Thursday, November 7, 2013

Beyond political patronage and oligopoly

“Government think-tank Philippine Institute for Development Studies (PIDS) has urged for a strong government support . . . to 15 industries to revive the domestic manufacturing sector.” [Manila Bulletin, 2nd Nov 2013] “Other measures needed by domestic industries include consistent set of investment policies for construction, auto appliance, shipbuilding; institutional mechanism to fully integrate copper industry; creation of supply hubs for raw and natural materials for the furniture sector; full integration of industry upstream-mining, reliable supply of iron ore and coal; access to raw material base, development of massive tree plantations and commercial agro forestry integrated with virgin wood pulp production to support the paper industry; and, institutional mechanism to fully integrate the copper industry; access to financing for SMEs.”

“Human resource development programs and skills training were also pushed for design, tool making, prototyping, molding, die and casting for the auto parts sector, chemical engineering, foundry technology, metallurgical engineering, industrial engineering, metal casting and die design industries. In pushing for these government interventions, PIDS . . . cited the sustained industrialization of Thailand program . . . [And] The Thai government invested $1.19 billion in 1997 . . .”

Clearly the recommendation is called for. Yet, as in any major undertakings, discretion is the better part of valor – especially in PHL where we’ve yet to solve our decades-old power problem; and what about getting new cars their proper tags or plates? The Thailand experience happened in 1997 when the world was less global and competitive. [I was then a regional manager in an MNC and we were attracted and thus invested in Thailand; like we did in China, India and Vietnam.] We need to figure out more rigorously, of the 15 industries, which ones will truly generate regionally if not globally competitive products given ASEAN. Having done global business for decades, I have serious doubts we could push 15 industries – we must learn to walk before we can run. Beyond manufacturing as Turkey has learned, for example, is marketing. And even Germany had to learn the lesson! Prioritize . . . and start with the end in view, i.e., define successful outcomes!

Meanwhile, reports The Economist, 19th Oct 2013: How science goes wrong . . . It needs to change itself . . . Modern scientists are doing too much trusting and not enough verifying—to the detriment of the whole of science, and of humanity. Too many of the findings that fill the academic ether are the result of shoddy experiments or poor analysis. A rule of thumb among biotechnology venture-capitalists is that half of published research cannot be replicated. Even that may be optimistic . . . A leading computer scientist frets that three-quarters of papers in his subfield are bunk . . . What a load of rubbish . . .”

It reminds me of the then PhD candidate that I mentored and reading the heap of research materials that she assembled, and “what a load of rubbish”! To a practitioner the materials would read well for classroom purposes but clearly many couldn’t be useful in the real world! And so she had to inject a major dose of qualifications to the discussions on the algorithms, standard in graduate work. “The acid test of this exercise is if your own brand will win in the marketplace,” I stressed to her. To cut a long story short, it did and in no time she was promoted to a regional job and more recently promoted to a headquarters job to lead a global initiative for her brand.

And my Eastern European friends early on chose to compete with Procter & Gamble – and have earned their stripes over the last 10 years. And recently they’ve learned that even icons could miss a beat, which has boosted their confidence: “P&G's marketing efforts have been labeled . . . as “old school” and “too traditional.” In terms of global expansion, P&G's old strategy involved an “all-in” focus on rapid expansion . . . More than 20 of P&G's brands generate $1 billion or more in revenues per year and they are extremely popular . . . These brands are famous for their high quality. However, despite the strength of its portfolio and its presence in more than 180 countries, P&G's performance in global markets is far from amazing.” [The Motley Fool, 27th Oct 2013]

“Colgate-Palmolive's performance in emerging markets has been outstanding. The company now owns 46% of the global oral care market. It's normal for the company to see organic sales rise in the double digits in Asia, Africa and South America. Wide distribution, coverage of rural areas, portfolio expansion and innovation, and strong marketing could be behind Colgate-Palmolive's success story in these economies. Unilever has also taken advantage of emerging economies to boost its revenue. The company not only focuses on creating an efficient global supply chain and distribution network, but also on product localization and non-traditional marketing to achieve its global objectives.”

Global competition is a true test of man's capacity; there’s no hiding behind political patronage and oligopoly! And we won’t get there without world-class infrastructure, and until we figured out the do’s and don’ts of 21st century industrialization – it’s about technology and innovation, education and training and product and market development!

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