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Why globalisation is a good thing

By Benoit Bazire, CEO, Qioptiq Group

Globalisation is not very popular these days. It is supposedly responsible for a great many of the problems the rich world economies are facing. Most importantly, it apparently destroys jobs in the Western countries to transfer them to emerging powers. In the buoyant market of photonics, however, I do think that globalisation is an opportunity.

As inflation is threatening again, it may be useful to remind us of the fact that the price of manufactured products is constantly… falling! We have all been waiting to see the price of the latest HDTV screens get to ‘accessible’ prices. When car manufacturers equip luxury models with new security devices, we know it’s just a question of time before it becomes affordable on every vehicle; prices of all electro-optical devices like cell phones, cameras, DVDs tend to dramatically decrease – unless they do a lot more for the same amount of money.

How is that achieved? Through design-to-cost efforts, productivity improvements and the constant pressure put all along the ‘chain value’ by manufacturing companies on their suppliers to have them decrease their prices. If you cannot positively respond to that kind of pressure, you finally lose your customers – particularly at a time when OEMs endeavour to reduce the number of their suppliers as a way to cut costs. As a supplier, you must have very good reasons to increase your prices. Admittedly, the extreme volatility of exchange rates and the dramatic surge of raw materials are good examples drawn from the current economic situation to do so. But even then, you are supposed to absorb a large part of the ‘shock’. In other words, you have to find new ways to make your processes more efficient, if you just want to survive.

One way to achieve that goal is by using the advantages of globalisation properly. You must detect places in the world where the features seem to fit the kind of work you want to perform. Among the features you must check before taking the decision to invest are: geographic accessibility, local skills and economic conditions, labour costs, education levels, ease of training, business environment, and regulatory and language constraints. You have to determine the level of quality you wish to reach at a given time in this given place. You must accept and control the levels of technology you can transfer. And when you have succeeded in doing so, after a number of bad experiences, you can then claim that you are a ‘global’ player in your domain and truly offer precisely adjusted solutions to your customers.

Within the Qioptiq Group, each of the three divisions has a leading company that owns all highend skills and industrial processes, a low-cost manufacturing centre and a footprint in the US.

Each division takes the greatest care in organising synergies between its different companies. But divisions are also co-operating and the flow of internal trade is rapidly growing as our customers want us to maximise our efficiency. For instance, our Singapore unit would deliver optics to our British company in Wales and to our Linos subsidiary in Germany, for a variety of customers in Europe and in the United States. Another example is when we strike a worldwide deal with a major US customer to supply products from multiple companies within the group.

To be successful, though, that kind of model demands considerable attention and must, in my opinion, follow a set of rules:

1) You have to offer to customers the very best combination of possible technologies and low-cost locations, in order to provide both the benefits of the highest technological capabilities and the lowest possible cost base for such a technology level.

2) You have to develop a real expertise in complying with all regulations when transferring business and technology or just simply sub-contracting; this is even more critical when you are, like the Qioptiq Group, involved in the defence business. In such a case, you basically have to make sure that you do not compromise the confidential data you have received – and you have to make clear to your customers, and the government authorities, that you are a trusted and reliable supplier.

3) With the constant pressure on prices, there is an incentive to move more production to lower cost locations: this creates ongoing challenges for the ‘high end’ businesses, which have to permanently generate new, differentiating technologies. These will in turn be transferred to the other centres.

4) You must be extremely well organised to succeed in outsourcing your production from one place to another: the complexity of the products and the necessity to perfectly analyse and document all the processes – even different manufacturing cultures – make sub-contracting inherently challenging; with time, though, this is progressively made easier as you work within the same group.

5) As the world economy is changing fast, you also have to adapt yourself, seek new places in the world and welcome new people from different cultures; we believe that we are well placed to face this challenge: our seven-strong management committee already includes five different nationalities.

As photonics is increasingly penetrating into all domains, we strongly believe that globalisation makes our products more affordable to our customers and end users, prompts companies in western countries to develop their ‘inventiveness’, urges them to transfer skills and technologies to emerging nations, and finally increases overall wealth.