The world is bumpy - Globalization and new strategies for growth
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25 Ianuarie 2012 |
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ERNST & YOUNG S.R.L. |
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Executive summary
Globalization and new strategies for growth
The world isn’t flat — it’s curved, bumpy and you can’t see what’s ahead. Even as new markets expand and globalization increases, opportunities are becoming harder to find. Not so long ago, mature-market companies, faced with shrinking prospects at home, looked to rapid-growth economies as their best hope for profitability. And for their part, rapid-growth-market companies, buoyed by robust domestic economies, began to expand into neighboring countries and, increasingly, the developed world.
Now the economic outlook is blurring in many markets, and a looming squeeze — slowing growth, increasing competition, significant operational complexity and shortages of talent in key markets — is diminishing business prospects. Slightly more than half of the senior executives questioned for this report think that the global economy is likely to fall into recession by the end of 2012. Almost two-thirds consider it likely that there will be a new global financial crisis triggered by Eurozone debt defaults. Nearly half of the respondents think that China could suffer a major economic slowdown over the next five years, and one-third expect a similar outcome for Brazil and India.
There’s no doubt that global integration is stronger, as our third annual GlobalizationIndex shows: after a brief pause in 2009, the overall average globalization score forthe world’s largest economies is estimated to have increased in 2011 and is expectedto continue increasing through 2015 (see Figure 1).
Increased integration has amplified some economic conditions. As many of the world’s markets cool down, the risk that politicians will resort to trade-distorting measures to curry favor with a local electorate cannot be discounted. The sovereign debt crisis in the Eurozone and the global economic slowdown have also raised the possibility of a new credit crunch as banks scale back lending against a backdrop of declining confidence in interbank markets.
This daunting scenario presents many hurdles for global companies, not all of which possess the flexibility, responsiveness or skills needed to scale them. Our research for this report has uncovered four fundamental business challenges that companies must navigate in the years ahead. These are complex and unlikely to be resolved quickly, but we believe that businesses can tackle them with new responses that rely on flexibility, speed and unconventional thinking.
Managing across highly divergent and fastmoving markets requires a laser-like focuson execution and operational excellence. Companies must develop highly flexiblebusiness models that enable them to respond to new opportunities and threats. And they must make efforts to ensure a strong talent pipeline that will provide them with the skills and capabilities to thrive in constantly changing conditions. The recommendations in this report are by no means sure-fire prescriptions for success, but they will help companies steer safely through the murky terrain of today’s global landscape.
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Business challenge
1. Succeeding in rapid-growth markets is harder than it used to be
Succeeding in rapid-growth markets is becoming more difficult because costs are rising, competition is becoming more intense and growth, while still rapid compared with that of the developed world, is slowing. Betting the future on rapid-growth markets just because they have the right economic and demographic conditions is not enough.
Business response
1. Think like a start-up
Shed organizational baggage.
Don’t try to transfer all developed-markets processes to rapid-growth markets. Instead, rethink your approach from the ground up and behave more like a start-up than an established multinational. Think aggressively, but actwith due calculation.
Devise innovative strategies that will secure a quick payoff.
As developed-market investments slump, companies no longer have the extra cash available to fund rapidgrowth-market investments. With surplus capital becoming scarcer, it is essential to impose greater financial discipline in rapidgrowth markets and, where possible, develop self-funding strategies.
Take a broader stakeholder view toward the investment.
Demonstrate a commitment to building the institutions that will enable both the company to operate and the market to develop. Build collaborative relationships with governments that focus on broader development outcomes, not just shareholder value.
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