The Impact of Globalization

1. The Impact of Globalization Debjani Deb Founder and Managing Partner EmPower Research, LLC

2. Agenda The staged advent of Globalization The impact on the communications function as it evolved Knowledge Process Offshoring The Value Arbitrage and EmPower Perspective from the ground at EmPower Conclusion

3. The Advent of Globalization Extension to knowledge services The success with process leads to intention to see if knowledge services can be sourced Extension to process based services The English speaking population in India, and the concentration of IT talent in both markets, make it very attractive to source services Extension of the customer base India and China are the world’s biggest markets in terms of population, and the growth in per capita income presents great opportunity The extension of the manufacturing footprint India and China present lucrative opportunities for sourcing in volume

4. The Extension of the Manufacturing Footprint Starting in the late 80’s this movement was led by the need to arbitrage the cost of labor and material The Impact on Communicators The diversification of the employee base How do you control the perception of quality? What is your corporate social responsibility to the community of the host country? Wal-Mart sets-up a global procurement center in China. Intel builds a US$375 million chip assembly and testing plant in Chengdu, China Nike sets-up major manufacturing plant in China. Subsequently in the spotlight for environmental policies in China

5. The Extension of the Customer Base In the early ’90s this movement was led by the growing buying power of the consumers in India and China The Impact on the Communications Function How do you control cultural, religious and societal factors that would lead to acceptance of/or rejection of the product? How to market to the diverse consumers tastes in the new market? How do you control brand dilution as you conform to local tastes? In 1995 KFC opens its first store in India, but scales back plans due to protests 1996, McDonalds open’s its first store in India. Wal-Mart tie up with Bharti to launch their branded superstores in India India accounts for $3 billion of the $170 billion of GE’s revenue

6. The Extension of the Services Footprint In the late 90’s early 2000’s, this movement was led by the telecom revolution which brought the worlds closer The Impact on the Communications Function How do you control the perception of quality? How do you bridge the cultures of communication – style of communication to your customers? Dell outsources its call centers to India. Faces backlash at home due to problems with accents Kimberly-Clark Co. inked a five-year contract for F&A outsourcing with Genpact, a major BPO service firm spun out of General Electric Co.

7. The Extension of the Knowledge Footprint This movement is led by cost arbitrage and the growing gap in availability of resources in the US, and the availability of the same elsewhere The Impact on the Communications Function How to control the perception of quality or establish credibility? How to take advantage of this arbitrage? HSBC, Standard Chartered, Lehman Brothers, Deutsche Bank, Fidelity and Bank of America have their captive centres in India which do high-end analytics work GSK has a five year arrangement with Ranbaxy India, for drug discovery and clinical trial and research Competitive analysis for Home Depot, Target, RadioShack, Unilver, Verizon, performed in India

8. The Market for KPOs 18 17 16 14 12 12 10 $B 8 6 3.7 3.7 4 2 0 2006 2010 India World Total Market (Source: PWC, NAsscom) • Business Intelligence • Legal Services • Engineering and R&D • Medical Services • Education and Training • Software Product Development • Pharma R&D • Market Research, Consulting Research, & Advertising • Writing/Content Development • Taxation Support • Finance and Accounting • Animation and Content development • Equity Research • Data Analytics

9. The Value Arbitrage in Knowledge Services High Custom In-House Intelligence e.g. Booz Allen, Unilever High Touch e.g. Mckinsey Cost A Non-Viable Sector Syndicated Intelligence e.g. Forrester Low High Customization/Value

10. The Value Arbitrage for the Communicator • 24X7 Media Monitoring & Analysis • Measurement & Audit on Demand • Competitive Intelligence on Demand • Market & Trend Analysis on Demand High High Touch Custom In House Intelligence Cost Syndicated Intelligence Low High Customization/Value

11. An Order of Magnitude Increase in Complexity Balance between business needs and nationalism A balance between price and quality A highly diverse and segmented customer base A diverse employee base with diverse cultural representation and needs The SPEED of information that is by all maxims at the speed of light A complex media landscape made more complex by user generated media A complex financial and reporting landscape A different maxim for social responsibility….

12. My Experience • There is no master, or one size fits all strategy • Information and understanding of each market key towards implementation of multi-pronged communications strategy • Cultural differences are a given that no amount of training can even out – better to avail off rather than smoothen out • Use the arbitrage to your advantage • Cost • Time • Focus on and build appreciation among stakeholders, for total value creation rather than shift • Information containment is no longer a strategy. Transparency and control over the message is the only way… • Finally, be ready to be sleepless as you implement…..

13. As we look into the Crystal Ball…. Imagine a time when the TIMES of INDIA or Rediff.com will have a larger media value in terms of consumer reach for US Brands than does the New York Times…. Imagine a time when McDonald’s is being marketed as the choice of the elite in one part of the world and as fast food in another