What CEO must Think in Global Market

Jul 23, 2015

The wave of globalization that took place over the last two decades has come to an end. The big winners are those companies that have established a significant international footprint—especially in emerging markets—pulling ahead of companies with a regional or domestic focus. Over the last decade, Volkswagen, the German automaker, has increased its annual revenues by an average of 10.5 percent, whereas Peugeot, its French rival, has seen revenues grow by an average of only 2.5 percent. Likewise, Procter & Gamble, the U.S. consumer giant, has enjoyed average annual growth rates of 7.6 percent, twice the 3.1 percent average achieved by Clorox, one of its regionally focused U.S. competitors. And, in the oil-field services industry, two rivals have taken divergent paths, with the more global Schlumberger recording an average annual growth rate of 16 percent, compared with 8.6 percent for Halliburton.

But globalization is not dead. Rather, it is morphing into a more nuanced and more complex phase, with the inexorable forces that drove the previous phase still very much alive. The emerging markets will continue to be the key source of growth, owing to their favorable demographics, rising middle classes (which will increasingly define consumer demand and choices), and new generation of “challenger” companies (which will seek partners in their quest to become global market leaders). As we move into this next stage of globalization, the gaps between the global haves and the nonglobal have-nots are likely to widen even further, creating a real chasm.

So, if you want to be truly successful over the next ten years, the big question you should ask yourself isn’t “Should my company be global?” Instead, it should be “How can I go global in a successful and sustainable way?” And this question must be asked—and answered—by CEOs of companies not only in the U.S., Europe, Japan, and other developed markets. Because frankly, if you run a company based in China or India or Brazil (or any other emerging market) and you have global ambitions, the choices you face are no different from those facing CEOs in developed markets, as are the factors critical to your success. And now is the time to make those decisions, when there is new and energetic national leadership in key emerging markets such as China, India, and Indonesia, when growth is returning to the U.S., and when a new realism regarding global trade policies is emerging.

Source: World Economic Forum

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