• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Towers watson- 2013 multilatinas internalization strategies survey report
 

Towers watson- 2013 multilatinas internalization strategies survey report

on

  • 1,473 views

This new study attempts to capture the different stages of internationalization among Multilatinas, as well as their plans for future global development, with special emphasis on identifying the ...

This new study attempts to capture the different stages of internationalization among Multilatinas, as well as their plans for future global development, with special emphasis on identifying the regions where they plan to expand and the role played by HR departments in their international growth strategy.

Statistics

Views

Total Views
1,473
Views on SlideShare
1,473
Embed Views
0

Actions

Likes
0
Downloads
20
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Towers watson- 2013 multilatinas internalization strategies survey report Towers watson- 2013 multilatinas internalization strategies survey report Presentation Transcript

    • Multilatinas Poised for Growth Seizing Opportunities in the Global Landscape Latin America 2013 Multilatinas’ Internationalization Strategies Survey
    • 2 towerswatson.com The survey upon which this report is based was designed and conducted by the TW MNC Research Team in Montevideo led by Magdalena Ramada and Karla Estavillo. The report was written by Felipe Bastarrica, Juanita Bloomfield, Federico Cabrera, Yoel Kwacz, Heber Lopez, Lucas Puig, Agustina de los Reyes, Mauricio Ruiz, Juan Scasso, Maximiliano Sosa and Adriana Vierci.
    • Multilatinas’ Internationalization Strategies Survey 1 2013 Multilatinas’ Internationalization Strategies Survey Latin America Table of Contents Introduction 2 About the Study 4 Study Respondents: Home Country 4 Key Terms 5 Going Global 6 Multilatinas’ Path 7 Internationalization of Multilatinas in Different Regions 9 Expansion Plan Abrod 11 Challenges for Multilatinas 14 Internationalization Growth Strategy 15 Classification fo Multilatinas’ Internationalization Strategies 17 Multilatinas’ Entry Modes 18 Corporate Governance 19 HR Role for Growth 22 Bringing It All Together 24
    • 2 towerswatson.com In recent years, Multilatinas1 have entered foreign markets that seemed out of reach a few decades ago. While Western economies have been keeping a watchful eye on Asian multinational companies (MNCs), Multilatinas have been sharpening their skills in the global arena and are poised to become fierce competitors. Many U.S. and European companies have yet to recover from the recession. Instead, Multilatinas are seizing opportunities in the developed world and becoming a potential threat to MNCs from other parts of the globe. Almost all the companies we interviewed plan to venture into new markets and expand their customer base soon. In these highly uncertain economic times, when MNCs would be expected to postpone risky undertakings, Multilatinas seem optimistic about their future and eager to grow. Their main focus is on how to get the right mix of resources — mainly talent — to maintain growth. As opposed to developed-market MNCs, Multilatinas are focusing less on cost management and more on organic and inorganic growth opportunities. “Many U.S. and European companies have yet to recover from the recession. Instead, Multilatinas are seizing opportunities in the developed world and becoming a potential threat to MNCs from other parts of the globe.” Introduction 1 See Key Terms on page 6 for definitions of terms used. 2 Horizontal FDI refers to investments aimed at building production facilities in multiple countries to produce the same good for their respective domestic or nearby markets. 58% of respondents enter new markets quickly to seize opportunities for growth The majority of the Multilatinas surveyed expand seeking new opportunities Multilatinas have, on average, a presence in About 69% of respondents are in the developed markets of North America, and 60% are in Western Europe 13countries The respondents consider Latin America to be the most important source of future growth 88% of Multilatinas plan to explore new markets over the next 3 to 5 Years Multilatinas are leveraging the economic forces driving business expansion in Latin America as well as trying their hand in vulnerable developed markets and in less explored developing areas, e.g., Africa. Nevertheless, Latin America is expected to remain the most important source of growth for these companies. Multilatinas include workforce issues in their risk matrices, both locally and internationally, as such issues play an important role in market expansion. Still, market opportunities and growth are the main drivers of internationalization, which comes as no surprise, as most global foreign direct investment (FDI) remains horizontal in nature.2 Some respondents, however, are also seeking cost reduction. This may seem surprising, as Multilatinas are headquartered in relatively low-cost countries, but wage growth has followed regional growth, making new lower-cost locations more attractive. Multilatinas at Hunt Seizing Opportunities in the Global Market t
    • Multilatinas’ Internationalization Strategies Survey 3 The most challenging workforce issue Multilatinas are facing is fierce competition for talent in key skill areas. The most widespread obstacle is lack of succession planning, which can jeopardize the viability of a company if a key operational position goes vacant. From an HR perspective, mergers and acquisitions (M&As) are by far the most challenging entry mode for MNCs, and Multilatinas are no exception. Companies cited cultural differences and the difficulty of standardizing business processes and models as the biggest hurdles. Many Multilatinas are family-run businesses, where family members actively participate in decision making. Thus, the decision-making process may be slower than in other MNCs, and some decision makers may lack business training or experience. For Multilatinas, global consistency3 is the most widely adopted governance model. However, the prevailing organizational structure varies by region. The country of origin seems to influence the management structure, which tends to be centralized rather than decentralized. 3 Global consistency refers to a fully integrated strategy for all regions and functions or segments. 4 See Towers Watson. Multilatinas Human Capital Practices Survey: Report by RAS Montevideo (Montevideo: Towers Watson, 2010), towerswatson.com/assets/pdf/3591/Multilatinas_Report.pdf (accessed Sep. 12, 2012) 5 See Maximiliano Sosa, Peter Nunnenkamp and Matthias Busse, “What Drives FDI from Non-Traditional Sources? A Comparative Analysis of the Determinants of Bilateral FDI Flows” (working paper Nº. 1755: Kiel Institute for the World Economy, January 2012), http://ssrn.com/abstract=2100529 (accessed Sep. 12, 2012) The exceptions to consistent global governance relate primarily to HR management, which is also an area in which firms are investing more heavily. Furthermore, when compared with the results of our previous study, the 2010 Towers Watson Multilatinas Human Capital Practices Survey4 , Multilatinas are increasing their focus on employee retention. This is aligned with our former recommendation, in which global governance and talent management were found to be Multilatinas’ most vulnerable areas. Strategic planning has become essential for successful Multilatinas, which cite a stable business environment as the primary determinant in relocation and expansion decisions. This finding, which is echoed in a recent Towers Watson study5 , contradicts a widely held perception that political and economic instability have less of an effect on globalizing emerging markets than on developed markets. The majority of firms – 40% – have in practice a combination of any of the previous structures The main global governance structures are by region: 30% business: 21% function: 9% Top globalization challenges facing respondents range from unstable business and macroeconomic environments to high taxes 41% of companies view HR from a risk management perspective Main HR barriers to international growth are Succession planning: 58% Talent loss in key areas: 42%
    • 4 towerswatson.com About the Study This study attempts to capture the different stages of internationalization among Multilatinas, as well as their plans for future global development, with special emphasis on identifying the regions where they plan to expand and the role played by HR departments in their international growth strategy. Study Respondents: Home Country The survey was fielded in 2011/2012 and includes 33 Multilatinas from eight countries: Argentina, Brazil, Chile, Colombia, Dominican Republic, Mexico, Peru and Uruguay (Figure 1). The selected companies met the criteria for best performers in the region6 . These companies have on average more than 25,000 employees and collectively employ 840,000 individuals (Figure 2). The study was based on a questionnaire comprising six sections, which focused on HR’s role in growth, corporate governance, stages of internationalization and future development, strategies for global expansion and implementation. To enrich the survey with qualitative information, Towers Watson gathered statements from the HR directors of each company, mostly through personal interviews. This analysis sheds light on the expansion strategies followed by Latin American multinationals in the past and, most important, those they have in mind for the future. It also provides insights into how Multilatinas compare with MNCs in other emerging regions. “This analysis sheds light on the expansion strategies followed by Latin American multinationals in the past and, most important, those they have in mind for the future.” Figure 1. Country of origin 18% Argentina 28% Brazil 12% Chile 6% Colombia 3% Dominican Republic 21% Mexico 3% Peru 9% Uruguay 18% 12% 28% 21% 9% 6%3% 3% Figure 2. Study respondents by employee population 9% Less than 1,000 22% 1,000 – 5,000 69% More than 5,000 9% 22% 69% 6 Sources considered for the selection of the Multilatinas in the study are Forbes 2000 Ranking, the Multilatinas ranking from América Economía magazine, the Multilatinas ranking from Boston Consulting Group and the United Nations Conference on Trade and Development (UNCTAD).
    • Multilatinas’ Internationalization Strategies Survey 5 Key Terms Adapter strategy: Seeks strong markets and operating efficiency supported by process innovation.7 Capitalizer strategy: Focuses on product innovation activities and efficiency at all levels of the value chain (sourcing, distribution, marketing and sales).8 Collector strategy: Focuses on acquiring resources and knowledge/assets. To some degree, the strategy also pursues efficiency (capital and time/ cost trade-off dimension).9 Engager strategy: Seeks strong local communities’ collaboration as well as innovation in organization and commercialization processes.10 Corporate governance: Procedures and processes for managing an organization. The corporate governance structure specifies the distribution of rights and responsibilities among participants in the organization — such as board members, managers, shareholders and other stakeholders — and sets out rules and procedures for decision making.11 Global company: A company with a presence in many countries that uses the same coordinated image and brand in all markets. One corporate office generally directs the global strategy. Greenfield: A type of foreign direct investment in which a parent company creates a completely new enterprise as a subsidiary or expands its own firm in a new country.12 Joint ventures: At least two companies jointly creating or jointly holding and controlling a third independent legal entity.13 Mergers and acquisitions: The consolidation of firms. A merger is when two or more companies agree to become a new single firm. An acquisition occurs when a company takes over another company and becomes the new owner.14 Multidomestic company: A company that has subsidiaries in different countries but manages the subsidiaries locally. Multilatina: A company headquartered in Latin America that manages production and/or provides services in various countries, as well as conducts business in at least two continents or larger regions. Multinational company: Although this company has enterprises in other countries, it serves individual local markets and thus adapts its products. Risk management: Determining existing risks and then managing them in a way best-suited to the company’s objectives. Talent: The supply of labor with one or more specific skills or abilities. 7 The strategies’ classification was developed in Towers Watson’s book: Internationalization Strategies of MNCs – are Emerging Market MNCs really that different? (Forthcoming). 8 Ibid. 9 Ibid. 10 Ibid. 11 See OECD, Glossary of Statistical Terms, Corporate Governance, stats.oecd.org/glossary/detail.asp?ID=6778 (accessed Sept. 12, 2012). 12 Also see for a more detailed explanation Magdalena Ramada “Entry Mode Determinants for MNCs Going Offshore: My 6 Million Regressions.” ssrn.com/abstract=1445422 (accessed Sept. 12, 2012). 13 Ibid. 14 See Bruno Terrien, “An Estimate of the Share of Mergers and Acquisitions (M&A) in French BoP Direct Investment Statistics in Equity Capital.” Presented at the United Nations Conference on Trade and Development Expert Meeting on Capacity Building in the Area of FDI: Data Compilation and Policy Formulation in Developing Countries, Geneva, Dec. 12 – 14, 2005, archive.unctad.org/ sections/wcmu/docs/C2em18p17_en.pdf (accessed Dec. 17, 2012).
    • 6 towerswatson.com Latin American countries have stepped up their participation in global trade. Several measures reflect this trend, including openness to global markets as measured by the ratio of trade to gross domestic product (GDP), which is the sum of exports plus imports divided by GDP. Latin American economies became significantly more open between 2010 and 201115 . Moreover, 2010 was an outstanding year for outward foreign direct investments (OFDI) from Latin America. The highest OFDI growth was in Brazil, where investment outflows grew by 215% over the previous year (US$11,588 million in 2010). Growth was also high in Colombia, at 112% (US$6,562 million in 2010), and in Mexico, at 93% (US$13,570 million in 2010)16 . However, despite the strong performance of Latin America OFDI in 2010 the debt crisis in Europe and the sluggish economic recovery in North America have affected Multilatinas’ investment plans, as reflected in a sharp drop of outward FDI from Latin American countries in the first half of 2011, according to data from the Economic Commission for Latin America and the Caribbean. Falling OFDI from Brazil suggests that Brazilian MNCs are focusing on their domestic market and avoiding unfavorable global conditions. Mexico and Chile also reduced their investments abroad in the first two quarters of 2011. This trend is not universal across Latin America, however, as Colombian and Argentinean multinationals continued to increase their FDI offshore in the first half of 201117 . Another indicator of Latin America’s increasing internationalization is its growing presence in rankings of global MNCs such as the Forbes 2000 or the Fortune Global 500. From 2003 to 2011, the number of Multilatinas on the Forbes 2000 jumped from 34 to 76. Brazil has had the largest presence, increasing its number of companies by 85% over the 2003 – 2011 period. Meanwhile, between 2005 and 2011, the number of Latin American companies in the Fortune 500 increased from 5 to 12, with firms headquartered in Brazil, Colombia, Mexico and Venezuela. Although the current wave of internationalization is more global in its nature than the former ones, Multilatinas still have a very strong regional focus, and global economic uncertainty has strengthened their internationalization focus. This is also the case for Asian MNCs, according to the findings of a parallel Towers Watson study in that region18 . Going Global 15 TW calculations based on data from DataBank 16 Ibid. 17 See ECLAC, Foreign Direct Investment in Latin America and the Caribbean (Santiago de Chile: ECLAC, 2012), www.eclac.cl/publicaciones/xml/2/46572/2012-182-LIEI-WEB.pdf (accessed Feb. 8, 2013). 18 In Towers Watson, Asian Trailblazers: The Accelerating Globalisation of Asian Companies (Towers Watson: 2012) towerswatson.com/en-AU/Insights/IC-Types/Survey-Research- Results/2012/09/Asian-Trailblazers (accessed April 5, 2013). ““Although the current wave of internationalization is more global in its nature than the former ones, Multilatinas still have a very strong regional focus, and global economic uncertainty has strengthened their internationalization focus.”
    • Multilatinas’ Internationalization Strategies Survey 7 Exporting Initial expansion Multidomestic Multinational Global •• Limited HR issues •• Expatriates •• Local hire support •• “How to” issues •• Expatriate programs •• Local policies and programs (includes implementation) •• HR Information System applications (i.e., basic  administration and communication with HQ) •• Compliance •• “How to” economically •• Market-driven programs •• Cost management •• Performance management •• Executive programs for key talent •• M&A •• Staffing and retention •• Rationalization/ harmonization •• Corporate governance •• Shared services •• Global HR framework •• Global programs •• Effective HR management •• M&A •• Reorganization/ change management •• Global synergies •• Team building •• Performance management •• Change management •• Global leadership •• Staffing and retention issues •• “One firm” communications •• Global systems Source: Towers Watson 4 Multilatinas’ Path Like multinational companies from other regions, Multilatinas typically move through a series of stages on their way to globalization. Based on the staging shown in Figure 3, we asked participating firms to describe their position on the continuum. The majority of respondents (70%) identified themselves as multinational companies with subsidiaries in several countries and global management of business units (Figure 4). Figure 3. Phases of Internationalization 1 2 3 Only 6% identified themselves as global companies, the most internationalized phase, while 15% are still on a multidomestic phase, with subsidiaries in different countries that are managed locally. The remaining firms are in the less developed phases of internationalization, which are exporter companies (6%) and companies in an initial phase of expansion (3%). Figure 4. Stage of Inernationalization 0% 10% 20% 30% 40% 50% 60% 70% Global company Multinational company Multidomestic company Initial expansion Exporter company 3366 1515 7070 66 5
    • 8 towerswatson.com Companies in an initial stage of expansion — such as exporter companies — are also the smallest companies, as measured by workforce size. Internationalization becomes more complex with subsidiaries abroad, and HR resources and business processes must be firmly established to deal with the new challenges. Moreover, larger companies with more resources are better able to afford operations in other countries. Only two companies considered themselves to be global: one from Mexico and another from Argentina. This suggests that the overall internationalization level of Multilatinas remains below that of major global players. According to our results, 49% of the companies maintain production, sales and distribution operations outside the home country but keep corporate functions, such as management, finance and HR, central. In contrast, 45% of the companies maintain a full-scale local operation in at least one country outside the home country with its own local management, finance and HR governed by global/ regional policies and structures. The remaining firms are exporters of goods and services with operations outside the home country limited to sales and distribution (3%), and companies that mostly operate offshore through joint ventures (JVs) (3%). Figure 5. Corporate functions outside the home country 49% Centralized corporate functions 45% Regional/global structures 3% Only sales and distribution operations outside home country 3% Mostly operates through joint ventures 49% 45% 3% 3% Figure 6. Year when companies first ventured outside their country of origin 30% Before 1990 7% Between 1990 and 1995 33% Between 1995 and 2000 27% Between 2000 and 2005 3% After 2005 30%27% 3% 7% 33% Interestingly, while 76% of the surveyed companies consider themselves to be multinational or global firms, only 49% have centralized corporate functions (Figure 4 and Figure 5). This indicates that despite their size and global reach, some Multilatinas have yet to establish a consistent and global governance approach if they are to compete with more experienced and developed MNCs. Three identifiable internationalization waves for Latin American MNCs have occurred: one during the first half of the 1980s, a second in the late 1990s and early 2000s, and a third from 2008 going forward. While the first wave was pioneered by manufacturing and consumer-sector multinationals, services companies dominated the second wave targeting the developed world, and the third one — more global in its pace — has had its major players among larger and diversified groups. This timing parallels the evolution of internationalization in other regions. Among the companies interviewed for this study were firms that started to internationalize during all three waves. Indeed, 30% of respondents went international before 1990, and only a handful of those started in or before the 1970s. Another 30% had their first international ventures after 2000, while the other 40% started their expansions in the 90s (Figure 6). Companies in Mexico and Argentina began their expansions abroad in 1970. These pioneers, however, are not necessarily the largest Multilatinas in our survey, and some of these early expansions failed. “Companies in an initial stage of expansion — such as export companies — are also the smallest companies, as measured by workforce size.”
    • Multilatinas’ Internationalization Strategies Survey 9 The number of target countries varies significantly among the Multilatinas surveyed, from companies in the first stages of expansion and presence in just a few countries, to global companies with operations in as many as 50 different locations. On average, Multilatinas operate in 13 economies. Brazilian multinationals have operations in more countries, followed by Argentinean and Mexican MNCs. Considering that Brazilian MNCs started their expansions earlier, other countries’ MNCs are expected to catch up as their internationalization progresses. Regional headquarters are most commonly located in the U.S. (30%) and Mexico (21%) for the North America region and in China (15%) for the Asia Pacific region. In almost 64% of surveyed companies, regional headquarters are in charge of local management. Internationalization of Multilatinas in Different Regions Companies with the largest workforces do not necessarily have operations in more regions, although as expected, there is a positive and significant correlation between size and international presence. According to our findings, the larger — and more productive — firms are more likely to become international19 . Latin America (LatAm) is the preferred destination for all operations — exports, sales, mining and quarrying, production, management, and research and development (R&D) — followed by North America (NA) and Western Europe (WE) (Figure 7). This is not surprising, as familiarity with local conditions and similarities with countries in the target region have proven to be key, with risks increasing with distance. As expected, sales are the most widespread type of operation around the globe. 0% 20% 40% 60% 80% 100% Middle East and AfricaAPACEastern EuropeWestern EuropeNorth AmericaLatin America 5252 8888 1515 7979 2424 6161 99 3636 5858 2121 7979 2424 4848 1818 2727 1515 7676 33333636 1818 1212 99 Extraction Production Sales Management R&D Figure 7. Global footprint: operations and destinations 33 33 33 66 66 66 33 19 See for example: E. Helpman, M.J. Melitz and S.R. Yeaple, “Export versus FDI with Heterogeneous Firms,” American Economic Review 94, no. 1 (2004): 300–316. ““Companies with the largest workforces do not necessarily have operations in more regions, although as expected, there is a positive and significant correlation between size and international presence.”
    • 10 towerswatson.com Multilatinas are most likely to have sales operations in Latin America (88%), followed by North America (61%) and Western Europe (52%), which is linked to the cultural and geographical proximity to these regions. Most of them also have a strong presence in their own region in terms of management (76%) and production activities (79%). Likewise, R&D activities are mostly concentrated in Latin America, where Multilatinas have been pioneers in tapping into highly skilled local talent and generating interesting local employment opportunities that were scarce 20 years ago. In terms of innovation, most Multilatinas prefer to conduct R&D in Latin America. Cultural similarities contribute to the successful development of new processes and ideas, and the region offers highly skilled talent pools. After Latin America, R&D units are most commonly located in regions with a comparative advantage in qualified workforce: North America and Eastern Europe. Finally, for extraction operations, Multilatinas follow the same path as most global foreign investment: to Africa. It is interesting to note that the relative size of operations in Latin America and North America are very similar, which could suggest that Multilatinas are not following a “low-cost” operation pattern at home (Figure 8). Multilatinas are also exploring Eastern Europe and the Asia Pacific (APAC) region, mainly for sales. Middle East and Africa (ME & Africa) have attracted less attention, although interest in investing in these regions, especially in Africa, is growing among pioneering Brazilian multinationals. 0% 20% 40% 60% 80% 100% Africa Middle East Eastern Europe APAC emerging Latin America APAC developed Western Europe North America 22 21 16 17 2422 21 16 17 24 6 24 30 23 186 24 30 23 18 9 26 34 5 269 26 34 5 26 28 18 12 20 2128 18 12 20 21 10 28 36 2610 28 36 26 24 12 31 3224 12 31 32 15 52 3315 52 33 15 22 17 4615 22 17 46 R&D Management Sales Production Extraction Figure 8. Relative size of operations by region ““Multilatinas are also exploring Eastern Europe and the Asia Pacific (APAC) region, mainly for sales.” *Percentages may not add 100% due to rounding
    • Multilatinas’ Internationalization Strategies Survey 11 Expansion Plans Abroad In chronological order, Latin America was the most popular region for early expansion plans, according to 79% of Multilatinas (Figure 9). North America ranked second, with 12% choosing it as the first destination to expand to and 42% selecting it as second. Some other Multilatinas hastily crossed the ocean, with 18% of the sample choosing to expand to Western Europe either first or second. The evidence collected in this study suggests that Multilatinas follow the Uppsala model20 , first expanding to other Latin American countries because of their geographic and cultural proximity, and then, when they feel ready for greater risks, venturing into larger and more distant markets, such as North America and Western Europe. These findings are in line with previous research findings that geography-related factors, such as distance, contiguity, language and historical ties, affect internationalization more strongly in its earliest stages21 . 20 See Jan Johanson, and Jan Erik Vahlne, “The Internationalization Process of the Firm — A Model of Knowledge Development and Increasing Foreign Market Commitments,” Journal of International Business Studies, 8(1) (1977): 23-32 21 See J.H: Dunning, R. van Hoesel and R. Narula, “Third World Multinationals Revisited: New Developments and Theoretical Implications,” in J. H. Dunning, Globalization, Trade and Foreign Direct Investment (Oxford: Pergamon, 1998): 255-286 and UNCTAD, “World Investment Report 2006” (New York and Geneva: United Nations, 2006). 0% 20% 40% 60% 80% 100% Middle East and Africa Eastern Europe APAC Western Europe North America Latin America 79 979 9 12 42 12 312 42 12 3 6 12 30 126 12 30 12 12 24 3612 24 36 6 156 15 3 3 303 3 30 46 17 22 1546 17 22 15 First destination Second destination Third destination Fourth destination or more Figure 9. Chronological order of going offshore by region ““The evidence collected in this study suggests that Multilatinas follow the Uppsala model20 , first expanding to other Latin American countries because of their geographic and cultural proximity, and then, when they feel ready for greater risks, venturing into larger and more distant markets, such as North America and Western Europe.”
    • 12 towerswatson.com Latin America leads the list of regions most important for growth according to 64% of the companies surveyed (Figure 10). Also including those who said Latin America is moderately important adds into more than 80% of the respondents. North America and Western Europe were considered the most important for growth by 12% of the MNCs, but North America was chosen as moderately important by 42% of surveyed companies while Western Europe was chosen by only 24%. APAC ranks third in importance for growth potential with 9%, while the Middle East is considered the least attractive region, with no company considering it to be either of upmost or moderate importance. Very similar regional preferences emerged in the Towers Watson Asia survey22 , where about 60% of respondents expected China and emerging Asia countries to be their main sources of growth in the future. North America was also the second preferred region for growth for 37% of the surveyed Asian MNCs. Additionally, 88% of respondents plan to explore new markets over the next three to five years, despite current financial turmoil in Europe and the slow and fragile economic recovery in the U.S. The remaining firms are divided: 6% do not plan to internationalize to new destinations over the next three to five years, and the other 6% are undecided. Those with plans for expansion were asked to identify their target countries, choosing, if applicable, more than one option: 67% plan to expand in Latin America, 30% to Asia Pacific, 18% to Africa and 15% to Europe. Asia is expected to be very attractive to Multilatinas for exploration and development because of its large markets, and natural and human resources. Moreover, many APAC countries are eager to attract foreign investment, and many Multilatinas have taken advantage of the financial and tax incentives being offered in these countries. Conversely, developed countries seem less attractive these days because of the greater uncertainty in investment returns. Consistent with the results of our past Multilatinas study, they continue to expand quickly in multiple regions. This expansion is a potential threat to multinationals with presence in the same markets, due to escalating competition for talent, resources and customers. Nevertheless, Multilatinas will need to be able to bridge significant cultural distance to succeed, particularly in Asia and Africa. It can be argued that Multilatinas as well as Asian MNCs have an advantage in Africa over competitors from developed countries because of their experience with similar government, political and economic systems and environments. However, some respondents are hesitant about the risks involved with long-distance expansion under the current economic environment and prefer to continue expanding within Latin America first. 22 See footnote 18 0% 20% 40% 60% 80% 100% Middle East Africa Eastern Europe Western Europe APAC North America Latin America 64 18 364 18 3 12 42 12 312 42 12 3 9 24 189 24 18 12 24 3612 24 36 6 156 15 3 63 6 More important Moderately important Less important Figure 10. Top regions for growth 33 ““Some respondents are hesitant about the risks involved with long-distance expansion under the current economic environment and prefer to continue expanding within Latin America first.”
    • Multilatinas’ Internationalization Strategies Survey 13 Figure 11. Primary reasons for entering foreign markets Multilatinas Asian MNCs23 To access new markets 100% 63% Integration of the value chain 30% 26% To acquire resources (e.g., labor, technology) 15% 37% To reduce costs (e.g., labor) 12% 28% To acquire strategic assets (e.g., oil, gas, metals) 12% 22% In the interviews, all companies said the main reason for expanding offshore was to access foreign markets, again emphasizing the importance of horizontal FDI (Figure 11). Our study finds that Chilean MNCs go abroad exclusively to enter new markets, and 30% of all responding companies look to foreign markets to integrate their value chain. Finally, 15% seek out international markets to acquire new technology and know-how. The low percentage might reflect the difficulty for some Multilatinas of absorbing superior technologies already available in the developed world and in consistency with the fact that most Multilatinas invest in R&D locally. As Multilatinas develop further, asset-augmenting FDI might become more important. Only 12% of companies mentioned lower costs as a primary reason for entering foreign markets, which is not surprising given relatively low costs in Latin America compared with Europe and the U.S. The above-mentioned Towers Watson parallel study of internationalization strategies in Asia Pacific found that the top reasons for these MNCs entering a new market are to be close to key markets, remain competitive, and gain expertise and specialized skills. Although it is ranked among the top-mentioned reasons, being close to key markets was only cited by 63% of Asian MNCs, compared with 100% of the surveyed Multilatinas. Figure 11 portrays Multilatinas’ main reasons for entering foreign markets and compares these with responses of Asian MNCs. Asian MNCs expect future growth from emerging Asian markets. More than 60%of respondents consider China to be an important source of growth, while 58%selected other Asian emerging markets. 23 The questionnaires of Asian Trailblazers and Multilatinas studies are not identical. For comparative purposes, we include in figure 11 questions that are similar.
    • 14 towerswatson.com Most companies identified instability in the business and macroeconomic environments as the most compelling reason for exiting or changing their locations, again challenging the presumption that Multilatinas are less affected by uncertainty (Figure 12). Almost 55% of surveyed companies said that a stable business environment is a determinant factor in deciding whether to relocate or target other markets. In addition, 42% cited macroeconomic instability as a primary reason to exit a market or change locations. Other important motivations for withdrawing from a market include onerous regulatory and tax requirements (39%), lack of resources or talent (9%), excessive benefit levels (9%) and salary inflation (6%). In interviews, nearly 33% of companies mentioned other reasons, such as a combination of all the previously mentioned, corruption, negative forecasts of demand and low profitability. 0% 10% 20% 30% 40% 50% 60% Others Excessive salary inflation Excessive levels of benefits Lack of resources/talent Taxation system Unstable macroeconomic environment Unstable business environment 5555 4242 3939 99 99 66 46 17 22 1546 17 22 15 Figure 12. Reasons for relocating 3333 Challenges for Multilatinas “Most companies identified instability in the business and macroeconomic environments as the most compelling reason for exiting or changing their locations, again challenging the presumption that Multilatinas are less affected by uncertainty.”
    • Multilatinas’ Internationalization Strategies Survey 15 Internationalization Growth Strategy The internationalization strategies of Latin American companies — and of emerging markets in general — differ from those in developed countries, primarily because of characteristics specific to each region. To uncover patterns of internationalization, we specifically asked Multilatinas about their approach to new markets, their adoption of local business culture and customs, and the type of innovation driving their products, among other questions. Remarkably, 58% of the companies prefer to enter new markets quickly to seize new growth opportunities, while 42% prefer to undertake a detailed analysis of the targeted market before moving (Figure 13). Argentinean and Mexican MNCs clearly favor moving quickly, while Brazilian and Colombian MNCs tend to thoroughly study the possibilities first. These firms managed to grow in an environment of instability and economic uncertainty, and were able to become highly efficient companies because of their ability to make quick decisions and to innovate. As Multilatinas at this stage are mostly entering other Latin American countries, a quicker strategy seems safer due to similarities among the countries. Regarding the choice of local versus global control, 51% prefer to be embedded in local culture, while 49% favor operating under global corporate principles (Figure 14). As expected, the extremes are less popular than more moderate positions: Only 18% of companies stated a strong preference for local culture, and only 9% showed a strong preference for global principles. The majority of surveyed Multilatinas declared to internationalize to reduce input prices and expand opportunities (58%), while only 39% were seeking a strong global presence (Figure 15). However, only 15% have a strong preference for seeking local opportunities and 18% for seeking a strong presence worldwide. Figure 13. Preference toward entering new markets 27% Strong preference for A* 31% Preference for A* 27% Preference for B** 15% Strong preference for B** *Option A: Enter new markets quickly to seize opportunity growth **Option B: Thorough analysis before entering new markets 27% 27% 31% 15% Figure 14. Preference toward global versus local control 18% Strong preference for A* 33% Preference for A* 40% Preference for B** 9% Strong preference for B** *Option A: Embedded in local culture **Option B: Driven by global corporate principles 18% 40% 33% 9% 18% Strong preference for A* 21% Preference for A* 43% Preference for B** 15% Strong preference for B** 3% No answer *Option A: Seeking strong global presence **Option B: Seeking best local costs and opportunities Figure 15. Preference toward global versus local presence 18% 43% 21% 15% 3%
    • 16 towerswatson.com Figure 17. Priniciples driving internationalization strategy Better opportunities 76% Replication of successful internal process 27% Differentiating idea or brand 9% Fruitful collaboration 9% Figure 16. Preference toward one-size-fits-all versus unique solutions 12% Strong preference for A* 24% Preference for A* 31% Preference for B** 27% Strong preference for B** 6% No answer *Option A: Develop unique products and serve specific needs **Option B: Develop one-size-fits-all solutions that imply efficiency 12% 31% 24% 27% 6% Since only 12% of the surveyed companies declared lower costs as a primary reason for entering new markets (Figure 11 – page 13), the analysis suggests that most companies are expanding to seek for other local opportunities apart from costs — such as being able to access new markets and clients or to acquire resources (including talent) — and this is more important than developing a strong global presence or controlling costs. As shown in Figure 16, Multilatinas prefer to develop efficient one-size-fits-all solutions (58%) and thus reduce costs, rather than developing unique products and serving specific needs (36%). Moreover, many companies have a strong preference for developing cost-efficient solutions (27%). Multilatinas prefer one-size-fits-all solutions so they can achieve economies of scale and keep the costs of differentiation low. As portrayed in Figure 17, the goals driving the internationalization of Multilatinas can be classified as better opportunities (76%), replication of successful internal processes (27%), differentiating idea or brand (9%), and fruitful collaboration (9%). ““Multilatinas prefer one-size-fits-all solutions so they can achieve economies of scale and keep the costs of differentiation low.”
    • Multilatinas’ Internationalization Strategies Survey 17 Figure 18. Internationalization strategy 33% Collector 37% Adapter 18% Capitalizer 12% Engager 33% 12% 37% 18% Engager Seeks strong collaboration and innovation in organization and commercialization processes. Collector Seeks resources and knowledge/assets. To some degree, it is also pursuing efficiency (capital and time/cost trade-off dimension). Adapter Seeks strong markets and operating efficiency supported by process innovation. Capitalizer Seeks product innovation activities and efficiency at all levels of the value chain. The Four Internationalization Strategies Classification of Multilatinas’ Internationalization Strategies Based on the strategies obtained from the survey, we categorized these Multilatinas according to the Towers Watson classification of internationalization strategies. These strategies fall into four categories: adapter, capitalizer, engager and collector24 . As shown in Figure 18, adapter is the most common strategy among Multilatinas, representing 37% of our sample. These firms managed to operate and grow in unstable environments, dealing with scenarios of economic uncertainty, constantly changing regulations and unfriendly institutions, where they have learned to take quick decisions and innovate. This explains why most Multilatinas from our survey were defined as adapters. The collector strategy is the next most common among Latin American multinationals. These firms focus on acquiring strategic assets and seizing opportunities to keep their business growing. This is also reflected on Multilatinas’ preferences toward entering new markets quickly. With 18% and 12% respectively, the capitalizer and engager strategies are usually adopted by MNCs in advanced stages of internationalization. This is not the case for most Multilatinas: only 9% said that differentiating an idea or brand is driving their internationalization. According to the Towers Watson classification, aiming to have the best brand or idea is associated with the engager or capitalizer strategies. 24 See footnote 11 1 2 3 4
    • 18 towerswatson.com Multilatinas’ Entry Modes From an HR perspective, an M&A is by far the most challenging entry mode, garnering 55% of total responses (Figure 19). This reflects the difficulties of cultural and organizational integration. Greenfield investments do not require companies to adapt to established organizational cultures, but they do require the MNC to adapt its structure to the characteristics of the receiving country, and the sourcing of local talent can be difficult. JVs are the safest mode of entry when the company does not know its target market well, which can easily be remedied by creating a strategic alliance with local companies. Similarly, Asian companies have gone abroad mostly through Greenfield investments with comparatively fewer M&As and JVs. However, even though Greenfields have remained the prevailing entry mode among Asian firms, according to Towers Watson’s latest study on Asian MNCs, M&A activity is expected to become more common, depending on the nature of the opportunity in the target market. Outbound M&A transactions made by Asian Trailblazers of 40.5%, M&A deal values have increased significantly in recent years, with an average annual increase from 2006 to 201025 . Different regions of the world present different challenges to Multilatinas, with cultural and linguistic barriers most mentioned as reasons in the interviews. Respondents said that they perceived Asia and Africa to be very challenging because of their geographical vastness and very different cultures. Business culture in those regions is felt to be more informal, and companies need to develop more complex organizational systems. Moreover, it is very difficult to find local employees willing to work in and travel to these regions. Many multinationals expressed that they have a hard time finding qualified local talent in Asia, and the lack of cultural understanding also poses a considerable challenge. Even though HR functions assign high importance to understanding and coping with cultural differences, these efforts have yet to yield beneficial results in respondents’ opinions. The Asian talent market is perceived to be hot and highly dynamic, posing more retention challenges and needs for quicker career advancement than in local markets. While Latin America is generally considered an easy region to internationalize, within the region Brazil is the most difficult country to enter according to survey results, primarily because of its complex legal framework and high costs. 0% 10% 20% 30% 40% 50% 60% Joint ventures Greenfield Mergers and acquisitions 5555 2626 1919 99 99 66 46 17 22 1546 17 22 15 Figure 19. Most challenging entry mode from an HR perspective 3333 25 See United Nations Conference on Trade and Development, World Investment Report 2011 — Non-Equity Modes of International Production and Development (Geneva: United Nations, 2011) www.unctad-docs.org/files/UNCTAD-WIR2011-Full-en.pdf (accessed June 5, 2012). In Towers Watson, Asian Trailblazers: The Accelerating Globalisation of Asian Companies (Towers Watson: 2012) towerswatson.com/en-AU/Insights/IC-Types/Survey-Research-Results/2012/09/Asian- Trailblazers (accessed April 5, 2013). ““Many Multinationals expressed that they have a hard time finding qualified local talent in Asia, and the lack of cultural understanding also poses a considerable challenge.”
    • Multilatinas’ Internationalization Strategies Survey 19 No organizational structure is dominant among the Multilatinas. As shown in Figure 20, 30% are structured by region and 21% by line of business. Only 9% are organized by function, while 40% employ some combination of the three or another structure. These results are very similar to those for Asian MNCs, highlighting the importance of geography in offshoring decisions26 . Regarding management structures, a fairly equal number of companies express a preference for either micromanagement or macromanagement, with minorities expressing strong preferences for one or the other (Figure 21). Our analysis suggests that the country of origin might influence the management structure. For example, Colombian MNCs included in our analysis favor a macromanagement approach. However, these findings should be interpreted with caution due to the limited number of firms reporting from each country. Interestingly, there appears to be no relationship between a firm’s stage of internationalization and its preferred management style. Centralized management is favored by 52% of respondents, while 45% prefer decentralization, with the less extreme options prevailing in both cases (Figure 22). Figure 20. Organizational structure Some combination of the structures below or others 40% By region 30% By line of business 21% By function 9% Figure 21. Management structures 15% Strongly prefer micromanagement 34% Prefer micromanagement 3% Don’t know/no answer 30% Prefer macromanagement 18% Strongly prefer macromanagement 15% 3% 34%30% 18% Figure 22. Management centralization 21% Strongly prefer centralized management 31% Prefer centralized management 3% Don’t know/no answer 27% Prefer decentralized management 18% Strongly prefer decentralized management 21% 3% 31% 27% 18% 26 See Towers Watson, Asian Trailblazers: The Accelerating Globalization of Asian Companies (Towers Watson, 2012), towerswatson.com/hong-kong/research/7061 (accessed Sept. 12, 2012). Corporate Governance
    • 20 towerswatson.com 0% 20% 40% 60% 80% 100% Other State/Government Family members Stockholders CEO Board 58 24 12 3 358 24 12 3 3 36 27 12 3 2136 27 12 3 21 18 15 3 9 5518 15 3 9 55 12 3 3 3 7912 3 3 3 79 3 9 883 9 88 3 973 97 Always Often Sometimes Rarely Never Figure 23. Decision-making process Among our respondents, Multilatinas from Chile prefer centralized management, while Colombian MNCs favor decentralized management. Regarding who makes the decisions, board members play the largest decision-making role in 97% of surveyed companies (Figure 23). At several companies, however, shareholders are also board members and thus also have significant decision-making power. A distinctive characteristic of the region is the large number of family-owned businesses, where family members make most strategic decisions. Finally, the state/government determines the overall legal framework but otherwise has very little influence on strategic decision-making processes. ““State/governement determines the overall legal framework but otherwise has very little influence on strategic decision-making processes.” *Percentages may not add 100% due to rounding
    • Multilatinas’ Internationalization Strategies Survey 21 27 See Magdalena Ramada and Marco Santana, “Workforce Risk Management: Key to Latin American Companies’ Global Growth,” Viewpoints, Strategy@Work (2011), towerswatson.com/ assets/pdf/5334/Towers-Watson-Viewpoints-Article-Multilatinas.pdf (accessed Sept. 12, 2012). 0% 20% 40% 60% 80% 100% Technology Compensation (e.g., global job grading) Sharing best practices Total rewards Value chain management Enterprise risk management Training, learning and development, career development HR systems Workforce planning Sales compensation Talent management Benefits 21 42 15 2121 42 15 21 24 27 30 1824 27 30 18 42 27 18 9 342 27 18 9 3 52 15 15 15 352 15 15 15 3 55 12 27 655 12 27 6 24 30 6 27 1224 30 6 27 12 30 12 33 21 330 12 33 21 3 30 21 21 21 630 21 21 21 6 30 21 24 2430 21 24 24 30 27 15 18 930 27 15 18 9 36 27 18 12 636 27 18 12 6 42 21 15 2142 21 15 21 Global consistency Regionally developed Under developed Locally developed Not in place Figure 24. Governance approachThe global consistency framework is the most widely adopted governance model by surveyed companies, followed by a regional approach in which most of the areas are already developed (Figure 24). As portrayed in Figure 24, the global governance structure for benefits and talent management are relatively underdeveloped, suggesting that Multilatinas need to focus on that area for global consistency. According to a Towers Watson article on workforce risk management27 , companies that grow too fast without well-developed governance systems expose themselves to serious risks, such as lower efficiency, uncontrolled costs, lagging technology development and overlooked synergies. Many such companies eventually fail as global competitors. Strong global governance systems are essential to control expanding corporate structures and foster sustainability. This is a result that was also found two years ago in our previous Multilatinas study, and it still is an area in which Multilatinas show focus. All in all, Multilatinas appear to be one step ahead of Asian MNCs in terms of global governance structures. The APAC survey found that global governance structures in Asian companies remain in their nascent stages, even among companies that have been globalizing for decades, as they still lack appropriate governance philosophies, structures and processes, particularly in reward components. This might give Multilatinas a competitive edge over Asian MNCs. *Percentages may not add 100% due to rounding
    • 22 towerswatson.com Entering new markets was the primary growth channel for the majority of Multilatinas we interviewed (63%), as shown in Figure 25. This supports the premise that Multilatinas are following an internationalization path and becoming active players in the global market, mainly as a way of accessing foreign markets and increasing global market share. It is also consistent with the Strategies for Growth study28 conducted by Towers Watson in September 2010, where companies from all regions ranked access to new markets as a top strategy to drive growth. HR Role for Growth Pursuing an acquisition or merger was the next most popular selection (60%). Less important drivers of international growth included increasing hiring in market-facing roles (36%) and significantly reducing expenses (33%). The most common workforce challenge for international growth is lack of succession planning, cited by 57% of respondents (Figure 26), followed by the loss of talent in key skill areas, cited by 42%. The Strategies for Growth study confirms this finding, noting that keeping talent represents 0% 10% 20% 30% 40% 50% 60% 70% Other Divesting unprofitable business lines Increasing hiring in service center roles Making significant changes in organization structure Increasing hiring in R&D roles Making a major shift in business strategy Expanding product/service lines Making significant expense reduction efforts Increasing hiring in market-facing roles (sales, customer relationship management) Pursuing an acquisition or merger Entering new markets 27 24 1227 24 12 18 18 2418 18 24 18 12 618 12 6 6 6 216 6 21 12 12 612 12 6 3 12 123 12 12 3 9 33 9 3 6 36 3 99 33 6 66 6 More important Moderately important Less important Figure 25. Most important actions to drive international growth 0% 10% 20% 30% 40% 50% 60% 70% Other Level of disengagement among workers Inability to use incentives to the degree required to differentiate/reward performance Inability to provide competitive benefits to employees Inability to pay at competitive levels Insufficient numbers of employees across the board (e.g. staffing cuts were too deep) Loss of talent in the management ranks Inability to attract necessary talent Aggressive recruiting from competitors Loss of talent in key skill areas Lack of succession planning management 15 30 1215 30 12 18 15 918 15 9 9 15 99 15 9 9 9 99 9 9 12 6 612 6 6 15 3 315 3 3 3 9 63 9 6 1212 66 66 9 6 219 6 21 Most challenging Second-most challenging area Third-most challenging area Figure 26. Most challenging workforce areas for international growth-focused intitiatives 28 See Towers Watson, Strategies for Growth: Talent and Performance Issues Lie at the Heart of an Emerging Global Growth Agenda (Towers Watson, 2010), towerswatson.com/assets/pdf/3371/ Towers-Watson-Strategies-Growth.pdf (accessed Sep. 12, 2012).
    • Multilatinas’ Internationalization Strategies Survey 23 29 See footnote 27. Figure 27. Extent to which workforce issues are viewed from a risk management perspective Local operations International operations To a great extent 41% 41% To some extent 41% 31% Not at all or very little 12% 19% Not at all 6% 9% the largest potential obstacle to growth for all MNCs, not just Multilatinas. Moreover, among Multilatinas, the governance structure for talent management is not well developed. Multilatinas also cited aggressive recruiting from competitors as a challenge (33%). All these findings confirm our previous study’s diagnostic on Multilatinas’ key challenge both in the global governance and in the talent retention space. According to the Asian survey, when going global, APAC companies rely on internationally mobile employees as a primary source of talent for senior management and critical-skill positions. This is not necessarily the case in Multilatinas, which identified other areas as challenging as well, such as cultural issues, lack of proficiency in English and difficulty finding qualified employees willing to work abroad. On the other hand, only 6% of Multilatinas regard disengagement among workers or an inability to use incentives to differentiate/reward performance as challenging areas. A large majority of the companies include workforce issues in their matrix of risks locally (82%) and internationally (72%), and a considerable number of them (41%) believe such issues are a great challenge (Figure 27). Only 6% do not include workforce issues in their local risk matrix, while 9% do not include them in their international risk matrix. This is slightly different from what happens with multinationals from other regions. According to a Towers Watson survey29 , multinationals overall tend to view workforce risks from a relatively traditional perspective rather than a comprehensive risk management perspective, such as by considering occupational safety as an HR priority. Nevertheless, a majority of surveyed companies involve their HR function in identifying and mitigating workforce risks, including succession planning, executive compensation design, talent retention and quality assurance. Only 12% of responding Multilatinas reported that HR directors and executives are full members of the standing risk committee (Figure 28). In about 15% of these companies, HR directors and other executives participate in local and international risk management decisions only in specific areas, such as occupational safety and training. Local operations International operations 0% 10% 20% 30% 40% 50% 60% Lack of an overall risk management program at the enterprise level Not sure Yes, full-fledged members of a standing risk committee Yes, for broad set of people-related risks Only for selected areas (occupational safety/training) Not at all or very little Figure 28. Participation of executive and HR directors in risk management 3 12 18 12 58 49 12 12 3 6 6 9
    • 24 towerswatson.com Multilatinas keep gaining power in the international arena, thus posing challenges to MNCs from developed countries. Our study suggests that although Multilatinas are now on a similar internationalization stage to other multinationals from emerging countries, especially to those from Asia, their strategies kick-started quite differently. A large proportion of Asian MNCs have used leapfrogging strategies to enter developed markets directly, as 56% of them did not enter psychically close markets of Asia Pacific before expanding to North America or Europe, Middle East and Africa. In contrast, the early internationalization of Multilatinas was greatly inside their own continent. Seventy-nine percent of the companies interviewed stated that the first location they expanded to was in Latin America. Multilatinas’ role in global markets is expected to increase in the next years. Our survey found that almost 90% of Multilatinas plan to explore new markets over the next three to five years, in spite of the slow recovery in developed markets. Though Multilatinas are ready to enter new markets, the benefit of further expanding in Latin America is still high, and 67% of our respondents declared that Latin America is where they will expand. On the other hand, governments in Asia have successfully attracted foreign investment through financial and tax incentives, and many Multilatinas have responded in terms of exploration and development, lured by the market size and resources. Conversely, the developed world remains uncertain, and the negative outlook of investment returns is not attracting Multilatinas. Multilatinas still think twice before going north or crossing the ocean. A large majority of Multilatinas currently intend to expand to other countries in Latin America, as a reaction to economic turmoil. Some of them, however, are sufficiently confident to take on riskier ventures farther from home. Though it is safer and easier to remain in the same region, the potential rewards might be larger elsewhere. They are less focused on cost management than their developed peers and more focused on growth opportunities and talent attraction and retention. Given the uncertain economic context, cost management has become one of the main priorities of developed- markets MNCs. Latin American multinationals, although also managing costs, see their survival of the economic turmoil and their consolidation as global players related to finding and leveraging the right growth opportunities — most of them arising from the current economic turndown — rather than through aggressive cost management. As a consequence, they also display an increased interest in finding better ways of managing their talent. Indeed, they cited loss of talent in key skill areas as the second-most challenging area for international growth-focused initiatives. The next steps are consistent global governance and succession planning. Despite their quick growth, Multilatinas still face many barriers. Workforce challenges are foremost, and these MNCs need to focus more on their HR strategies, especially when they expand via M&As, which pose particular HR risks. Also, talent management among those wishing to advance to the next internationalization stages should be more consistent globally, and their succession planning, which can jeopardize the viability of a company if a key operational position goes vacant, still has a long way to go. Global governance is the result of years of experience in the multinational arena and will be a particular roadblock for Multilatinas. The concept is only starting to be raised in Latin America, where even in Spanish there is not a direct translation for the word, and it encompasses many topics, so it may not always be well understood. But Multilatinas are going global, and they will need to think about global governance beforehand or else collect the pieces like many U.S. firms have. Over 75% of the companies interviewed in this survey are at a multinational or global stage compared with roughly 50% having centralized corporate functions. This seems to suggest that companies have proven their global reach, but a consistent global governance approach is yet to be established. Multilatinas are mainly adapters and collectors. This means that they have chosen to adapt local processes to their operations in other countries or to acquire strategic assets and grow with these acquisitions. In addition, Multilatinas prefer to enter new markets quickly. This mode of entry is easy when the company knows its target market well, such as when Multilatinas expand to nearby regions. However, going farther abroad calls for greater knowledge and planning, which takes more time. Although they face many challenges, Multilatinas have performed very well in recent years, achieving global recognition. MNCs from the developed world are aware of the threat Multilatinas pose and view their increasing strength as a near-term challenge. Bringing It All Together
    • Multilatinas’ Internationalization Strategies Survey 25
    • Copyright © 2013 Towers Watson. All rights reserved. TW-NA-2013-31977 towerswatson.com About Towers Watson Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of benefits, talent management, rewards, and risk and capital management.