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By ALEJANDRO RUELAS-GOSSI

Escape the Low- Cost Trap & Enhance Value for Your Business

CRAFTING YOUR VANTAGE POINT

A t the start of 2016, the Trans-Pacific Partnership, a trade agreement brokered at the end of 2015, was b e i n g h o t l y d e b a te d b y t h e 1 2

signatory governments. Proponents hailed it as a boon for economic development, especially for the emerging economies of Chile, Malaysia, Mexico, Peru and Vietnam. But critics argued it might simply do more to advance the interests of the richer nations involved: Australia,

Brunei, Canada, Japan, New Zealand, Singapore and the United States. Instead of the economic rebalancing being promised by an integrated value chain representing 40 percent of global trade, critics predicted more of the same: an offshoring of low value-added activities to less powerful members of the chain in a distribution that would be neither fair nor equitable.

To some extent, the critics may be right: The “global factory” model can engender a vicious

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Many discussions of raising national competitiveness take the “global factory” model as

their starting point. This model

essentially assumes that the

primary way for less developed

economies to catch up is to

carry out low value-added

activities within the global

supply chain. The inevitable

result is a frantic race to the

bottom, where being competi-

tive means being the lowest

cost provider.

This article proposes a

markedly different approach

based on the orchestration

of an economy’s “Vantage

Point.” Rather than cutting

costs (and living standards),

countries should instead focus

on enhancing the value of

the goods and services they

naturally produce. Examples

from Spain’s Basque Country,

Mexico and Colombia illustrate

how intense collaboration and

innovation in the production

process – even in the produc-

tion of what may seem to be

basic commodities – can lead

to a virtuous circle of value

optimization and economic

development.

EXECUTIVE SUMMARY

cycle of underdevelopment where countries specialize in low-cost activities and fail to ac- cumulate the skills and resources necessary for sustained long-term growth. The country effec- tively surrogates itself to externally generated knowledge and becomes an industrial outpost of developed economy multinationals.

Development strategies that are narrowly focused on reducing costs in export-oriented factories, exploiting natural resources to the point of depletion, providing low value-added services (such as call centers) and prolonging a country’s dependence on unsophisticated industries (extractive and agricultural sectors) often condemn nations to a bleak future of slid- ing salaries and contracting revenues.

T h i s a r t i c l e p r o p o s e s a n a l t e r n a t i v e – w h a t I c a l l t h e “ Va n t a g e Po i n t. ” T h i s approach emphasizes a country’s natural advantage, taking those resources owned and developed by a given country and enhancing their sophistication to create an inimitable value proposition. By replacing – or at least c o m p l e m e n t i n g – t r a d i t i o n a l l o w - c o s t strategies, the Vantage Point framework allows societies to enhance the value of their outputs

and, by extension, per capita income. It sets in motion a self-perpetuating virtuous circle of development in which valuable skills are accumulated and the country’s primary sources of competitive advantage are strengthened.

For almost two decades, I have been doing research and consulting in firms around the world and across a wide range of industries. In particular, my work with the Mexican cement giant, Cemex, in four continents and my in- depth studies of Spain’s Basque Country while directing the think-tank Orkestra led me to develop the concepts described in this article. Apart from Mexico and Spain, I have identified examples of these concepts among firms in Bolivia, Brazil, Chile, China, Colombia, Egypt, Finland, Holland, Indonesia, Ireland, Japan, Peru, Singapore, South Africa, Sweden, the United Kingdom and the United States.

For the purposes of this article, I will focus on examples from the Basque Country, Mexico and Colombia to illustrate how the Vantage Point process works for businesses there – and how it might likewise inspire your own.

Time for a Rethink Adopting the Vantage Point approach requires a drastic rethink of the role of foreign direct investment (FDI) in economic development. Rather than serving to create and perpetu- ate low value-added industrial functions and temporary, low-paid jobs – as is often the case – FDI would be drawn to a country to enhance and develop its economic potential, in addition to generating returns for commercial partners.

This redefinition entails an enormous shift in relations between developed and emerging markets. For emerging economies, a Vantage Point model offers the chance to develop in a more sustainable way that is more advanta- geous to the broader population. However, to pull it off, they need the sophisticated knowl- edge of a developed market counterpart. In the long term, developed and emerging economies both benefit enormously.

For example, promoting genuinely sustain- able economic development in emerging and

The Vantage Point emphasizes a country’s natural advantage, taking those resources owned and developed by a given country and enhancing their sophistication to create an inimitable value proposition.

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developing economies would help stem the mass exodus of people fleeing the troubled re- gions of the Middle East and Africa for the more stable regions of Europe. If emerging econo- mies began to enjoy the benefits of economic specialization and sophistication, fewer people would be motivated to move elsewhere.

Many of the beggar-thy-neighbor forms of arbitrage that became popular with the explo- sion of global trade in the 1990s, such as offshor- ing, are no longer fit for purpose in a world where shared prosperity and development are the only guarantors of shared security and stability.

Meanwhile, the global commodity bubble is well and truly over, leaving one to wonder just how the nations and regions that grew dependent upon it will get back on their feet. The answer is by bringing value, not volume, to the equation; by enhancing the sophistication of what nature gave in abundance to each of the world’s regions. Time is of the essence, especially with the Great Global Recession beginning to bite in emerging markets.

Strategic Orchestration Mu c h s t r a te g i c t h i n k i n g t a ke s a n a r r o w p e r s p e c t i v e , w h e r e t h e m a i n g o a l i s t h e maximization of company profits – and by extension national GDP. The starting point is almost always the individual firm, which exists to create, capture and sustain economic value. As such, firms largely focus on opportunities from which they alone can benefit.

The Vantage Point approach advocates a more allocentric view (from the Greek allos meaning othe r). The name of the game is collaboration and orchestration, rather than competition and domination.

Try to think of the myriad links beyond the value chain as players within an orchestra. It is the task of the orchestrating node – the conductor that initially identifies and develops an opportunity – to get all the other nodes to play along to its tune. To do that, it must find a way of engaging all the other nodes, i.e., the individuals, business units, companies or even governments that control relevant resources

and make them available for use to fill a gap in the market.

The two dominant streams of strategy today – industry structure and the resource- based view of the firm – perceive strategic choices from a predominantly individualistic perspective. As long as the firm is maximizing its profits, most other concerns are moot.

As part of this approach, firms are encouraged to improve their weaknesses, investing more resources to make up for what they lack internally. Their strengths may go untouched and they fade into a landscape of mimicry.

By contrast, the Vantage Point principle of allocentrism seeks to orchestrate the strengths o f t h e m a r k e t p l a y e r s a c c o r d i n g t o t h e particular strengths that the firm is bringing to the relationship. Every node will be playing at its best, always enhancing its particular strengths. Weaknesses must be orchestrated, not improved. One’s weakness is a strength of another node.

Consider how Apple has mastered this approach, orchestrating millions of developers in the process of enhancing its allocentric value around its strengths in design and ease of use. Apple is not an isolated example. Facebook, Alibaba and peer-to-peer pioneers U b e r a n d A i r b n b h a v e a l s o a d o p t e d a n allocentric orientation, seizing opportunities by orchestrating a network. To make it work requires a seismic shift in how managers establish and develop relationships.

In the traditional view of the firm, the firm maximizes its own value, often at the expense of other players in the value chain. The orchestration approach, by contrast, assumes there are unlimited opportunities to create new value, as long as there is cooperation between the network nodes and the pie is carved up in a manner that satisfies all participants.

Allocentrism Not Altruism This cooperative model is not altruistic. It acknowledges the self-interested desires of each human being – indeed, that is what makes the network work. As the economist Adam

Much strategic thinking takes a narrow perspective, where the main goal is the maximization of profits. The Vantage Point approach advocates a more allocentric view, where the name of the game is orchestration.

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Smith argued almost three centuries ago, what makes societies function successfully is each participant’s innate egoism. However, instead of allowing egoism (from the realm of philosophy) to morph into egocentrism (from the realm of economics), the orchestration approach turns it into allocentrism.

T h i s p h i l o s o p h i c a l d i f f e r e n c e c a n b e e x p l a i n e d w i t h t h e h e l p o f t h e N a s h Equilibrium. Using the classic “prisoner’s d i l e m m a , ” t h e m a t h e m a t i c i a n Jo h n N a s h showed that it is precisely the non-cooperation of parties that results in equilibrium. The possibility of getting a reduced sentence is so strong an incentive for the prisoner that betrayal of his partner in crime – the most selfish choice – becomes his best option. However, Nash extended the two-party, zero- sum scenario to any situation with n number of participants. He argued that there are games in which players coordinate their choices and negotiate among themselves. He called this phenomenon “the bargaining solution.”

An orchestrated network is an allocentric game of n number of participants that reach an ideal bargaining solution. For example, Apple did not establish itself as a platform for millions of developers to create apps and reap millions of dollars in profits in the process in order to help them out of the goodness of its heart. It did it to engage them in its own game while increasing the value of Apple’s ecosystem.

In contrast to the resource-based view of

Alejandro Ruelas-Gossi is a professor of Strategy at the

University of Miami School of

Business Administration and

a visiting research professor

at New York University Stern

School of Business. He has

consulted for a number of

Fortune 500 companies

including Sony, Microsoft, IBM

and Philips. Prior to going into

academia, he was a senior

executive at Cemex and Deere

& Company. He also served

for a number of years as the

founding director of Orkestra,

the Basque Institute of

Competitiveness, in Spain.

ABOUT THE AUTHOR

the firm, the Vantage Point framework sees firms as porous entities. As such, companies are able to enhance value through the integration and coordination (orchestration) not only of their own resources and capabilities but also of external ones.

To enhance the Vantage Point of each geographic region, firms and governments will need to play an allocentric game to organize and coordinate all the nodes that play an active role in defining a distinctive value proposition. The core strategy of a region would then be the development and orchestration of the necessary skills and at tributes to enhance the value and competitive advantage of its products and services.

Putting Value Before Cost: Basque Country Development A f i t t i n g i l l u s t r a t i o n o f t h e b e n e f i t s o f value enhancement and allocentrism is the d e v e l o p m e n t o f t h e B a s q u e C o u n t r y, a n autonomous region in northern Spain. In the early 1990s, the region had an unemployment rate of around 25 percent and GDP per capita income roughly equivalent to $13,000. Over the past 20 years, the Basque Country has steadily outperformed the rest of Spain. Today it boasts the second lowest level of unemployment and the highest per capita income level for any region in Spain, closer to that of more advanced economies around the world. (See Exhibit 1.) Local political and business leaders achieved this by enhancing value, not by reducing costs.

More than half of the region’s workers are employed in industrial sectors, in particular the steel industry. However, rather than trying to make the cheapest steel in the world, the Basques have concentrated on enhancing its value. Just after signing the third stage of the Basque Economic Agreement, in 1981, the Basque Country’s regional government began orchestrating an allocentric game, bringing together public sector and private sector players around mutually beneficial objectives, igniting the early sparks of an industrial renaissance that continues to this day.

To enhance the Vantage Point of each region, firms and governments will need to play an allocentric game to organize and coordinate all the nodes that play an active role in defining a distinctive value proposition.

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Also key to the region’s economic devel- opment was Spain’s membership of the Eu- ropean Union, in 1986, which resulted in the elimination of tariff barriers and greater expo- sure to international competition. In addition, the common monetary policy prevented Spain from engaging in competitive devaluations.

Basque industry had little choice but to raise its game as fast as it could. To do that, however, it did not slash prices – indeed, there was no point: the price of steel is set in inter- national markets and is subject to high cyclical variations. Instead, it focused on product and process innovations, which helped to mini- mize exposure to price volatility. Indeed, be- tween 2005 and 2008 the Basque Country was able to increase the value of its exports, even as labor costs rose.

To support this race-to-the-top process, the Basque autonomous government lever- ages public policy to foster private initiative. It does this in two key ways. First, it encour- ages entrepreneurs and business leaders to contribute toward industrial development through the implementation of new competi- tiveness policies. It also identifies opportuni- ties for new technological development (such as graphene). It is constantly on the lookout for new investment opportunities in R&D, as a means of constantly renewing the region’s productive structure.

The regional government has created a web of nonprofit institutions linked to public and private universities. Their role is to support world-class research and innovation in the re- gion. To ensure effective knowledge transfer, private sector participants are invited to join the boards of these R&D programs and institu- tions, some of which, including Tecnalia, Iker- lan and IK4, have developed a strong presence on both sides of the Atlantic.

At the heart of the Vantage Point concept is the understanding that every geographic re- gion has distinct characteristics, and it is much better to direct FDI toward creating support- ive, productive structures that enhance those strengths and orchestrate the weaknesses, leading to a unique value proposition. This act of “bricolage” – the construction or creation of a work from a diverse range of available things – is a much better path to development than reaching for unavailable things, which is cost- lier and riskier. The Basque Country’s recent development may be impressive, but it is by no means alone, as illustrated by the next ex- ample from Mexico.

Avocados From Mexico: Healthy Growth I n Fe b r u a r y 2 0 1 5 Av o c a d o s Fr o m Me x i c o (AFM) took the world by surprise when it presented its first ever NFL Super Bowl com- mercial. Some people in the audience might have wondered what exactly they were doing watching a commercial for avocados. After all, avocados are just a basic food commodity – or so they might have thought.

Fo r Me x i c o , o r to b e m o r e p r e c i s e t h e Me x i c a n s t a te o f M i c h o a c á n , t h e av o c a d o is not just a basic commodity, it is a clear Vantage Point. Michoacán’s rich volcanic soil, abundant sunshine and timely rainfall provide the perfect microclimate for producing tasty, creamy avocados all year round. Since 1997, t h e Me x i c a n H a s s a v o c a d o i n d u s t r y h a s achieved rapid growth in the United States, representing around 70 percent of the U.S. market today.

This act of “bricolage” – the construction or creation of a work from a diverse range of available things – is a much better path to development than reaching for unavailable things, which is costlier and riskier.

1 9 9 5 2 0 0 5 2 0 1 4

BASQUE COUNTRY €21,303 €29,423 €29,142

SPAIN €17,869 €23,484 €22,357

* in constant euro rate for 2010

Changing Fortunes BASQUE PER CAPITA INCOME HAS STEADILY

OUTPERFORMED THE REST OF SPAIN.

EXHIBIT 1

SOURCE: Orkestra, the Basque Institute of Competitive- ness, based on Spanish Regional Accounts from the Span-

ish Institute of Statistics (INE).

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What’s more, consumer trends are decid- edly in the company’s favor. Food consumers are becoming a lot more sophisticated in the health choices they make. Retail stores dedi- cated to health-conscious food have been growing at double-digit rates for the past de- cade. AFM has a particular advantage in this regard – avocados contain nearly 20 vitamins and minerals, including vitamins B6 (offering 4 percent of the recommended dietary allow- ance), C (4 percent) and E (4 percent); niacin (4 percent); folate (8 percent); and fiber (4 percent). AFM has also been able to garner the support of celebrated gourmet chefs on both sides of the U.S.-Mexican border, and guaca- mole – a Mexican dish – has become popular the world over.

Rather than serving as a cheap link in global supply chains, AFM has harnessed its strengths and orchestrated a host of other players. In 2009, the company invested in state-of-the-art technology that allows it to trace each avocado back to farm in less than one hour. Meanwhile, Mexico’s Avocado Producer and Exporting Packers Association (APEAM) has adopted rig- orous industry standards to support the pro- duction of avocados with unsurpassed taste, food safety and quality.

Producers are also constantly working to improve their health and environmental im- pact by participating in voluntary audits that verify that the fruit and vegetables produced have been grown, packed, handled and stored as safely as possible to minimize risks of mi- crobial food safety hazards.

Like the Basque Country, AFM has taken a readily available local resource, but rather than letting it become a commodity in some- one else’s value chain, it has turned it into its own natural Vantage Point. Think about it: California also grows avocados but only ac- counts for 20 percent of its home market. This shows there can be a viable alternative to the maquiladora model that has sprung up along the U.S.-Mexican border, where Mexico sim- ply provides cheap labor and assembly facto- ries to U.S. parent companies.

Juan Valdez Coffee: Raising the Stakes Another emerging market multinational that has learned to maximize its value proposition is Juan Valdez Coffee. In 2014, the Colombia- based company enjoyed a prolific year as coffee prices jumped 50 percent, making it the year’s best-performing commodity.

However, like Avocados From Mexico, Juan Valdez refused to make do as a commodities trader heavily exposed to the whims and vaga- ries of the global markets. To that end, the com- pany has carved out a lucrative niche in domes- tic and foreign retail markets. It now enjoys a presence across 13 countries, with 309 outlets, and its donkey-and-farmer icon is recognized the world over.

The basic arithmetic behind JV’s decision to expand into retail was a no-brainer. The average price of a cup of coffee in a JV outlet is $5. You get 70 cups of coffee from every pound. The to- tal coffee production of Colombia is 11 million sacks of coffee. Every sack of coffee contains 132 pounds. JV consumes only 24,000 sacks, which is only 0.2 percent of total production. The price per pound of most of the coffee produc- tion is $2. In other words, taking a grain of cof- fee all the way to a JV outlet increases revenue by 175 times (70 cups x 2.5 times of price/cup).

It is no surprise that coffee has far more value as a high-end retail product than as a ba- sic commodity. However, like Nespresso, Juan Valdez understood that the beloved brew is fast gaining the sophistication and cachet normally reserved for alcoholic beverages like wine or whisky. It even calls its outlets “boutiques.” Despite fierce competition in the sector, the JV brand is extremely well positioned, and in some countries, such as Chile, its prices are higher than Starbucks’. There is also ample room for further growth.

For its home market of Colombia, Juan Valdez has pried open a value proposition that is well worth exploring. That proposition is to attract some of the world’s best coffeemakers to the country to enhance the value of the nation’s coffee – just as the Basques enhanced

Producers have taken a readily available local resource, but rather than letting it become a commodity in someone else’s value chain, they have turned it into their own natural Vantage Point.

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the value of their steel – as well as cultivating and spreading a coffee culture across the whole country. One of my Colombian students who works for Juan Valdez recently suggested s e t t i n g u p t h e w o r l d ’ s f i r s t e v e r “ c o f f e e university” in Colombia, which could serve as a repository of knowledge on global coffee- making cultures, traditions and businesses.

What my student realizes that many busi- ness executives do not is that deep knowledge is key for creating long-lasting value. The aim is always to increase a product’s numerator. While a handful of supranational institutions are coming round to the vital role of upgrad- ing, diversifying and skilling in achieving more sustainable development in the Global South, most developing countries continue to adopt denominator-driven rather than numerator-

driven strategies. Denominator-driven strate- gies – what I call Maquiladora Syndrome – focus all efforts on just three variables: delivering the best quality, on time, at the lowest cost. As a re- sult, these countries are left cruelly exposed to the volatility of foreign direct investment, and unable to accumulate the skillsets necessary to free themselves from the commodity trap.

In studying primitive cultures, anthro- pologists and archeologists have argued that the fate of early human societies depended on their ability to farm their own food, providing their people with enough idle time to think about how to build a better future. Other societies that did not farm continued to hunt and gather, using up most of their time searching for food just to survive. This left little opportunity to think about new ways of doing things.

High Value

Low Cost

Egocentric Allocentric

Most innovative firms from developed economies

R&D is decisively egocentric, typified by “not invented here” syndrome, silo culture, incremental innovation and imitation

Typical for emerging economies

Competitiveness = the cheapest option

The sweet spot, where orchestrating the strengths of others enhances the firm’s own value in the process

Firms expand their value mindset by orchestrating the relevant nodes in their natural ecosystem

This is the next progressive step for companies that would find it more difficult to switch immediately to high value

Example H&M orchestrating consumers to bring old clothes back to the store to recycle while at the same time buying new ones

Examples Apple, Google (aka Alphabet) and the German insurer Allianz, which has launched an innovation accelerator center in Munich, orchestrating Google as a node

Example Samsung, which is a global tech leader but is also frequently accused of copying others’ inventions

Example Maquiladoras along the U.S.-Mexican border

EXHIBIT 2The Vantage Point Matrix MANAGERS SHOULD MOVE FROM

LOW-COST, EGOCENTRIC TO HIGH-

VALUE, ALLOCENTRIC BUSINESS

MODELS.

What my student realizes that many business executives do not is that deep knowledge is key for creating long-lasting value. The aim is always to increase a product’s numerator.

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Sull, D. and A. Ruelas-Gossi. “Strategic

Orchestration.” Business Strategy Review 21, no.

4 (2010): 58-63.

Ruelas-Gossi, A. “How Colombia Can Turn Its

Economy Around.” Harvard Business Review,

December 2010.

Ruelas-Gossi, A. “Mexico’s Maquiladora

Syndrome.” Harvard Business Review, October

2010.

Rivera, R. and A. Ruelas-Gossi. “Las multilatinas.

Multinacionales del Nuevo Mundo.” Foreign

Affairs Latinoamérica 7, no. 4 (2007): 83-95.

Sull, D., A. Ruelas-Gossi and M. Escobari. “What

Developing-World Companies Teach Us About

Innovation.” Harvard Business School Working

Knowledge, January 2004.

TO KNOW MORE

Many developing and emerging markets face a similar dilemma. They can take a more proactive approach to their national competi- tiveness agenda by focusing all their energies on value enhancement, or they can resign them- selves – surrogating their thinking – to serve the short-term needs of Western multinationals ad infinitum. If they take the first path, they should have a good stab at achieving sustainable eco- nomic growth and development. The second option can only mean more of the same – stag- nation, exploitation and ever lower standards of living.

The matrix in Exhibit 2 illustrates the stark contrast between these two development mod- els. The content of each quadrant can be seen in both retrospective and prospective ways.

For instance, retrospectively, the low-cost, egocentric quadrant is typical for emerging economies. Arbitrage is the obvious strategy of choice for most emerging market compa- nies. Firms spend less on R&D than traditional MNCs, have lower rates of new product devel- opment, less coordination across the region and less engagement in strategic planning and budgeting, not to mention relatively limited corporate control and reporting requirements.

Prospectively, the matrix offers prescrip- tive implications. Perhaps most important, the farther that companies are able to move their products away from their basic origins as possible, the higher the value of their outputs. For emerging markets to adopt the Vantage Point approach, the public and private sectors must work closely together to identify which industries make the best candidates for value enhancement.

A Change of Course Over the past three decades, several manage- ment principles have become so widespread that they now practically constitute absolute truths. Among them is the determination to of- fer the lowest possible prices, along with relent- less attempts to follow the rhythm set by com- petitors and the constant (but limited) analysis of the value chain.

For emerging markets to adopt the Vantage Point approach, the public and private sectors must work closely together to identify which industries make the best candidates for value enhancement.

While these strategy principles may be a source of interesting ideas of where and how to go, they are often misapplied, doing noth- ing more than promote a culture of sameness by curbing differentiation. And what are the consequences of these precepts on global liv- ing standards? Even in a market as supposedly developed as the United States, the number of people now living in poverty there is at record- high levels – and climbing – and the contagion is spreading throughout emerging economies.

We cannot go on like this forever. In addi- tion to recognizing the unsustainable practices that have contributed to the problem, we have to resolve not to apply more of the same old ap- proaches that have led to this state of affairs. In short, we need to change the way we think – we need a dramatically different Vantage Point. I urge you to redefine “competitiveness” – from meaning “low cost” to playing a new allocentric game of strategic orchestration.

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The last few decades have seen tremendous increases in the sophistication with which

strategic alternatives are evaluated.

Not nearly as much systematic

attention has been allotted to the

complementary question of how

to generate better sets of strategic

alternatives to evaluate.

While there are many routes

to improvement, I read Professor

Ruelas-Gossi’s article as an

argument, powerfully illustrated,

that one way of getting to better

strategic alternatives is by revisiting

some strategy basics – which

sometimes get lost in the process of

coming up with the annual strategic

plan and linking it to financial and

other performance measures.

In this sense, I see three

strategic basics underpinning the

argument, in a way that stands

out particularly sharply in the

international context on which the

article focuses:

1. THINK (HARD) ABOUT UPGRADING. The need for upgrading is a

standard strategic mantra. It gains

additional force in the international

The Vantage Point in Perspective Global strategist Pankaj Ghemawat highlights three strategic basics that he sees underpinning Alejandro Ruelas-Gossi’s article.

“Orchestration is a fresh evocation of an alternative to asset ownership.”

the perspective of a country or

region. At the firm level, the notion

has an additional, quite literal

interpretation: firms that engage in

foreign direct investment typically

– and with good reason – tend to

invest in markets that are close by

before they turn to ones that are

farther away.

3. RECOGNIZE THAT OWNERSHIP IS NOT THE ONLY ALTERNATIVE. Once again, this point applies both

domestically and internationally

but is more in evidence in the latter

context. In particular, theorizing

about international business has

long stressed that even if a firm

has a competitive advantage at

home, it should think about a

range of alternatives for exploiting

it overseas, including exports,

licensing, joint ventures and so on,

as well as direct asset investments.

Orchestration is a fresh evocation of

an alternative to asset ownership

that platform-based business

models such as Airbnb and Uber

have popularized because of their

quick, asset-light global rollouts.

In sum, there is still gold there in

some of those basics, and Professor

Ruelas-Gossi’s article reminds us

of that in a way that should get

creative juices flowing.

To read more on the first point

in the context of globalization, see

Competing in Capabilities by John

Sutton (Oxford University Press,

2012). I elaborate on the second

and third points in my forthcoming

book The Laws of Globalization

(Cambridge University Press, 2016).

context from theoretical models

that indicate that increased

cross-border integration will

generally raise the capability

hurdles that companies must clear

just to remain in operation. And

empirical evidence suggests that

the companies from emerging

economies that are intent on

surviving will generally have to

focus on improving the numerator

of the differentiation-to-cost ratio

by building up their intangible

assets in terms of marketing and

technological know-how.

2. WHERE YOU ARE FROM AFFECTS WHERE YOU SHOULD GO. The “Vantage Point” notion applies in

domestic strategy in a somewhat

abstract way, in terms of the

need for a company to focus

on its (cumulated) distinctive

competence. Professor Ruelas-

Gossi stresses the same point in

the international context from

Pankaj Ghemawat is the Anselmo Rubiralta Professor of Global Strategy at IESE Business School. He is also the Global Professor of Management and Strategy and

Director of the Center for the Globalization of Education and Management at the

New York University Stern School of Business.

EXPERT insight ESCAPE THE LOW-COST TRAP & ENHANCE VALUE FOR YOUR BUSINESS

IESEinsight 61 ISSUE 28 FIRST QUARTER 2016

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