Globalization – Where clients get the most value!

I read two articles recently in two different publications that refined the concept of globalization.

The Rise of Central Europe – Deep reserves of educated, ambitious, and affordable workers are driving the region (Business Week – December 12, 2005).

The rise of nearshoring – Ex-communist Europe is grabbing a lucrative niche in the global outsourcing business (The Economist – December 3rd-9th 2005).

First some data (Business Week):

 
   
   
   
Country
   
   
   
Factory Worker
   
   
   
Engineer
   
   
   
Accountant
   
   
   
Middle Manager
   
  
  
   
   
Poland
   
   
   
$3.07
   
   
   
$4.32
   
   
   
$4.03
   
   
   
$6.69
   
  
  
   
   
Czech    Republic
   
   
   
2.81
   
   
   
5.38
   
   
   
4.10
   
   
   
6.81
   
  
  
   
   
Bulgaria
   
   
   
0.73
   
   
   
1.43
   
   
   
0.83
   
   
   
2.80
   
  
  
   
   
China
   
   
   
0.80
   
   
   
3.50
   
   
   
3.20
   
   
   
4.42
   
  
  
   
   
India
   
   
   
0.43
   
   
   
2.40
   
   
   
1.93
   
   
   
3.13
   
  
  
   
   
Germany
   
   
   
18.80
   
   
   
38.90
   
   
   
26.40
   
   
   
40.40
   
  
 
 
     
Data: Compiled by Ariba Inc. using national sources
 On the surface, one would assume that the price advantages offered by the China/ India competition would overwhelm any attempt by the East European countries to compete in an open market. After all, I occasionally tell of my personal experience while working for a large multi-national U.S. corporation in a fabrication facility in Brazil. The facility was manufacturing products that originated in a U.S. facility, subsequently were moved to Scotland, then to Brazil. The Brazilian facility eventually lost the business to a facility in India because the Brazilian factory workers were paid US$1 per hour and the Indian factory workers were paid US$0.25!

How do you compete?? Proximity … leverage the fact that your are;
   
Physically close,
   
Perhaps a member of or soon to be member of the European Union,
   
Have employees that are fluent in German, French, Italian, Spanish, etc.
 
   
 In fact these countries are starting to see investments not only from western companies, but from companies based in China, India and Turkey that seek access to the European Union market.
 
What are the challenges?? Most are hold over’s from the communist controlled economy mentality;

   
Stifling bureaucracy, corruption, etc.
   
Lack of investment in infrastructure, higher education, etc.
   
Complacency (don’t worry we will get it right eventually!)
   
Shallow talent pool (e.g. middle managers with customer/ quality focus, …)
 
 The key is does your company offer the best value to your customers??