A recent article published by Knowledge@Wharton raises the fascinating OM topic of how companies are dealing with a 
“two-speed” world. This world has 2 types of markets, each with different characteristics. High-growth economies (such as China, India, Brazil) have growth rates of 8-12% and some 2.6 billion people with low average incomes. Slow-growth economies (US, Western Europe, Japan) have growth rates of 1-4%, but higher average incomes. What are the key challenges that global manufacturers face as they try to synchronize their worldwide operations to meet the demands of these 2 markets? The article interviews a series of Wharton profs and Boston Consulting Group execs to reach these conclusions:
1. In either market, companies need to have lean products and systems. In slow-growth world, “you need low costs and the ability to respond quickly to customer needs”. In the high-growth world, “you need to be lean to customize your products and create capacity to grow”. GE, for example, is making a $750,000 version of its MRI for emerging markets, while the sticker price of a slightly more sophisticated model in the US is $1.6 million–see The Wall Street Journal (April 26,2011)
2. Companies need to have a shared platform for production of high-end and low-end products, often at the same factory. With cars, common components can be partly completed chasses.In pharma, it can be intermediate chemicals. In mobile phones, its partially kitted parts.
3. Networks need to be restructured to serve local markets. “The global market means more languages, more rules, and different duty, tax, and patent issues–a new level of complexity. It’s a think local, act global thing”.
4. Companies need to balance the low-cost of labor with added logistical costs and risks inherent in lengthier supply chains. Although firms in slow-growth developed markets are tempted to manufacture in high-growth, low-cost markets and sell to both markets, “customers don’t just want the lowest cost, they want their products quickly too”.
The bottom line in the article is that companies that are thriving in this two-speed world are really good at managing both mass production and JIT production.
I think the two-speed world will reward a new capability as well, the ability to bridge the two. Most consider the two worlds as silo-ed (e.g., how do you compete in the developed markets vis a vis the developing markets). However, I believe the marketplace will reward those companies that can best take advantage of one to serve the other.
As point 4 illustrates, the winning firms will be those that can take advantage of potentially low-cost labour regions while getting their goods to developed markets more quickly and with higher quality than their competitors.
This will have to go the other way as well, rewarding those companies that can translate emerging products and services that are produced in the developed regions into products and services that are purchasable in the developing regions. I think those companies that can more quickly take cost out of “new” products and services in order to meet a different value perception will be rewarded here.