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Overall average scores for globalization

Overall average scores for globalization

Source: Globalization Index 2011

The world is not flat; it's bumpy and you can't see what's ahead. 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. For their part, rapid-growth-market companies, buoyed by robust domestic economies, began to expand into neighboring countries and the developed world.

Now the economic outlook is blurring in many markets, and a looming squeeze is diminishing business prospects:

  • Slowing growth
  • Increasing competition
  • Significant operational complexity
  • Shortages of talent in key markets

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. 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.

Global integration is stronger, as our third annual Globalization Index shows: after a brief pause in 2009, the overall average globalization score for the world's largest economies is estimated to have increased in 2011 and is expected to continue increasing through 2015.


Overall average scores
for globalization

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 scenario presents many hurdles for global companies and some lack the flexibility, responsiveness or skills needed to scale them. Our research for this report uncovered four fundamental business challenges that companies must navigate in the years ahead.

We believe that businesses can tackle them with new responses that rely on flexibility, speed and unconventional thinking:

 

Challenge Response
Succeeding in rapid-growth markets is harder than it used to be  Think like a start-up
One size does not fit
all markets
Adapt your approach to new operational complexities
Policy has become more important
and less predictable
Build a strategy for connecting with governments
Good people are hard
to find
Embrace bold approaches to talent management

Managing across highly divergent and fast-moving markets requires a laser-like focus on execution and operational excellence. Companies must develop highly flexible business models that enable them to respond to new opportunities and threats.

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.

 

 

About this report

The world is bumpy: globalization and new strategies for growth draws on three sources of original research: The 2011 Globalization Survey, an online survey of 992 global business executives conducted for EY by the Economist Intelligence Unit; in-depth interviews with senior executives and high-level experts conducted at end-2011; and data from EY's Globalization Index 2011, which measures the 60 largest countries by GDP according to their degree of globalization.