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Is the world really flat? The 'flatness' of the world depends on the perspective with which we look at it. When we look at a product whose parts are made in China, assembled in India and sold in the USA, we say the world is flat. When we see people all over the world communicating with one another, sharing their thoughts and bringing each other closer culturally and emotionally, is it because of the flatness of the world or is it just due to technological advancements and effects of globalisation?
According to me, the world is not becoming flatter as much as the balance of power and control changing. A few years back, one had to go to the US to gain more knowledge, earn money and maintain a good standard of living whereas now a person in China or India can earn the exact same amount of money, maintain as good a standard of life, all the while, staying in their home country. Does this mean the world is getting flatter?
A truly flat world is one in which one is able to do anything anywhere and there is a truly horizontal work flow system with equal emphasis on each of the intermediate stages. Everyone should have equal access to a universal pool of resources. Currently, what is happening is that the rich world is getting its work done from the poor world. It has happened to come that in the single-mindedness of the western countries to get their work done cheaper, they have started an overdependence on each other. The western countries cannot get any work done, be it manufacturing or writing software, without help from China and India. Similarly, India and China cannot thrive based just on domestic demand. They need the western countries to outsource and offshore work for them to earn better income, increase foreign investment inflows (FDI and FII) into the country.
Some of the advanced flattener such as supply chaining have still not penetrated many markets like India where retail marketing is still in its infancy and more than 90% of goods are sold through neighbourhood grocery stores. Insourcing as a concept, faces a lot of hurdles in the form of legal and copyright issues. Internet penetration, though it has improved, has a long way to go in countries like India where one still pays really high rates for even dial-up connections. Even in countries like China, where affordable high speed internet access is available, the free flow of information is tightly constricted and regulated as is evident from the recent withdrawal of Google from the country.
The concept of a flat world will fail when the incomes all around the world get flatter. Then, the concept of outsourcing and off-shoring will not work as the basic objective of cutting costs fails. Hence, this flattening of the world is nothing more than a form of globalisation which is primarily due to the technological advances.
This situation is changing even as we speak with the domestic demand spiking as more people earn well and the standard of life at all social levels improves.
The competition for resources has definitely intensified in the current scenario, be it natural, financial or human resources. In terms of human resources, there is a lot more demand for highly skilled and specialized workers in most fields. The saying 'Jack of all trades, master of none' will not work anymore. One has to be highly specialized and an expert in his field. The demand for quality human resources increases as competition among companies and industries increases. At the same time one needs to make sure of his basic competencies in order to survive in this highly competitive world.
There is a lot more competition in the current world, as a Malaysian company can bid for a mono rail project in India and if successful, can also build a coach building factory here to cut costs as is the case currently with the monorail project being currently implemented in Mumbai.
As regards natural resources such as fuel, food, shelter, the demand has increased as in the globalized world we live in, the spread of technology has ensured that people all over the world have access to vehicles, need more electricity, need more food, need proper housing, all of which is provided for by the earth. The competition for natural resources is clear in the price rise of all essential commodities mentioned above.
In a flat world, the cultural differences across the globe should have been bridged by the flatness of the world. As pointed out by Pankaj Ghemawat, the noted expert on global strategy, Wal-Mart is not able to conduct its business in India without the help of an Indian partner. Similarly, any organization planning to do business outside its home country, needs to bridge the cultural divide by employing people from the foreign country unless the cultural differences are negligible.
There is more of a group wise flattening happening among the various power blocks in the world. The Americas, Britain, Canada and so on have moved closer in terms of trade and cultural divides and hence the cooperation among them has also improved. Also, among the developing countries like the BRIC countries (Brazil, Russia, India, China) there is a flattening happening as they try to grow together and compete at the same time. This was evident even at the recent Copenhagen summit where this bloc of countries took a tough common stand against the demands of the developed countries.
"The World is Flat: A Brief History Of The Globalized world in the Twenty-First century" is written by Thomas Friedman, an American Journalist well known for the compelling anecdotes that he uses in order to support a concept or an idea. In this book, Friedman's message is clear: Globalisation has made the world flat and one needs to be prepared because this phenomenon waits for no one. He paints the picture of a flat world moving faster than most can keep up. In India, the common perception is that globalisation is the aftermath of outsourcing by US firms which lead to the much talked about IT revolution in the country and hence this phenomenon is confined to the IT sector. But what one fails to realise is that globalisation will someday (if not already) hit everyone in the face and those who are not prepared will perish. In India, few have been able to foresee the changing future and have taken adequate measures not only to survive the new revolution but also to benefit from it. The Tata group is one such Indian business house which has fully internalised the concept of globalisation. It was one of the first few Indian firms which realised that globalization was no longer a choice, but inevitable. The sooner you embrace it, the easier it gets to survive in this flat world.
Tata Group is currently the largest private corporate group in India and has been recognized as one of the most respected companies in the world.Â It deals with a wide range of products and services likeÂ steel, automobiles,Â information technology,Â communication,Â power,Â teaÂ andÂ hospitality. The Tata Group has operations in more than 85 countries across six continents and its companies export products and services to 80 nations. The Tata Group comprises 114 companies and subsidiaries in seven business sectors.
In his book, Friedman says "the fall of the Berlin Wall on 11/9/89 unleashed forces that ultimately liberated all captive peoples of the Soviet empire. It tipped the balance of power across the world towards those advocating democratic, consensual, free-market oriented governance."India's "Berlin wall" came down when in 1991, Manmohan Singh, the finance minister of India at that time(now prime minister) opened India's economy and abolished numerous trade controls.
Post liberalisation, the Tata Steel Company (TISCO) found themselves working with an outdated plant with obsolete and inefficient machinery. The quality of their products was poor and cost of production was high. They needed to become competitive and use new technology and processes in order to match up to the global competition and hence, a new Tata Steel Plant was built post 1991.
The modernising of the plant was a huge challenge as the company did not have the requisite capital. Years of government control had left it in poor financial health. But that did not weaken their resolve. Between 1991 and 2000, Tata Steel spent more than Rs 10,000 crores to build a new plant within the old campus. Today, the Jamshedpur Steel Works is one of the most modern, technologically up-to-date and environmentally clean plants in the world.
Friedman says that once the "Berlin Walls" of the world started to fall, the platform for the flattening of the world started to emerge. It was then that more people from different places found that they could collaborate with more people on more different kinds of work and share more different kinds of knowledge than ever before. This lead to the emergence of two new concepts: Off shoring and Outsourcing. Outsourcing allowed companies to split service and manufacturing activities into components, with each component performed in any part of the world in the most efficient, cost-effective way. Offshoring is the Manufacturing's version of outsourcing.(4)
When Ravi Kant joined Tata Motors as the Managing Director, the new theme that he scripted for the company was "Not trying to develop everything in-house". The concept of off-shoring and outsourcing was thus introduced in the company. He brought about a huge change in the mindset of the vertically integrated company and moved the organisation from a hierarchical model to a collaborative approach. Tata Motors has expanded its production and assembly operations to several countries including South Korea, Thailand, South Africa and Argentina. 80 per cent of the parts for 'Ace', the only diesel mini truck in the world is outsourced. Many components of the Nano are made by the Bosch, such asÂ fuel injection, brake system, ABS etc(5). Thus Tata was moving with the rest of the flat world where outsourcing and off-shoring were proving to be some of the best ways to cut costs and improve productivity. They were making full use of the flatness of the world.
The Tatas have aggressively pursued expansion by means of taking over of companies outside the country. For example, Tata acquired Natsteel, a company in China, following which Tata Steel has a production footprint in China as well. They have followed up by opening new plants as well like the Greenfield project in Liaoning Province in China(6).
In Africa, Tata Steel has set up Tata Steel KZN to manufacture high carbon ferrochrome in a new plant in Richards Bay on the KwaZulu-Natal coast. This is used in the manufacture of Stainless Steel which is exported to Asia Europe and United States.
In 1968, Tata Consultancy Services (TCS), India's first software services company, was established as a division of Tata Sons. Today, it offers not only " Business process Outsourcing" solutions but also other IT services like IT infrastructure services, Enterprise Solutions and Business Intelligence.(7)
Â Friedman compares the modern supply chain to a river, where a company using technology to streamline item sales, distribution, and shipping.
Considering Tata Motors as an example here, supply chaining is of utmost importance for companies associated with manufacturing and assembling units for vehicles. Here, the entire process is fully automated and this is where a supply chain comes in.
The manufacturers of individual parts of the vehicle such as the engine manufacturer, the chassis supplier, the ECU manufacturer should all be in sync so that principles like JIT(Just In Time) can be used to increase the efficiency and reduce stagnancy of parts. The manufacturers are continuously kept informed of the count of parts already used and those that are available and ready to be assembled. Hence production can be continuous and optimum utilisation of the assembly plant is achieved.
Tata Consultancy Services has gone one step further and has introduced a new system of computerized inventory management by introducing IMMOLS (Integrated Materials Management Online Services), a nation-wide systems integration project addressing the computerization needs of inventory control and logistics management for the Indian Air Force(8).
TCS IMMOLS covered all the issues faced by the IAF regarding their Inventory management including stock outs, delays, dependencies on individuals and inaccurate communication and provided a host of benefits such as efficient materials management, assets visibility, speedier demand process cycle, speedier procurement & repair cycles, reduction in inventory levels, efficient spares accounting and much more(8).
The concept of a new age supply chain management is still in its infancy in India and the TATAs, living up to their reputation, were one of the first to foresee the benefits of such a system in the country and have pioneered the adoption and implementation of new techniques to increase productivity and pave the way for the country to excel in a global economy.
According to Friedman, "insourcing is a whole new form of collaboration and creating value horizontally made possible by the flat world and flattening it even more." Many big companies which do not want to manage certain complexities which they fell are not a part of their core competency; outsource that particular function either to other divisions of the same group or to completely different companies. Tata Motors is one search company that outsources the logistics and distribution part of its business to a fully owned unit, TML Distribution Co. Ltd.
Similarly, TATA Teleservices outsources its entire IT infrastructure management to Tata Consultancy services. TCS manages all of its IT related activities including implementation, application development and maintenance as well as change management across the enterprise. In addition, management of data centres, information security management, training end-users is also part of the agreement.(9)
Tata Motors also has a distribution alliance with Italian car maker Fiat SpA under which it sells Fiat cars through Tata dealerships. For Fiat to do business without a local partner would be very difficult and through the tie up with a company with as wide a network as Tata Motors, it ensures that it reaches out to the length and breadth of India thereby increasing their business. For Tata Motors, as long as there is no direct conflict of interest, it is a very profitable arrangement.
The Tata group is only one illustration in a country of 1.2 billion people. One can quote hundreds of other instances of different companies; big and small, old and new; which have spotted the opportunities provided by going global instead of losing sleep because of the unfair advantage it provides to some. Globalization has opened doors of prosperity for millions across the world. The world is flattening at a rapid rate and the levels of the playground are now becoming equal for all.