MANILA BULLETIN
Business & Society
October 24, 2011
How Firms Can Go Global
In the 1990s, some of us at the Center for Research and Communication (CRC) were
at the forefront of studies on how the Philippines could be globally competitive. Having been a
think tank focused on business and industrial economists, CRC had a team of specialists on
different industries that came out with studies very much inspired by then world's leading
business economist on global competitiveness, Michael Porter of Harvard University. In fact, we
invited Professor Porter to give a series of lectures at the University of Asia and the Pacific to
both business people and academics about his famous diamond model of global competitiveness.
He inspired me and my colleagues at the UA&P-CRC to write a book entitled "The Philippine
Advantage" which outlined during the second half of the 1990s what we considered the "sunrise"
industries in the Philippines. We are proud of the fact that our studies then identified the sectors
that are now very much in the limelight as the growth industries for the Philippines in the first
decades of the twenty first century, as heralded by that most valuable document entitled
Arankada put out by the seven foreign chambers of commerce. We were among the first to
describe in detail the competitive advantages of such sectors as agribusiness, business process
outsourcing and other IT-related services, tourism (including medical tourism and retirement),
mining, the creative industries (especially fashion and entertainment), infrastructure and real
estate, electronics, and manpower exports.
Thanks to the efforts of the foreign chambers as well as the local business groups--led by
the Makati Business Club--a strong public-private partnership is helping the entire Philippine
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economy become more globally competitive and attractive to investments, both domestic and
foreign. Very recently, the standing of the Philippines in the Global Competitiveness Report of
the World Economic Forum showed some noticeable improvements. As I wrote in a recent
column, however, we cannot be complacent because in the overall rankings, the Philippines is
still behind all the ASEAN countries with the exception of Cambodia. Until we can compete
more closely with our peers such as Malaysia, Thailand, Vietnam and Indonesia, we have much
more to do in investing heavily in infrastructure, energy, and education as well as improving
governance by combatting both private and public corruption and by removing legal and
bureaucratic obstacles to foreign direct investments.
There is, however, another challenge to both large and medium-scale Philippine firms to
bring the Philippines to the next level of global competitiveness. As economies in the East Asian
region become more and more integrated through such arrangements as the ASEAN Free Trade
Area (AFTA) as well as AFTA plus China, AFTA plus 3, etc., Philippine business can further
enhance its global competitiveness by the economies of scope and scale that will be made
possible if our firms are able to venture into other markets in this most dynamic of all regions.
Philippine enterprises should not only think global. They should go global, following the
examples of the few bold firms like San Miguel Corporation, United Laboratories, Jollibee,
Liwayway Manufacturing (with the Oishi brand), Century Can, Southeast Asian Food, etc. More
firms can leverage on the increasingly abundant savings the Philippines is generating (thanks to
the OFWs) and our existing pool of managerial and entrepreneurial talents to expand their reach
to the booming emerging markets of Asia, especially in such populous countries as China,
Indonesia, and Vietnam where middle-income households are increasing by leaps and bounds.
Once again, we hope the University of Asia and the Pacific will play a major role in
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guiding Philippine corporations go global. On December 12, 2012, we are repeating history by
bringing to the Philippines for the first time the person whom I consider the guru of globalization
of the first decades of the twenty first century: Dr. Pancaj Ghemawat, the Anselmo Rubiralta
Professor of Global Strategy at the famous IESE Business School in Barcelona. He served for
more than twenty years on the faculty of Harvard Business School, where in 1991, he became the
youngest person in the school's history to be appointed a full professor. Ghemawat has been
described by his Harvard colleague, Michael Porter, as "one of those rare individuals who
combines world-class scholarship with a deep knowledge of business practice." He is the
youngest "guru" included in the guide to the greatest management thinkers of all time published
in 2008 by the Economist.
In two of his major publications, i.e. Redefining Global Strategy and World 3.0 (which he
will launch while he is in Manila), he musters hard economic data at both the macro and micro
levels to demonstrate that there is a middle and more pragmatic alternative to unregulated
globalization ("the world is flat") and autarky or protectionism. He calls this way "semiglobalization." He proves that the world is not nearly as globalized as we think. Just to illustrate
this point, especially for us Filipinos who are at the forefront of overseas workers, he cites data
showing that first-generation immigrants account for only 3 percent of the world's population;
that students studying overseas account for just 2 percent of all university students; and that
about 90 percent of the world's people will never leave the country in which they were born.
Data like these serve to warn business people about assuming that they can just move from one
country to another and transfer without much modification the products that they sell in their
home markets; or the way that they deal with their employees; or the manner of relating to the
government and other public institutions or other business practices that are sensitive to
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differences in cultures, administrative practices, geographical conditions and income levels. He
fills his books with very concrete case studies of successes and failures in global strategy of such
well known companies as Wallmart, McDonald's, Federal Express, Coca Cola, Google, and
Facebook.
I would venture to say that Philippine global corporations like San Miguel
Corporation, Jollibee, United Laboratories, and Liwayway Manufacturing could have increased
even more their chances of business success in their forays abroad if they had the previous
advice of Professor Ghemawat.
As described in the inside jacket of the book World 3.0, Ghemawat describes how a wide
range of players--businesses, policy makers, citizens, media--can help open up flows of ideas,
people, and goods across borders, but in ways that maximize the benefits and minimize the
potential side effects. World 3.0 dispels powerfully entrenched--but incorrect assumptions about
globalization. Provocative and bold this new book explains how people around the world can
secure their collective prosperity through new approaches to cross-border integration. CEOs and
other top management people of both domestic and multinational corporations must make time
to listen to what Ghemawat has to say about the appropriate approach to globalization, especially
during these times when the whole world economy is still reeling from the after-effects of the
Great Recession. Those who are interested in attending the different sessions in which Professor
Ghemawat will be discussing his ideas and findings about globalization may get in touch with
the Business Economic Club of the University of Asia and the Pacific at 631 1305; 637 0912 loc
335, 309, 374, 251. For comments, my email address is bernardo.villegas@uap.asia.
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