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Wednesday, March 9, 2011

If you fail to compete with your close competitor marry it: A case Study

#Q1. How do you define the strategy, “if you fail to compete with your close competitor marry it”? Comment in the context of competition between India and China.
India and China are two of the world’s most ancient surviving civilizations.  The Chinese built the 4000-mile Great Wall some 2000 years ago, about the time of the birth of Jesus Christ.  As an awesome marvel of engineering, most of the wall still stands intact, the only man-made object visible from the outer space.  They invented bureaucracy even earlier, thousands of years before Max Weber brought it eloquently to the attention of the western world.  The Terracotta Army built by Emperor Qin in the 3rd century BC is in almost perfect state of preservation to this day.  Some of the greatest inventions that we live by even today came from China, including the gun powder – the most infamous of them all, the paper, paper money, printing, viaducts, dams, clocks, the compass, astronomical observatories, and countless other inventions .
            Indian contributions to algebra, textile, chemistry, medicine, metallurgy, and astronomy in the Ancient and Medieval periods are legion. Sophisticated agricultural practices, architecture, and sewage systems were developed by the engineers in the Indus Valley civilizations of Harrappa and Mohanjadaro. The wisdom of the Buddha flowed from India to China, while Confucius’ precepts of compassion, humility, and right conduct by merciful rulers influenced the behavior of emperor Ashoka in the 3 rd century B.C. who inscribed on his commemorative pillars, Satya amar jayte (Truth alone shall triumph).           
            India became a free country through peaceful transition of sovereignty from Britain in 1947.  China had a proletarian revolution in 1949 led by Mao Zedong.  Both democratic India and Communist China embarked upon ambitious science, technology, and economic development programs through centralized planning.  Both emphasized self-reliance through local initiatives, restricting the flow of foreign capital and technology for nearly three decades.  During this time, the Peoples Republic of China (PRC) controlled its economy and protected it from outside influences far more than did India.  For at least 10-15 years since the revolution in 1949, the only source of foreign capital and technology for China was its ideological partner, the Soviet Union. That relationship began to crack in 1962 because of the USSR’s reluctance to transfer nuclear technology to the Peoples Republic.  China continued its isolation and suffered serious stagnation for 20 or so more years, until after Mao’s death in 1976.
            During this period India also strictly regulated its economy, allowing only partial and highly restricted entry of foreign capital and technology.  The Indian economy began to open its door a bit more widely by the middle of the 1980s, at about the same time as did China.  By this time, the global economy had already taken hold of the national economies in North America, Europe, and the Pacific Rim.  Post-Independence era regulations proved a mixed blessing for India.  It missed 20 years of the information technology revolution that was sweeping the world and driving the global economy – remember how the IBM and Coca-Cola were kicked out of India in the middle of 1970s.  The private sector stagnated under those regulations.  The protected government sector thrived despite its magnificent mismanagement.  India’s industrial development suffered.  While these negative trends were the legacy of regulations, government policy of self-reliance helped built robust networks of techno-economic institutions and individuals that were ready to march forward when the global economy did finally reach India.  Through regulations India was also able to protect its local industries and markets from unbridled speculation and exploitation by multinational corporations.  Let me return to China for a minute.
            Deng Xiaoping took command of China in 1979, three years after Mao’s death.  With a massive shift of public policy, Deng opened the Chinese economy to foreign capital, technology, and competition.  The scene that I witnessed in China when I went there for the first time in 1980 was a totally different scene than what is going on there today.  Despite the open door policy, economic modernization remained laggard during the entire decade of the 1980s. Things began to change rapidly in the next decade.  Since then, the Chinese economy has been growing at about 9-10% per year, surpassing any other country for a sustained growth at such a high rate.  In terms of GDP per capita, modern China is the world’s 4th largest economy, and is likely to overtake Japan within the next 5-10 years.  It is one of the world’s largest exporters of consumer items through retailers like Wal-Mart, Carrefour, Target, and Tesco.  Even garlic in the United States is being imported from China.  The American Wal-Mart is probably the biggest buyer of consumer goods made in China.  “It bought $19 billion worth of Chinese goods in 2004, amounting to some 15% of China’s total exports to America in that year.
            India has finally left behind its “Hindu growth rate” of 3% to hit an annual growth rate of 8+%.  Its technological capability is strong.  It is the most preferred destination of IT outsourcing, now moving away from being the world’s call center to being a vital feeder to the global knowledge industry.  India’s economic base is vast – 4th largest in the world in terms of purchasing power parity and 12th largest in terms of per capita GDP.  It is projected to become one of the five largest economies in the world by 2050 along with China and Brazil.  Its markets are huge, with the current consumer class estimated to be around 350 million, about the size of the entire European Community. 
            India-China trade is currently running at $20 billion from only $1.8 billion in 1989-90. A substantial share of India’s mobile-phone market is run by Hutchison Telecommunications of China.  Huawei Technologies has a software center in Bangalore that employs 1,150 Indian and 50 Chinese engineers. I understand that most of the Diwali lanterns for 2006 celebrations came from China.  The Chinese computer giant Lenovo has recently established its global marketing hub in Bangalore to be run and managed by Indians.  China imports iron ore and other minerals from India.  From the Indian side, an estimated 150 companies are currently doing business in China. The trend, nonetheless, is definitely pointing in the direction of increasing bilateral trade and technology agreements.  
            It’s high time to India to compare their strength and weakness with China and make the strategy accordingly. China is always doing very good in the hardware manufacturing side and India always good in software R&D and marketing side. So India must join hand with China in her strength positions and vise versa. This will lead the win win situation to both countries and can become two economical giant Asian nations in the near future.