The geostrategic position of nations

Globalization has not reached its end yet, in fact we might still be at the beginning of it, but some aspects have already reached its maximum. Our physical and practical borders become clear if we take a look at pretty much any day of an international working manager. In the future we will need to pay more attention to these borders, accept them and choose the best locations to maximize the productivity of our work days.

Some say the world is flat1, others see it as a big world after all2. Both opinions have popular arguments supporting them. Thomas Friedman argues that globalization has come to the next level and that borders are not primarily drown by countries anymore. To him continues developments in information technology such as high speed internet net connections, workflow software and search engines are the main actors of globalization. His book the world is flat is probably one of the most discussed bestsellers in the area of globalization and has led Steven Brakman and Charles van Marrewijk to come up with a different study which shows that the commerce between two countries gets reduced by 9 per cent for every 10 per cent increase in distance between them. I dont think many people will argue with me if I say that globalization has had its impact on all of us. Even though we are not living in a one-earth one-country world yet the ways to communicate, to travel and to exchange knowledge have had and will have an increasing effect on value creation aspects. Production, sales and operations locations will continue to move abroad. With it the flow of goods, capital and human resources gets diverted into streams that have been unthinkable only 50 years ago. The parts to construct a new passenger airplane come from over 100 countries3 and even a simple T-Shirt travels around the world before it gets finally sold for less than $ 5 USD4. The location of a companys headquarters and production facilities becomes more important. I am not talking about tax advantages or Porters factor conditions such as; related and supporting industries, demand conditions as well as strategy, structure and rivalry. I am talking about geostrategic factors that gain rapidly increasing importance for global operating companies and could very well be seen as an addition to Porters Diamond. Somewhere on this planet it is always daylight, somebody is getting up when we go to sleep and somebody is starting work when we are packing our stuff together. Many firms have set up production or service facilities that run virtually 24 hours a day. These companies are already taking advantage of our ball shaped planet and its spinning movement. A call from a worried customer at 10pm in France must not be answered by a support employee in the same time zone. A 24 hours service center on each continent is not necessary if I can just direct the call to a
1 2

Friedman, T., The World Is Flat: A Brief History of the Twenty-first Century. (2005) Brakman, Steven and van Marrewijk, Charles, "It's a Big World After All" (April 2007). CESifo Working Paper Series No. 1964
3 4

Rivoli, P., Reisebericht eines T-Shirts (2006). Econ

Christoph Lymbersky

French speaking employee in America who just came back from his lunch break at that time. Others companies such as IBM cooperate with companies 10.000 miles away on a joint project. Before the English programmer goes home from work he sends is work to his colleague in India who keeps working on the same task until his work day is over and then sends it back to England. I dont think it is necessary to further elaborate on the competitive advantages that this workflow system brings with it. However, the importance to choose and to optimize the different production and service facilities is worth taking a closer look at. Even though more data can be transferred quicker and more flight connections are possible we will still reach a limit at some point. If we take the time that it takes to get from one continent to another for example then these borders become more clear. Boeing canceled its planes to build its fast Sonic Cruisers in 2002 and another Concorde is not visible on the horizon either. Passenger airplanes are not going to be much faster within the next few decades and even if a nine hours flight will only take eight hours5 in 30 years then we still will not be able to have breakfast in Singapore and London on the same day. Furthermore the human factor deserves some attention at this point. We cannot travel around the world every week and adopt to new time zones. There are borders that every manager who travels a lot has come to know. Personal face to face communication is and will always be very important at the top management level but even frequent telephone calls can be difficult if the time difference between two subsidiaries, clients or partners is 10 two 12 hours. If imagine an employee that has to call its subordinates in Peking at 10pm from home every day to check up on their status, then we can see the physical and practical borders of the globalization. Having this point of view in mind it becomes clear how important geostrategic positioning is. As an example I want to take Germany and its position in the center of Europe to illustrate this factor. From Frankfurt, Berlin or Munich it is possible to travel to almost every major city in Europe within two hours. A flight from Helsinki, Finland to Rom, Italy would take more than 3,5 hours if a direct flight is available. More importantly international Destinations such as Tokio or Los Angeles can be directly reached from Frankfurt within 11 hours. A flight from New York to Singapore on the other hand would take 19 hours or more. The geostrategic position of Germany and all other countries that are situated on the GMT +1 time zone makes it possible to communicate with every major city around the world on a nine hours work day. To coordinate a project in Hong Kong, Tokyo or Beijing from New York would be quite difficult since the time difference is 10 hours or more. From this viewpoint the U.S. west coast is not a much better place to place if we consider a 10 or more hours time difference to Moscow or New Delhi. One could argue that asynchronous communication like emails, fax or traditional mail make the time differences fade. However, from my point of view, and I know a lot of managers will agree with me on this, synchronous communication such as telephone calls, videoconferences and face to face meetings cannot be completely replaced and will always be the best way to solve problems, to build trust and to negotiate contracts. The geostrategic positioning is therefore very impotent when it comes to choosing the right country to enter or to choose for management offices.

The cruising speed of a 40 year old Boeing 747 is 0.83 Mach and only slightly faster than the current Airbus A380 with 0.85 Mach.
Christoph Lymbersky