A Cautionary TaleA Cautionary Tale for Emerging Market G for Emerging Market G

iantsiants

JAPANJAPAN35.2% 1994

20.8% 2000

11.2% 2008

BRICBRIC

0.9% 1995

10.4% 2008

Will those countries (BRIC) Will those countries (BRIC) lose their edge in the years lose their edge in the years ahead, ahead, as Japan did ?as Japan did ?

ProblemUnable to transform the cultures and processes that propelled their early export-led growth into those needed for global leadership.

Devotion to TheDevotion to The Way Way

Japan’s early success:Japan’s early success:

•Develop substantial asset basesDevelop substantial asset bases•Achieve economics of scale and Achieve economics of scale and drive down costdrive down cost•Maintain the high qualityMaintain the high quality•Powerful export value propositionPowerful export value proposition

Japan’s early success:Japan’s early success:

•Created strong corporate policies, Created strong corporate policies, practices, thinking and behaviorspractices, thinking and behaviors•Purpose, unity and rules governing Purpose, unity and rules governing relationships and expectations of relationships and expectations of behaviorbehavior

Devotion to TheDevotion to The Way Way

Devotion to TheDevotion to The Way Way

Japan’s decline:Japan’s decline:

•Replicating the wayReplicating the way•Narrow hiring Narrow hiring criteriacriteria

eg: mobile telephony eg: mobile telephony Sony Ericsson Sony Ericsson

Devotion to TheDevotion to The Way Way

Is It Risk?Is It Risk?

•Developing ways will Developing ways will hinder their hinder their international international expansion expansion eg: China (Guanxi)eg: China (Guanxi) Russia Russia (Government)(Government)

An isolated domestic marketAn isolated domestic market

Japan: Japan: • little competition little competition • FDIFDI• foreign firmsforeign firms

• Disadvantage: less competitive Disadvantage: less competitive e.g. e.g.

Nomura Nomura

• Is it a risk? BRICIs it a risk? BRIC

An isolated domestic marketAn isolated domestic market

A docile labour forceA docile labour force

Japan: Japan: • homogeneous labourhomogeneous labour• few subethnic groupsfew subethnic groups• no local dialectsno local dialects• few immigrantsfew immigrants

• Disadvantage: workplace normsDisadvantage: workplace norms diverse, combative diverse, combative labourlabour e.g. sexual e.g. sexual harassment, litigationharassment, litigation

• Is it a risk? BRIC Is it a risk? BRIC

A docile labour forceA docile labour force

A Homogeneous Team at A Homogeneous Team at the Topthe Top

Japanese companies ——cohesive and homogeneous leadership

Matsushita Electric (now Panasonic)——all Japanese during the 1980s and 1990sIn the 68 Japanese firms on the 2009 Global 500, nearly 98% of the listed corporate officers were Japanese.

Only exceptions: Nissan and Sony

On the contrary…

●European and U.S. ——diversifying their leadershipExample: Carrefour’s success

“…if your company’s international revenues approach 50% of the total, but fewer than 25% of your top leaders come from foreign markets, it’s time to get nervous about your firm’s ability to make the leap from plucky challenger to global leader…” Stewart Black, J. & Morrison, A.J. (2010)

Is it a risk? Many BRIC companies lack leadership diversity.

WHAT TO DO?WHAT TO DO?

- Early expatriation

- Inpatriation

- Education