Langues appliquées - Anglais : Economie, gestion, droit, AES - 4e - 116

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Instructions For Study
1. Turn to the definitions following the text Competitive Advantage. They refer to the specialist
terms printed in bold type in the list of Useful words and concepts. Study them closely
and pinpoint them in the text.
2. Use an English language dictionary to check the meanings (in context) of the other words
in the list.
3. Do the exercises to improve your language skills.

Competitive Advantage
For many decades, multinationals were able to earn good returns by acting as efficient global
conduits for assets that were difficult to transfer, including intangibles such as product designs,
technologies, management systems and company cultures. Transfers within the multinational company
were substantially more efficient than obtaining those assets through open-market transactions. In
competing with local players, multinationals therefore had a competitive advantage.
However, a number of forces have been eroding that advantage. First, in the drive to reduce costs,
established multinationals have focused increasingly on activities with the highest returns. This meant
the lower-value activities were outsourced and often offshored to emerging economies - creating
global markets in which local companies can also source components and services. The outsourcing
drive also necessitated more modular designs. The result is that once-closed value chains have been
opened up, enabling local players to source 'plug-and-play' modules that can be combined to create
products very similar and sometimes superior to those of foreign multinationals.
China's Xiaomi Inc. is a case in point. Modularization and outsourcing allowed Xiaomi to produce
a line of sleek and feature-packed smartphones that became number one in the Chinese market after
only five years in business, with a 13.7% share in the fourth quarter of 2014, outpacing both Apple
and Samsung. Xiaomi's phones are based on Qualcomm reference designs, are manufactured by the
same companies that make phones for its multinational competitors and use modules from the same
component suppliers. Xiaomi's MIUI software is a localized version of Google's Android, but it has
the advantage of weekly updates that draw on inputs from millions of Chinese users.
A second development is the increasing globalization of the talent and business services markets.
A decade ago, it was rare for experienced expatriates living in emerging markets to work for local
companies. But as the global talent pool becomes more fluid, successful local companies in emerging
markets employ dozens, sometimes hundreds, of foreign experts to fill gaps in their knowledge and
capabilities. Hugo Barra, for example, a Brazilian, joined Xiaomi from Google, where he oversaw the
rise of its Android ecosystem as vice president of Android product management. Local companies are
also tapping into know-how from global professional services firms (design, engineering, consulting,
auditing, financial and legal) that are now eager to diffuse best practices in ways that were previously
available only to multinationals. Moreover, there is now a large contingent of top-tier students from
emerging countries who have returned home after graduating from the world's best universities.
Third, successful local companies have increasing opportunities to use offshore mergers and
acquisitions to capture assets, capabilities and know-how that would otherwise take years to
accumulate. Foreign takeovers still face many barriers, including political opposition, but data reveal
that companies in emerging markets are making large numbers of acquisitions overseas and that some
of these acquisitions are aimed at accessing knowledge that can be brought back home and used to
close the gap with multinationals (as opposed to expanding market share abroad).

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