From: Eddie Evans, Reuters
Published December 15, 2007 08:43 AM

World is not flat, academic says

NEW YORK (Reuters) - One of the most talked-about books of the last two years was "The World is Flat," in which author Thomas Friedman argued that borders between countries were becoming less and less important.

Now, Pankaj Ghemawat warns in "Redefining Global Strategy" (Harvard, $29.95) that businesses suffer when they follow such globalization logic too far.

The real state of the world is neither globalized nor local, Ghemawat writes. It is semiglobalized, and will remain so for decades to come.

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Ghemawat, on leave from Harvard and visiting professor of global strategy at IESE Business School in Barcelona, found that the average level of globalization in investments, phone calls, tourism and immigration is just 10 percent.

And some measures, like the international share of total Internet traffic, are actually decreasing. "This calls into question the other common myth that even if the world isn't quite flat today, it will be tomorrow," he said.

He cites Google Inc <GOOG.O>, Coca-Cola Co <KO.N> and Wal-Mart Stores Inc <WMT.N> as examples of companies that have suffered when they tried to treat all the world the same.

Google, whose English-language search engine and Internet advertising businesses are explosively successful, has struggled for market share in Russia because of a difficult language and has run into censorship difficulties in China.

Wal-Mart has failed to replicate its U.S. success uniformly around the world, and even pulled out of Germany. Its most profitable operations abroad are in Canada, Mexico and Britain, places that according to Ghemawat are culturally or graphically closest to the United States.

"The point is not that Wal-Mart shouldn't have ventured into more distant markets, but instead, that it needed to think differently about how to compete in them -- something it is now starting to do in markets such as India," he said.

Under Ghemawat's analysis, Coca-Cola lost its way as it seesawed between extreme centralization under Roberto Goizueta in the 1990s and excessive localization under Douglas Daft between 2000 and 2004.

Now, Coca-Cola is attempting to compete in a way that neither ignores the differences between countries nor caves in to their cultures and customs entirely. "It recognizes the reality of semiglobalization," he writes.

And, Daimler's purchase of Chrysler was doomed because the costs of combining such different companies exceeded the savings, a point Ghemawat made at the time.

"Obviously the world is not yet flat," Friedman replied in Foreign Policy magazine. But the evidence of "flattening" and globalization is all around.

"Anyone who thinks that some protectionist measures are going to put YouTube back in the bottle ... is blind to the dramatic changes that have already taken hold," wrote Friedman, who is also a columnist for the New York Times.

For Ghemawat, it is not globalization, but "semiglobalization" that accounts for the success of Japan's Toyota Motor Corp <7203.T><TM.N>, which has overtaken General Motors Corp <GM.N> to become the world's biggest automaker.

Toyota anticipates expanded free-trade agreements within the Americas, Europe and East Asia, but not across them, according to Ghemawat.

"This is a more modest -- but also more realistic -- vision in which neither the bridges nor the barriers between countries can be ignored."

(Reporting by Eddie Evans; Editing by Jeffrey Benkoe)

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