Tomorrow’s successful companies are those that are ready, today, to flex and adapt.
Companies are having to adapt to a more globalized world where ownership structures change overnight. A world where customers and employees cross many cultures, and traditional ideas and practices may no longer hold true.
Business as a whole has shaped our globalized world. But individual firms also need to think about how to react to the new environment. In 2006, Samuel Palmisano, CEO of IBM, wrote that “state borders define less and less the boundaries of corporate thinking or practice.”1
He pointed out that the multinational company can no longer succeed as a collection of country-based business units reporting into a single headquarters. Rather, it must “fashion its strategy, its management, and its operations in pursuit of a new goal: the integration of production and value delivery worldwide.”
This means that key business functions will need to move closer to the end user or key resources. The best and brightest managers or technicians will be found and relocated anywhere. Capital will be tapped not only in New York or London, but also from sovereign wealth funds in the Gulf, Singapore or China. And as suggested in a recent book, Globality2, “everyone is competing with everyone for everything.”
The new order might feel more like a multi-dimensional balancing act. Make your company resilient to shocks but flexible enough to grasp new opportunities. Maintain proven business methods while accommodating very different demands of emerging markets. Deepen local know-how while delivering global economies of scale.
To help companies everywhere understand these changes, Ernst & Young, in cooperation with the Economic Intelligence Unit, surveyed 520 senior business executives. We also interviewed 30 senior executives and high-level experts.
Five business responses to globalization
Our surveys and interviews revealed how companies view the present and future of globalization, with five key insights emerging.
- Competing in a new environment: The rise of companies from emerging markets has changed the game and the outlook for business.
- Expanding internationally: Despite the downturn and concerns over state intervention, companies are still planning geographic expansion.
- Innovations in innovation: Companies must rethink strategies to ensure that innovations developed in one country are commercially viable in others.
- Diversifying management: As companies deepen and broaden their presence in international markets, the need for culturally diverse management teams becomes all the more pressing.
- Policy matters: Business will have to engage with governments and other policy makers on global issues such as protectionism, regulation and trade issues.
1 The Globally Integrated Enterprise, Foreign Affairs, May–June 2006.
2 Sirkin, Harold, Hemerling, James, and Bhattacharya, Arindam. Globality: Competing with Everyone from Everywhere for Everything. Business Plus (11 June 2008).
