Monday, July 18, 2011

‘Management incompetence’

“An outspoken, straight-shooting executive [former GM Vice-Chair Bob Lutz] believes the greatest factor in the demise of the U.S. auto industry is management incompetence,” reports The Daily Tickler, Jul 6th. “No, it's not the unions (although that contributed). No, it's not uncompetitive wages compared to Asian manufacturers . . . Auto executives worried too much about hitting the numbers and not enough about creating a product consumers wanted to buy . . .”

The writer has heard the exact same criticism (from his days negotiating with unions, and doing restructuring and M&A’s) and thus recognizes the imperative of market research, R&D and product development. And so he gives his Eastern European friends grief whenever he senses that they’re slacking in product development.

Whenever the writer is in town he instinctively goes to do ‘store checks’ – to get a sense of what consumers find in the stores, and which products or brands appear to be moving relatively fast. But what hits him is the range of products, of local and foreign brands. It would confirm how much trade has been liberalized; and no wonder those with a strong patriotic bias are critical of globalization – and why our liquor industry is against a recent WTO ruling? Hedging against globalization should not mean the absence of conviction; and we won’t have the conviction if we keep to the proposition that the current generation is not ready – i.e., we’ve given a string of generations slack and the whole country is paying the price?

What is reality? We have pursued a consumer-driven economy that effectively responds to the needs of our OFWs? And, of course, ‘the elite’ – who now have access to their preferences without hopping on a plane to Hong Kong or Singapore? Today’s kids can pursue culinary arts when their parents had to travel to Switzerland?

Unfortunately, everyone is focused on the local market . . . yet rightly so – it’s a big market of 100 million Filipino consumers? For foreign brands, the Philippines is part of their concerted effort to expand their market. But for local brands, it is part of a defensive effort to protect a piece of the Philippine market? Local brands by design (i.e., sense of entitlement?) limit their market while foreign brands by design (i.e., competitive spirit?) expand their market? Fundamental in strategy formulation is the expansion of one’s market – which to foreign brands is a no-brainer? (The best defense is offense!) But it isn’t so with local brands? Do our parochial tendencies narrow our perspective? Do we believe we can’t compete overseas?

Looking at how our local brands present themselves in supermarket shelves, for instance, there should be no reason why we should not venture to market them overseas? Is it because our brands don’t have healthy margins for us to afford market development beyond our shores? Is it because our brands tend to be copycats and don’t have true value-added? It is precisely why product development is critical – and glossing over it equates to the ‘management incompetence’ that Bob Lutz speaks to? This blog talks about investment: in technology and innovation, and talent, product and market development – precisely because they are the imperatives if we are to leverage the global economy? Our financial services industry must look beyond our shores – and promote business development initiatives beyond our parochial predisposition? And our marketing, science & technology communities and universities ought to aggressively pursue R&D and product development? But we don’t have to start from scratch – partnering with global players could provide us the necessary platform to raise our technology and innovation quotients – and Nokia is a good example?

And we don’t have to be a Steve Jobs to succeed in the global arena. We must develop the overseas market for products and services that we can differentiate – and add value? But then again, shifting our mindset will be the most difficult part especially if we can’t shed our parochial bent? Foreign investment in the meantime continues to raise objections to our protectionist bias, despite trade liberalization. As the world knows, Philippine industry equates to a handful of major local players – and they have yet to truly enlarge our economic pie – and our actuations are perceived as unwelcoming. Ergo: they simply look elsewhere? We don’t want to burn our candle from both ends?

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