What a CEO Must Do in the Next Era of Globalization

Research from Hans-Paul Bürkner, Arindam Bhattacharya, and Jorge Becerra of the Boston Consulting Group looks at how companies should react in the next wave of globalization.

“The huge 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.”

Here are some things to keep in mind:

  • To succeed in today’s more complex phase of globalization, CEOs must ask themselves not if their companies should go global but how they can do so in a way that works for the long term.
  • Whatever a company’s geographic position, the certainty of globalization should determine its aspirations and approach.
  • No matter how large, a company must be able to adapt quickly when regional conditions change.
  • Create a “virtual” company with major capabilities and decision making spread around the globe.
  • Foster a multicultural culture that reflects the various markets in which the company does business.
  • Motivate, inspire, and encourage a multinational leadership team, and delegate real responsibility to the company’s leaders.

The CEO Forum has a good piece on rethinking globalization.