I am of the opinion that one of the advantages of globalization is shorter time to market. Why is “short time to market” important? Basically, I do not believe that anyone can predict the future with any level of accuracy. General trends can be predicted, but it is impossible to consistently predict actionable specifics that can be used by an enterprise to plot what the specific products the future market will require, hence future product requirements. The only reasonable strategy is to develop a product development cycle capability which is flexible and can quickly get a product to market. Thinking of the global market as a source for product components, provides advantages in lower product cost and shorter time to market.

I often wonder how the automobile industry has managed to survive with 3 to 4 year development cycles. The recent run-up in gasoline prices last year demonstrated how quickly the market can change. The automobile industry was and is currently faced with products offerings that featured few products that the customer want. I suspect that part of the answer is a culture based upon NIH (Not Invented Here) and an unwillingness to cannibalize existing product markets for greater leverage. The industry has made an effort to move away from a vertical integration mind set (everything is manufactured in-house from raw materials to finished automobiles) touted by Henry Ford in the early 1900′s. They have attempted to spin-off major components as separate business entities (axles, transmissions, etc.). Unfortunately, these spin-offs still bear legacy ties to the original automobile manufacturer which closely tie their future to the original automobile firm.

Take Away Thought: The global market should be thought of as a smorgasbord of products and services. Product planning is a constant evolution based upon close consultation with the firm’s suppliers and customers. Constant product evolution implies a willingness to cannibalize existing products through the introduction of new and better products. An example of those that failed to adapt to change are those firms that made huge profits just 10 to 15 years ago in 35mm SLR cameras and 35mm film. The majority of the market has switched to digital cameras and is gradually switching to using their mobile phones!

PS: Here is a radical thought … rather than supporting the traditional automobile companies with R&D funds for the development of the future alternative power systems, maybe the US Federal government should put their support behind a separate entity that could supply power systems to all manufacturers, domestic and international. Another thought is invest the R&D funds with the traditional automobile companies, but insist that the technology that is developed is “open source” and available to all!

Globalization has been used in context of nation to nation trade. In a more general sense the word can be interpreted as an entity incorporating the products and services of others in the development, sale and distribution of their products and services. We typically think of manufactured products and services, though one could make the case that the current American financial crisis was spread worldwide by that sale of those financial instruments globally. In other words, single financial instruments sold individually, many financial instruments packaged into larger financial packages, financial derivatives sold based upon the fluctuation in performance of those financial packages.

Take away thought: Any business to business transaction can be thought of as globalization. Total vertical business integration is not cost effective, feasible or competitive. Vertical integration is an anathema to robust business flexibility or the ability to shift approaches quickly as the market changes. NIH (not invented here) and the concept of “sunk costs” must be avoided.

There is an article in the March 3rd, 2009 issue of the Wall Street Journal (“Intel Turns To Taiwan For Its Push Beyond PCs”) which I believe illustrates the competitive advantage of globalization. Intel has agreed to share its microprocessor technology with a Taiwan based IC contract manufacturer (TSMC) in the development of new integrated circuit products. The custom IC products will integrate the microprocessor technology from Intel with the unique circuitry specific to narrow market applications for production by a company that specializes in custom IC manufacturing. The implication is that the joint ventures customers will also gain a competitive advantage in the development of their product(s) due to the higher integration at the IC device level.

Take Away Thought: By leveraging the competitive value add from each partner ( Intel’s microprocessor technology expertise and TSMC’s manufacturing expertise ), their customers have the potential to become more competitive. This ripple effect of improved productivity gains is good for all.