The changing face of the multinational corporation

The Economist says the multinational corporation (MNC) is in trouble

Mr. Trump is unusual in his aggressively protectionist tone. But in many ways he is behind the times. Multinational companies, the agents behind global integration, were already in retreat well before the populist revolts of 2016. Their financial performance has slipped so that they are no longer outstripping local firms.

I am not sure I agree. The world has evolved rapidly in the last couple of decades. My travels in the last few months have been “déjà vu” — I have been back to places I had not been to in a decade or two or three. US, UK, Japan and German brands used to dominate. They still do but many of the names are different. Also there is a much wider range of regional brands. Several trends I saw in my travels:

The growth of the global customer

Nearly 60 countries now recognize “dual citizenships”. As the Trump administration found out during its recent attempt at a “travel ban” people hold two, even three passports, green cards and other travel documents. That translates to a very mobile consumer base. And they influence tastes of their friends and family who may not travel as much as they do. Sushi, hummus, quinoa were unheard off in most US households couple of decades ago. Now, even your local grocery store offers them. Panera, Starbucks and Whole Foods expose us to even newer stuff that McDonald’s and KFC never did for the longest time. The high-minded Michelin recently awarded a star to a humble “hawker” stand in Singapore. Alibaba announced at the recent Davos event they would be sponsoring the next few Olympics – as the Chinese consumer increasingly becomes global in his tastes and travels.

The emergence of city-states

On a recent cover, BusinessWeek quoted “No unions. No shareholders. No expense spared. I love Emirates!” Drive around UAE and you see the massive Dubai airport, the third busiest in the world, which services the Emirates Airline fleet of A380s (by far the largest in the world). A bit further you see the port of Jebel Ali, now one of the top 10 container ports in the world. Same with Singapore which boasts another superb airline and the world’s 2nd busiest container port. Ditto with Hong Kong which has a similarly excellent airline and the 8th busiest airport in the world. Look in the US. The town of Ft. Worth, TX has blossomed with its own massive, multi-modal logistics hub – AllianceTexas. Greenville, SC has become a hub for advanced manufacturing with large BMW, GE and other facilities. Even the humble Mississippi delta boasts its Golden Triangle. Each of them has a blend of private and public partnership which is coming to define a new class of multinationals.

Mass customization is table stakes

The Amazon India site shows Tropicana’s Litchi and Guava juices, flavors we don’t see in the West. But many locals in Mumbai don’t order them from Amazon. Their local stores provide consumers same hour delivery. As a result factories, distribution centers and data centers have to be customized and responsive to the local customer all over the world. Apple, which long manufactured the majority of its products in China, is diversifying to production in India and Brazil (and even some to the US). Flextronics, the contract manufacturer, routinely moves capital equipment around the world in response to emerging middle classes on various continents. Amazon is estimated to have over 360 distribution centers around the world. Google has unique domain names for most countries and users are served content localized for language and relevance. To service them, it has a global network of data centers at the Finnish waters of Hamina and the factory town of Lenoir, North Carolina.

Partnering is the new norm

During a recent round-the-world trip, we flew on several Delta SkyTeam partners. We used a Bank of America card but the ATM machines belonged to banks I had not heard of before. My iPhone accessed networks of Sprint partners. My Nexus did the same with Google Fi partners. Again, I had not heard of most of the telcos.  As President Trump looks to tinker with NAFTA, he will find the US auto supply chain is made up of hundreds of suppliers and the parts cross borders many times. Did make me wonder how complex the revenue sharing must be in each of these industries.

So, is the MNC dying? Hardly — it is morphing, and I suspect our accounting, both at the corporate and at the governmental level, struggles to keep up with all the changes I noted. The world has moved on.

Cross-posted at Medium