad off late to use the software versioning nomenclature for naming the latest business concepts, organizational vision, strategic initiatives etc. Several organizational use terms like Vision 2.0 or Mission 3.0 to reflect the latest ‘version’ of their vision/mission etc and similar nomenclature is used for strategic organizational initiatives. I think this approach serves the organization well in terms of being a chronological indicator of the progress and changes made in the organization over a period of time.

In the last 9-10 months, I have read three remarkable books written by people with Ivy League backgrounds which also follow a similar nomenclature. The first one is the book from Kellogg’s Marketing Guru, Philip Kotler titled “Marketing 3.0” which extols the virtues of social media and collaboration and talks in detail about how the 4Ps of marketing should be re-aligned keeping in view the changes happening in today’s ‘socially networked’ world. The second one is the book called “Enterprise 2.0” by Andrew McAfee which talks about the new avatar of the organization that leverages Web 2.0 technologies as a competitive advantage.

The third and most recent book is a book titled “World 3.0” by Pankaj Ghemawat who taught Economics and Strategy in Harvard Business School for 25 years. This is a very impressive book and in this blog I will talk about Ghemawat’s ideas and also express my view points at relevant places.

Ghemawat talks about the first era of the world (20’th Century) as 'World 1.0' where there was a domination of individual nation-states and there was little cross boundary business activity and little market integration. He then talks about the world during the early 2000s when the "Flat world" and "Boundary-less world" themes were fashionable and people expected that the world would be free of protectionism and become truly boundary-less. He calls this state as 'World 2.0'. Ideas from experts like Thomas Friedman and management guru Kenichi Ohmae were dominant during those days and people believed in ideal situations like borders being torn apart and a possibility of completely free trade across borders.

The reality is that the world today is plagued with protectionist tendencies and the global economic recession and sovereign debt crisis has added to the woes further acting as an impediment to full market integration. Ghemawat argues that the future state is 'World 3.0' where we will need to work within the constraints of protectionism and market regulations and still look for ways and means of creating a environment for market integration and trade to flourish. So the reality is that the market regulation and market integration will need to co-exist and we will need to look around for ways and means of making cross border business happen despite of the regulations.

Some of the ways in which global firms can make this happen are as follows:

1.   The pitch/business case that the global companies need to make to the governments where they intend to do business should incorporate the ‘political imperatives’ from the local government’s stand point rather than focusing purely on economic parameters and business benefits.

2.   Being sensitive to local customs/laws and adapting to the local culture and the market sentiments. Instead of sounding as an external threat to the local markets the global firms must make adaptations needed for the local markets and make the trade with them a win-win situation instead of appearing like a ‘colonial’ power.

3.   Engaging with the local authorities and common man is the key. Global firms must have a local flavor in all things they do and ensure that they communicate the benefits that accrue to the local populace. They must generate employment locally (including in leadership roles) and participate in the society building initiatives and become a ‘local’ firm in all possible ways.

4.   There are several situations wherein the global technological know-how and knowledge of global industry best practices can help local economies to come out of difficult economic situations. Such conditions will need to be leveraged by foreign firms. Also where ever reasonable global firms can work out ‘technology transfer’ arrangements with local industry thus creating a seed cluster which will boost the economy

5.   In many cases there is a minimal/negligible impact to the domestic economies at macroeconomic level due to certain types of cross border trade. The domestic macroeconomic parameters are largely due to the domestic conditions and cross border trade has negligible impact on these parameters. This should be analyzed and business case made accordingly at the macroeconomic level.

In summary, protectionist tendencies and national regulations are here to stay and will become a way of life for the global companies. It is up to the firm’s ingenuity to work around these impediments and create economic value to all the stakeholders involved.