Advanced Management Program
Cross Cultural, Cross Industry Dialogues

How can you think beyond the borders of your own professional training, company, or industry? You need to expose yourself to diverse perspectives from different global markets and industries. Wharton Advanced Management Program faculty recently looked at opportunities in Africa and the three-dimensional chess involved in effective "global gamesmanship."

Get on the Ground in Africa

When it comes to Africa, there is no substitute for direct experience. Steve Bell remembers pitching a project in Egypt to the board of a multinational company. "The blowback from the board was incredible," recalled Bell, President of Exploration and Business Development of BHPBilliton Petroleum, speaking to a recent Wharton Advanced Management Program (AMP) class. "There is a difference in perception versus reality. Most companies have a perception that they will have to deal with many more things than are the reality. The board was concerned about the workforce in Africa, but it became the most reliable workforce in the world."

The only way to break free of these perceptions is to "get on the ground to learn," Bell said. "You have to be willing to take your losses, but be prepared to learn from them. My experience is that my perception on the outside rarely matched the reality."

Africa has its challenges. Its infrastructure is weak, and it has among the worst conditions of sanitation, education and literacy, and a devastating AIDS epidemic. One of the biggest challenges for businesses is political and cultural fragmentation. "In Africa, there are 800 million people in 54 different countries," he said. "In China, there are 1.4 billion people living under one set of laws." The European colonization of Africa in the 1800s left complex geographic boundaries and a vacuum of leadership in many countries. The risks include political unrest and currency fluctuations. There are also complex political risks. Bell noted the disastrous experience of Canadian oil company Talisman in the Sudan. What might have been a good investment on paper became a disaster when oil profits were seen as fueling the nation's civil war. Talisman became a focus of global diplomatic protests, with a long-term negative impact on its performance.

Even so, "there are pockets of positive development in Africa that make foreign direct investment quite attractive," he said. "Many of those doing business there have enjoyed a significant return on capital." There are opportunities to earn strong enough returns to justify the added risks. For example, a new aluminum smelting plant in Mozambique developed by a Japanese and Australian company required a "leap of faith." It meant going into a country that was just emerging from a 17-year civil war that destroyed most of its infrastructure. On the positive side, however, the project was aided by support from the government, development agencies, private lenders, and other investors. It was completed six months ahead of schedule and $100 million under budget and was named the "industrial deal of the year" in 1999. It is now one of the most modern aluminum smelting plants in the world, with workers so skillful that they are exported to other sites. "We believed we had a competitive advantage because of a knowledge of Africa, particularly southern Africa," Bell said.

The temptation may be for managers to "wipe the entire continent off the map and say you don't want to be there," Bell said. "Don't take Africa as one big mess. Test the perception and reality of the political and business risks. The perception is often different from what you find on the ground, but be careful where you go and which wars you get involved in."

Think More Broadly About the Global Chess Match

Leaders often think too narrowly about strategy, limiting their analysis to a certain industry or geography instead of seeing the bigger picture. When Phillip Morris cut prices for its Marlboro brand in 1992, on what became known as "Marlboro Friday," it was a puzzling move from the perspective of the U.S. market. With predictable reactions from rival RJR, the price wars ultimately eroded profits for the entire industry. But the strategy may make more sense with a broader view of competition. Although the moves weakened positions in the United States, they may have placed pressure on rivals in other parts of the world.

"When you are competing in multiple markets and multiple products, victory may have nothing to do with what you are doing in the specific market," said Wharton Professor Ian MacMillan. "It is like playing three-dimensional chess. The spoils go to companies who can outthink competitors on this new dimension of competition."

By looking at the "global gamesmanship" of this full three-dimensional chess game, managers can see opportunities for offensive or defensive maneuvers across markets. For example, sometimes companies will concede a position in one market to concentrate on a strategy in a different market. This is like a "gambit" in chess where a player gives up a piece in exchange for a stronger overall position on the board. For example, Gillette withdrew from the lighter business in 1984, handing the market to rival BIC. But this allowed Gillette to focus on developing its very successful Sensor razor. "You sacrifice a piece to gain position," MacMillan said.

 

    

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