Monday, September 8, 2008

Maximizing Regional Opportunities

Going global is now popular strategies among companies. For many national companies’ executives, they should include global strategies among their strategic choice. But it is not easy to set up global strategies especially for our national companies. Companies need smart strategy which has considered deep understanding of their own product categories and the geographic arenas they operate in.

Indonesian manufacturers were already facing the prospect of a more difficult environment due to globalization of manufacturing production and liberalization. In addition, low competitiveness applies to Indonesian condition since the slow-down of the manufacturing sector in 1993-1997. This challenge creates difficulties for national manufacturers to compete in the global arena.

How successful a company is depends crucially on how intelligent it is at observing and interpreting the dynamic world in which it operates (Gupta and Govindarajan, 2002). It makes companies need to take rigorous look at where they stand relative in the industry. It has several purposes, first, take a different view of companies in the industry and rigorous understanding about interdependencies with other sector. Second, it would provide potential opportunities and weaknesses which could be the evident later. Companies can used their understanding to creates strategic choice for the companies.

Economic experts have predicted that the 21st century will be the Asia-Pacific century: forecasts say that in 2020, the year the total free trade begins, almost 70 percent of the world’s GNP will be circulating in the Asia-Pacific region (Ciptono, 2005). For local champion, it is the time to expand their market, creating early competitive advantage in regional first. In other word, global strategy may start at a regional level.

But the definition of "region" often changes in response to market conditions and, indeed, to a company's own strategic decisions (Ghemawat, 2003). Thus, companies need to consider what they mean by region. According to Indonesia, common understanding of region is based on geographic view, that is ASEAN-south east continent and Asia Pacific region in which Indonesia take an important roles inside.

Maximizing regional opportunities has several benefits for Indonesian companies. First, it has many similarities with national condition in cultural, economic, political, and administrative. Thus, expanding into regional market become achievable and easier than going global directly. Companies would not confuse to decide whether standardize or localize product because regional market is much more similar. Regional expansion creates business model easier—how much to standardize from country to country versus how much to localize to respond to local differences.

Second, starting regional market as the early step for global strategy is supported with the free trade arrangement. As we know, by the time AFTA is implemented, South East Asian market will be integrated. The opportunities create here if the companies start to expand the markets now.

In many if not most cases, companies see globalization as a matter of taking a superior (by assumption) business model and extending it geographically, with necessary modifications, to maximize the firm's economies of scale (Ghemawat, 2003). There are several national companies that create success in expanding into regional market. They are even have new motto in facing globalization challenge, that is “go regional, act local”. This success story is expected to inspire other local champion to start enter the global market through regional strategy.

Global market is a very big opportunities. Maximizing its potential need smart approach in choosing what’s the first move. Regional strategy is one of the right choices for national companies which possess some benefits.

Gupta and Govindarajan, 2002. Converting Global Presence into Global Competitive Advantage. Academy of Management Executive. Vol. 15 No. 2

Ciptono, 2005. Towards A New Indonesia: Total Quality of Indonesian Management-The Red and White Management. Paper on International Seminar, 50 Anniversary Faculty of Economics, Gadjah Mada University.

Ghemawat, Pankaj. 2003. "The Forgotten Strategy," Harvard Business Review, Vol. 81, No. 11, November

Ghemawat, Pankaj. 2005. "Regional Strategies for Global Leadership," Harvard Business Review, Vol. 83, No. 12, December 2005

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