Here is a brief excerpt from another terrific article featured online by The McKinsey Quarterly, published by McKinsey & Company, in which Martin Dewhurst, Jonathan Harris, and Suzanne Heywood explain why, as the economic spotlight shifts to developing markets, global companies need new ways to manage their strategies, people, costs, and risks. To read the complete article, check out other resources, obtain information about the firm, and sign up for email alerts, please click here.
Source: Organization Practice
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Managing global organizations has been a business challenge for centuries. But the nature of the task is changing with the accelerating shift of economic activity from Europe and North America to markets in Africa, Asia, and Latin America. McKinsey Global Institute research suggests that 400 midsize emerging-market cities, many unfamiliar in the West, will generate nearly 40 percent of global growth over the next 15 years. The International Monetary Fund confirms that the ten fastest-growing economies during the years ahead will all be in emerging markets. Against this backdrop, continuing advances in information and communications technology have made possible new forms of international coordination within global companies and potential new ways for them to flourish in these fast-growing markets.
There are individual success stories. IBM expects to earn 30 percent of its revenues in emerging markets by 2015, up from 17 percent in 2009. At Unilever, emerging markets make up 56 percent of the business already. And Aditya Birla Group, a multinational conglomerate based in India, now has operations in 40 countries and earns more than half its revenue outside India.
But, overall, global organizations are struggling to adapt. A year ago, we uncovered a “globalization penalty”: high-performing global companies consistently scored lower than more locally focused ones on several dimensions of organizational health. [Note: Please see Martin Dewhurst, Jonathan Harris, and Suzanne Heywood's "Understanding your ‘globalization penalty,” mckinseyquarterly.com, July 2011.] For example, the former were less effective at establishing a shared vision, encouraging innovation, executing “on the ground,” and building relationships with governments and business partners. Equally arresting was evidence from colleagues in McKinsey’s strategy practice showing that global companies headquartered in emerging markets have been growing faster than counterparts headquartered in developed ones, even when both are operating on “neutral turf”: emerging markets where neither is based (see “Parsing the growth advantage of emerging-market companies”).
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To read the complete article, please click here.
Martin Dewhurst is a director in McKinsey’s London office, where Suzanne Heywood is a principal; Jon Harris is a director in the New York office.
The authors would like to acknowledge the contributions of Kate Aquila and Roni Katz to the development of this article.