Hal Sirkin: Commodities And The ’Next Billion Customers’

Friday, June 19, 2009

What is the end result of globalization? A new era of international hypercompetition – and sky-high commodities prices – called “globality,” says Harold (Hal) L. Sirkin, co-author of 2008’s “Globality: Competing with Everyone from Everywhere for Everything.”

Sirkin, senior partner of the Boston Consulting Group’s Chicago office, has written about globality’s impact on businesses and the markets for BusinessWeek, Harvard Business Review and the New York Times. He’s also a frequent guest on CNBC, Fox Business News, MSNBC and CNN. HardAssetsInvestor.com Associate Editor Lara Crigger recently chatted with Sirkin about globality, including how it impacts commodities supply and demand, which emerging markets could soon dominate the markets and who exactly are “the next billion customers.”

Lara Crigger, HardAssetsInvestor.com (Crigger): What is globality, and how is it different from globalization?

Hal Sirkin, senior partner, Boston Consulting Group (Sirkin): Primarily, globalization was about companies from the developed world – the U.S., Western Europe, Canada, Japan – looking for ways to save money and to be more competitive. Those companies went to the developing world to source parts, components and products, because they could forgo wage rates that might have been $20-30/hour in the U.S., and work with people who were earning $1/hour. And $1/hour was actually good money in those poor countries; it was a good opportunity for them to improve their standard of living.

But this created an interesting dynamic that wasn’t anticipated – companies in those markets began to learn about how to produce products for the developed world, and they weren’t satisfied by just serving the traditional multinational companies. They wanted to serve the end customers themselves.

So these suppliers became competitors. It became a two-way street. And it wasn’t just about going and getting low-cost labor; you started to see the real development of companies like Bharat Forge and Tata in India or GoodBaby in China, who are now selling products in the developed world. Globality is about that shift.

Source: iStockAnalyst.com (link opens in a new window)