A wake-up call for CEOs...Connecting The Dots Contnd...

A wake-up call for CEOs

Urban world: The shifting global business landscape Contnd...

 

Corporate leaders can’t afford to be complacent about a change of such magnitude. In fact, we have seen all this before. In the 1970s and 1980s, Japanese carmakers began gaining global market share and, in some cases, outcompeted their US counterparts. More recently, South Korea’s Samsung has weakened Apple’s grip on the global smartphone market. In the decade ahead, this type of story will play out on a much bigger scale, and the rate at which newcomers topple industry leaders will probably accelerate.
Such up-and-coming companies could disrupt entire industries by designing superior products at lower cost, by bringing them to market faster, and by streamlining business processes. Many of these businesses, having been nurtured in difficult operating environments, are not only more agile than their counterparts from advanced economies but also prepared to invest for the long term, even if this cuts earnings in the next few quarters. Many new players will be setting their sights on expanding into international markets. Business leaders will have to monitor trends constantly to spot new markets and competitors. They need to meet three imperatives.

1. Optimize sales networks. The growth of new businesses is not only a competitive threat to older ones but also gives suppliers and service providers a significant opportunity. B2B companies will need to assess how to organize themselves so they can sell to a much more diverse and dispersed customer base. To do so, they must rethink (and perhaps redeploy) their sales networks.
2. Understand how customers and competitors are evolving. New industry hotspots will be sources of both competition and demand, so companies must track up-and-coming hubs in emerging regions. Hsinchu (in northern Taiwan) and Brazil’s Santa Catarina metropolitan district, for example, may not be household names, but they are already hubs for multiple billion-dollar companies in industries such as advanced electronics.
3. Reconsider the headquarters configuration and the location of other core activities. Already, many businesses find that the traditional single-headquarters model no longer meets their needs. Companies such as Caterpillar and General Electric have thus split their corporate centers into two or more locations that share decision making, production, R&D, and service leadership. Unilever created a second headquarters, for global development, in Singapore, which now has key members of the company’s senior-leadership team.

A big opportunity for cities

Today, just 20 major cities host one-third of all large companies. Tokyo is by far the leading hub, with more than 600 large companies. Only nine other cities around the world are home to 100 or more of such companies’ head offices (Exhibit 2).