C.K. Prahalad and Hrishi Bhattacharyya write about a new world order that is transforming corporations:
Growth prospects for multinational corporations (MNCs) are expanding enormously. In Asia, Latin America, Africa, and Eastern Europe, there are more than 4 billion new potential customers whose rising incomes and aspirations have created an unprecedented market for all manner of goods and services. They want to own homes, to eat nutritious food, and to have varied entertainment options. They want toothpaste, cell phones, and motorcycles. To cater to these needs, business-to-business enterprises will be called upon to provide chemicals, cement, machine tools, electricity, and much more.
Many corporate leaders recognize this opportunity, but few are developing the capabilities or the management focus that they will need to realize its full potential. They persist in thinking of these new markets as “emerging markets,” separate from their existing customers in the industrialized world. Many companies have not reorganized their operations to serve a fully global economy.
Currently, most companies attempt to “go global” in one of two ways: centralization or decentralization.The gateway–hub structure represents a third alternative: a hybrid that reduces the tension between global integration and local responsiveness. Corporate leaders who are based in business unit–style organizations in selected gateway countries have a natural base from which to extend their footprint into nearby markets.Together, the 20 gateway countries — 10 from the industrialized world and 10 from emerging markets — account for about 80 percent of the world’s economic activity, and 70 percent of its 6.6 billion inhabitants. An MNC could most effectively expand its operations around the world by making it a priority to set up hubs in these gateway nations.
A gateway–hub structure can be flexible. A Chinese hub could manufacture goods for Greater China, other Asian markets, the Middle East, Europe, and the U.S. Conversely, a vibrant consumer market need not depend on a single hub: A hub in the U.S. could draw in goods from Brazil, China, and Mexico. All the hubs would probably be involved in manufacturing, but only some might incorporate research and development.
I personally think, we need to use markets/countries (effectively basis their strengths) that can add competitive advantage to various functions to an organization and get them to work in a networked manner. The challenge is to move these processes seamlessly across countries and that is what will make or break this structure.
