BEE Partner, South Africa Economy Watch

One of the major problems facing strategic thinkers is the whole issue of competitive advantage. According to strategy guru Richard D’Aveni, in most industries the days of permanent competitive advantages are long gone, because of the nature of what he calls `hypercompetition’.² D’Aveni contends that the best one can hope for is an ongoing series of temporary advantages, and that that is wh_atstrategists should be aiming at. This has led many organisations to move from seeking immediate competitive advantage to the development of long-term relationships with customers in the belief that opportunities for the creation of advantage will arise within the relationship. Allied to this is the belief that customers are company assets that need nurturing, rather than income sources that are there to be exploited. Also, more organisations are beginning to place greater value on customer advocates than on powerful management teams. In terms of customer loyalty, greater emphasis is being placed on moving customers up the loyalty ladder, until they becom_e advocates of the company and its products.’

The world of technology also provides us with a number of trends that will impact not only on companies‘ global business, but also on their technology business processes. These trends are likely to affect the customer—supplier relationship, and will impact on consumer buying behaviour. In an era where technology and innovation are two keys to global competitiveness, the decrease in the time frame of the product life cycle continues unabated. The rule of thumb is that by the time a product gets to market, its shelf life has been halved. This puts pressure on a company’s R&D capabilities to help keep it innovative and, therefore, competitive.

Futurist and technologist David Smith identifies a number of technologically orientated trends, which will impact on company strategy in the globalisation game.

The impact of global competition has also started a powerful trend in the European Union — one that some analysts believe could improve companies‘ productivity and provide them with the wherewithal to better compete on the global stage, particularly against the United States. It is hoped that the South African government and the country’s business organisations have been taking note of this development. The trend is longer working hours.

Many European companies are now demanding that their employees work longer hours for the same amount of pay. The bargaining chip that they are using with the trade unions is twofold:

• The ten new member countries in the European Union, which include Hungary, Poland and the Czech Republic, can offer prospective investors lower labour costs, longer working hours and highly skilled workforces.

• The emerging global competitiveness of the new mega-economies of China and India is putting pressure on the nations of theworld — even the mature economies — to improve efficiency andmove up the value chain.

A good example is Thomas Cook’s German operation, where the company’s employees accepted a working week of forty hours (an increase of one-and-a-half hours), with an annual vacation time of twenty-three days (a reduction of five days). Trade unions, although opposed in principle to such moves, appear to be resigned to this new policy in order to preserve jobs in a region where unemployment averages about 9 per cent. Other companies that are restructurin_g themselves along this line include Porsche, Volkswagen, Siemens, DaimlerChrysler, Spar and Lufthansa.

The case of Germany is a lesson to South Africa and other emerging economies. The German industrial worker is one of the highest paid in the world, with German companies offering some of the best employee benefits to be found anywhere. With the emergence of low-wage countries in central Europe and Asia, many German companies are now demanding that their workers extend their working week, without additional pay. In return, these companies are pledging to their unions not to make any (additional) layoffs. With the pressures of global competition, in conjunction with the poor economic growth in the country, German employers have been threatening to take jobs to lower-cost economies. During 2004, Siemens, for example, pointed out to its trade unions that labour costs in Hungary are almost a third lower than in Germany. During mid-2004, the company also said that it would be spending about US$1.2 billion investing in China over the next few years. It would appear that German employers feel nothing about taking German jobs to lower-cost economies, a threat that prompted Chancellor Gerhard Schroeder to label them unpatriotic. The German government, however, is considering reducing the number of public holidays in order to help economic growth.

However, a closer look at the picture will reveal that, during the 1980s, German Unions entered a seven-week-long strike to win, amongst other concessions, a shorter working week. Twenty years later, these same unions have lower _membership, owing to _unemployment and a diminishing of interest in the union movement at _grassroots level. The balance of power does appear to have switched to the _employers. German employers quite simply want a reduction in their cost structures because of the impact of global _competition, _and they are looking to reduce their wage bills. If their workers will not accept longer working hours for te same ay, they are quite prepared to move operations to countries that can give them what they wan_e that need to become more competitive.

The lesson for an emerging economy? All stakeholders need to work with one another in a coordinated manner for all parties, including the national economy, to effectively manage fast-paced globalisation in the neo-liberal model of capitalism. The prize to be secured is a win—win—win—win relationship. Business organisations will win by becoming more efficient and profitable; trade unions will win because they retain members; shareholders will win because they secure good returns on their investments; and the national economy will win with lower unemployment. I have identified seven investments that South African companies need to pursue in order to align their strategic thinking with global trends, and to spearhead a South African challenge in the global arena.

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