When news broke recently that Brazilian investment firm 3G Capital was teaming with Berkshire Hathaway to buy Heinz for $28 billion, some people noted that the deal marked a resurgence in M&A activity. Maybe so, but I see it as part of a bigger, more formidable trend that has vast implications for the future of almost every business: what I call the global tilt.
The global tilt is an irreversible shift of economic power from North to South: from the U.S., Europe, and Japan in the Northern hemisphere to China, India, Brazil, Indonesia, Malaysia and other countries mostly in the Southern hemisphere. The center of gravity for jobs, wealth, and market opportunities is moving, disrupting the world economic order as we have known it.
Fluid capital, mobile communications, and an expanding global middle class all contribute to the global tilt, but the human factor is also a powerful driver. Along with a newly enriched investment class, business leaders in the South are on the move, tapping into the readily available funding and expertise they need to grow, and scaling up fast to grab once-in-a-lifetime opportunities. The empires they are building could rival those created in the nineteenth-century by the likes of Cornelius Vanderbilt, J. P. Morgan, Andrew Carnegie, and John D. Rockefeller.
It’s easy for leaders in the North to underestimate their counterparts in the South, attributing their success to government support or low-cost labor, but such a viewpoint is narrow and risky. Successful leaders of the South have enormous energy, ambition, and business savvy, and they are aiming to compete everywhere on the planet.
In some ways business leaders in the South have an edge:
They are a product of scarcity. Many have grown up under conditions of hardship. Improvising and working on very tight margins is second nature. They are fiercely focused on operations, because they know that’s how money is made or lost. Sunil Mittal, founder and CEO of Bharti Airtel, the fourth largest telecom company in the world, began his work life doing the grunt work of sales and distribution as he tried to make a living selling crankshafts to bicycle manufacturers in Ludhiana, India. His customers always overpowered him and controlled the pricing, and his meager budget relegated him to riding in the backs of trucks and crowded trains. The discipline of tight margins never left him.
They think large-scale. South-based leaders are living through huge changes in their home countries, and suddenly see opportunities they never even dreamed of right in their own backyards. An American company might think 4 percent revenue growth is acceptable; a Southern company thinks 20 percent is normal. Right from the start, CEO Zhang Ruimin of China’s Haier Group set his sights beyond China. “The objective of most Chinese enterprises is to export products and earn foreign currency,” he told Harvard Business School researchers in the 1980s. “This is their only purpose. Our purpose in exporting is to establish a brand reputation.”
By innovating, operating efficiently, and exploiting market niches, Zhang has confronted well-established manufacturers of the North on their own territory and used his success there as leverage to win in the global game. In 2011, for the third year in a row, the Euromonitor International market research firm ranked Haier as the top appliance brand in the world, calculated its retail volume share as 7.8 percent, and named it a global leader in consumer electronics.
They learn fast. These leaders tap the advice of investment bankers and consultants, many from the North, to identify the best opportunities, and they use partnerships, joint ventures, licensing deals, and acquisitions—whatever it takes— to establish themselves in a market or industry and scale up quickly. Indian infrastructure company GMR, which built the Indira Gandhi International Airport in Delhi, knew virtually nothing about building or running airports when it made a successful venture into that business. Its leaders studied the business intently and met with service providers, cargo companies, duty-free operators, vendors, and architects worldwide to learn what they could. Kiran Kumar Grandhi, son of the founder who oversees the airports business, says he learned to learn from his father, GMR founder G. M. Rao: “All through my childhood I observed him interacting with other people in this way. He was constantly gathering information.”
They move fast. These leaders are energized by the opportunities they see before them, and they are decisive. As head of Brazilian beer company AmBev, Carlos Brito had a voracious appetite for growth. He went on a tear of expansion in Latin America, then in 2004 undertook a merger with Belgium-based Interbrew. Although the European company was bigger, the Brazilian leader ran the combined company. In 2008 he was ready to take yet another big bite, making a surprise purchase of Anheuser-Busch, to create AB Inbev, the world’s largest brewer. Now he is trying for 100% ownership of Mexican beer company Grupo Modela, though the outcome of that deal is uncertain because of antitrust concerns.
Don’t get me wrong; I’m not saying that the tilted world belongs exclusively to the South. The challenge is to understand the competition and adapt how you run your business — your mindset, your approach to strategy, your resource allocation, and your organization’s social system. In 2012 Procter & Gamble moved its headquarters for personal care from Cincinnati to Singapore, and GE posted a vice chairman in Hong Kong for the first time ever. As Keith Sherin, GE’s chief financial officer, explained, “This is where the growth is. We are shifting our center of gravity to emerging markets.” Winning in the global tilt starts with seeing its reality.
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Millions of people around the world use Foursquare to check into places they visit. The company has taken a year’s worth of these check-ins at two of the planet’s largest cities — New York and Tokyo — and plotted them on a map.
VIBHAV BALARAM
With last week’s installment, this little series largely came to an end for now, but it doesn’t mean that I am not actively planning for future improvements to the digital lifestyle in our home. In fact, my list of ideas for improvements is a rather lengthy one, though the expenses are enough for now and I have no desire to incur the wrath of my wife with more deliveries showing up on our doorstep.
