fueL thought WILFRID L. KOHL is Director of the International Energy and Environment Program of the Foreign Policy Institute and Professor of International Relations at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University. WILFRID L. KOHL The Perfect Storm OPEC and the World Oil Market O il continues to be the world's most important fuel, contributing >') percent ofthe global energy supply. It will remain the leading luel in the near future, driven primarily hy demand from the rapidly growing transportation sector. Crude oil prices have been especially volatile recently, reaching almost US$50 per barrel in AiLgList 2004. W hy have oil prices risen so significiintiy, and what is the role ofthe Organization of Petroleum Kxporting C^ountries (OPEC) in the oil market? OPF.C is an organization of oil-producing governments that cooperate to manage oil supply and prices in order to maximize the revenues ofthe memher states and promote stability in the oil market. The ten producer governments who make up O P E C (OPEC-10), most of them in the Middle East, have economies that are highly dependent on oil revenues, all ot whom ostensibly accept produc- tion quotas. Iraq, the eleventh memher, currentlj" has no quota because it is tr\'ing to restore its fomier oil production after the Iraq war in 2003. O P E C acts like a cartel as it pursues its economic and political ohjectivus. .Although O P E C has ahout 75 percent ofthe world s oil reserves, it currently comprises only ahout 35 percent of world oil production, much less than the 60 to 65 percent it controlled at the time ofthe oil shocks in the 1970s. Non-(^PEC producers are thus important, led by Russia, whose production is expanding, and the United States, whose production is declining. While O P E C has had some success at managing the world oil market in recent years, it has also made mistakes. At times, it is confronted by challenges beyond its conti'ol, as in 2004. The Oil Price Band At its disasti'ous meeting in Jakarta at the end of November 1997, O P E C increased oil production despite the economic crisis in Asian economies, which led to falling demand in 1998 and a price collapse to US$10 per barrel. T h e price collapse caused severe damage to the economies of producer countries. T h e cartel was able to regroup and cut production in March 1999 with the assistance of non-OPEC producers, specifically Mexico, Russia, Norway, and Oman. Oil prices recovered and increased above US$30 per barrel by early 2000, tiriven partly by Asian recovery and low Organization of Economic Co-operation and Development (OECD) oil stocks. O P E C overshot its target of restoring prices to the low- to mid-US$20 range. In 2000, O P E C increased output four times to try to reduce the high oil prices that threatened to diminish oil demand. At its l i e n n a meeting in March of that year, O P E C reversed its 1999 decision and increased production, assisted again hy the .

1. fueL
thought
WILFRID L. KOHL is Director
of the International Energy and
Environment Program of the
Foreign Policy Institute and
Professor of International Relations
at the Paul H. Nitze School of
Advanced International Studies at
Johns Hopkins University.
WILFRID L. KOHL
The Perfect Storm
OPEC and the World Oil Market
O
il continues to be the world's most important fuel, contributing
>') percent ofthe global energy supply. It will remain the
leading
luel in the near future, driven primarily hy demand from the
rapidly growing transportation sector. Crude oil prices have
been
especially volatile recently, reaching almost US$50 per barrel in
AiLgList 2004. W hy have oil prices risen so significiintiy, and
what is the role ofthe
Organization of Petroleum Kxporting C^ountries (OPEC) in the
oil market?
OPF.C is an organization of oil-producing governments that

2. cooperate to
manage oil supply and prices in order to maximize the revenues
ofthe memher
states and promote stability in the oil market. The ten producer
governments who
make up O P E C (OPEC-10), most of them in the Middle East,
have economies
that are highly dependent on oil revenues, all ot whom
ostensibly accept produc-
tion quotas. Iraq, the eleventh memher, currentlj" has no quota
because it is tr'ing
to restore its fomier oil production after the Iraq war in 2003. O
P E C acts like a
cartel as it pursues its economic and political ohjectivus.
.Although O P E C has ahout 75 percent ofthe world s oil
reserves, it currently
comprises only ahout 35 percent of world oil production, much
less than the 60
to 65 percent it controlled at the time ofthe oil shocks in the
1970s. Non-(^PEC
producers are thus important, led by Russia, whose production
is expanding, and
the United States, whose production is declining. While O P E C
has had some
success at managing the world oil market in recent years, it has
also made mistakes.
At times, it is confronted by challenges beyond its conti'ol, as
in 2004.
The Oil Price Band
At its disasti'ous meeting in Jakarta at the end of November
1997, O P E C
increased oil production despite the economic crisis in Asian
economies, which

3. led to falling demand in 1998 and a price collapse to US$10 per
barrel. T h e price
collapse caused severe damage to the economies of producer
countries. T h e
cartel was able to regroup and cut production in March 1999
with the assistance
of non-OPEC producers, specifically Mexico, Russia, Norway,
and Oman. Oil
prices recovered and increased above US$30 per barrel by early
2000, tiriven
partly by Asian recovery and low Organization of Economic Co-
operation and
Development (OECD) oil stocks. O P E C overshot its target of
restoring prices
to the low- to mid-US$20 range.
In 2000, O P E C increased output four times to try to reduce
the high oil
prices that threatened to diminish oil demand. At its l i e n n a
meeting in March
of that year, O P E C reversed its 1999 decision and increased
production, assisted
again hy the cooperation of several non-OPEC producers. It also
announced a
price band mechanism designed to keep oil prices in a target
range of US$22 to
US$28 per barrel for die OPEC basket of crudes.
T h e O P E C basket is a weighted average of Saudi light and
six other O P E C
crude oils. It includes an automatic production adjustment
mechanism that is
68 H K V K I) I I I l: . L R E M II, Winter 200:5

4. implemented if the price goes above or below the bantl,
though the mechanism has not always been implementeti.
Other production increases followed in June, Septemher.
and October 2000, but oil prices remained stubbornly high,
finally dropping at the year's end.
T h e record of die O P E C hasket price is a good indica-
tor of OPEC^s success or failure at managing the world oil
market. Oil prices have been within the hand only about
half of the tiine and rose well above the Iiand in 2004. The
O P E C basket price tends to run about US$2 below die US
benchmark oil price for West Texas Intermediate crude
(WTI), which is the price quoted on the New York Mer-
cantile Exchange.
In 2001, O P E C faced an economic recession in the
United States thiit gradually spread elsewhere in the world
and reduced oil demand. Following sevL-ral OPE(^ pnxluc-
tion cuts, the OPEC basket price initially remained in the
mid-US$20 range (within the price hand). However, the
September 11 attacks were tollowed by a reduction in air
travel and a decline in the stock market that deepened the
recession. Oil demand fell o^ and oil prices soon fell below
USS20 per barrel. To respond, OPEC^ calleil an emergency"
meeting in hue November and announced a production
cut of 1.5 million barrels per day (mbd), effective January
2002, on the condition that non-OPl'"C^ producers led by
Russia would contribute an additional
cut of 500,000 barrels per day (bptl).
T h e O P E C strategy was largely suc-
cessfiil.
A global economic slowdown and
a slump in oil demand confronted
O P E C at the start of 2002. O P E C

5. was determined to prevent a further
collapse of prices and restrained pro-
duction. Political tensions rose in the
Middle East with new Israeli attacks
against the Palestinians and US threats
against Iraq. Iraq continued its practice
of interrupting oil exports. OPEC's
production quotas, the lowest since
1991, ;issisted in keeping oil stocks low
and helped move oil prices back into
the USS20 to US$25 range by spring
2003. Economic recover)- began in the
fall, and oil prices increased. OPEC-
basket prices were again within the
price band. In December, OPEC raised
its production ceiling to 23 mbd to
align it with actual production.
A strike of Venezuelan oil produc-
tion workers in earlv 2003 removed
most of that producer's oil production and exports, causing
;i shortfall in the market. .At the same time, unrest in Nigeria
decreased that countiy's production. Consequently, at its
Januar- 2003 meeting, OPEC decided to raise its production
by 1.5 mbd to 24.5 mbd on a ptv rata basis, effective Febru-
ar)' 1, largely to compensate for the Venezuelan shortfall.
By March, fears of war in Iraq (the United States and Great
Britain were calling for military action), cold weather, and
low US product inventories temporarily drove up W^FI
prices to nearly USS4() per barrel. O P E C indicated that it
would keep the oil market well-supplied in a crisis and the
International Energy Agency (IEA) agreed to let O P E C
attempt this before responding with any release of strategic
oil supplies. VVhen the war began in Iraq, oil prices declined
to US$30 U T l in the expectaticjn ofa short war. O P E C

6. replaced lost Iraqi production in April through increased
production by Saudi Arabia (which had gone up to 9.5 mbd)
and hy Kuwait, Lilna. and Algeria.
At the end of April 2003, O P E C agreed io cut iictual
production by 2 mhd to 25.4 mhd on the assumption that
there would be a seasonal drop in demand and that Iraq
would be gradually reintegratetl into the market. Saudi Oil
Minister Ali al-Naiini stressed renewed effort to keep the
|irice as close to US$25 per barrel as possible. Iraqi produc-
tion began to slowly recover. Oil prices were at the to|) ofthe
Opposite: OPEC ofTicJals announce the reluctant increase of oil
production ID Sep-
tember of 2004. Above: Kuwaiti Oil Minister Ahmed al-Fahd al-
Sabah responds to
questions about OPEC's surprising cut in production in February
2004.
Photos Courtesy AFP/Getcy Images W i n t e r 2005 - H A R V
A R D r I" V R N A T [ ( ) X A L R I". ' I K W | 6 9 i
ENERGY
price hanti. But in August. Init.] s northern export pipeline was
sabotaged and U N headquarters were bomhed in Baghdad,
exerting upward pressure on oil priees.
in a somewhat surprising ilccision, OPF.C^ decided to
cut production further in September 2003 and return to
the Februar)- ceiling ot 24.5 mhd to preempt siock-build in
the fourth quarter and maintain prices in the upper part ol
the price hand. OPEC!] did this under the assumption that
the world economy was slowly improving and that Iraqi

7. production and exports were slowly expanding. Naimi saiil
that OPE(^ would not raise the price band despite a proposal
from Venezuela to do so. Oil prices rose to helween US$2H
and USS2y per barrel in September and to lietween USS3()
and US$32 per barrel by November. Both US President
George W. Bush ami IKA Executive Director C îaude Mantlil
expressed disappointment al the September decision, con-
cerned that it would harm economic growtli.
In December 2003. OPF.C^ reaffirmed its September
decision, noting continuing political tensions beeause of
disorder in Iraq and the continuing weakness of the US
BARRELS OF FUN
SOO
f — + — 4
The figure above shows OPEC's net revenues from oil ex-
ports over time.The grey line represents prices in nominal
US dollars while the black line indicates prices adjusted to
represent the value of the 2004 US doHar.The oil crisis of the
1970s, which was a high revenue period for OPEC because of
increasing demand for oil, was followed by a period in which
OPEC continually misread the market's need for oil.The de-
creased revenues reflect these market misreadings. Much of
the volatility in the period after 2000 has been explained by
conflicts in the Middle East and oil strikes elsewhere.
Energy Information Administration
dollar, w hich lowered OPEC^ purchasing power. Meanwhile,
Iraqi production reached 2 J 5 mbd and tbe O P E C basket
price had exceeded L'S$28 for long enough that the auto-
matic price band adjustment should have hccn triggered.

8. But O P E C resisted this aetion, fearing that demand would
tumble by the second quarter of 2004.
Market Miyreadings
OPEC; lost control of oil prices in 2004. Tn the first three
quarters of 2004, the O P E C basket price remained above
USS40 per barrel, although it fell slightly below US$40 per
barrel in September. A series of factors contributed to these
developments, which have been characterized by observers
such as Edgard Habib, ehief economist at ChevronTexaco,
as a "perfect storm." Factors included a largely unanrJtipated
surge in oil demand spurred by high economic growih in
China and the United States (estimated at 13 percent and
4.5 percent respective!)' in 2004 by Deutsche Bank), low oil
inventories, deepening violence and instability in Iraq, de-
clining OPEC' spare capacity, and bottlenecks in tbe gasoline
market due, in part, to stretched refineries.
O P E C , led by Saudi Arabia, began tbe j'car b' misread-
ing the market when it announced its intention to reduce
overproduction '.md adhere to a 24.5 mbd ceiling in March
before cutting proiiuction in April. Naimi reaffirmed his
belief in a US$25 per barrel price for the O P E C basket,
citing c(jncern about falling ilemand ;ind a large stock build
in the second quarter, and was detenninctl not to repeat the
mistakes of 1997 to 1999. In March, WV prices reached
a high of hetween USS36 and USS38 per harrel and the
C P̂ EC^ l>asket price ranged from betw een US$32 and L'SS33
per barrel.
On March 31. 2004. in Menmi, O P E C confirmed its
earlier decision t() cut ouqiut by one nibil on Ajiril 1 to 23.5
mbd despite high oil prices. It blamed tbe cut on tightening
US gasoline supplies, geopolitical uncertainties, anil on the
fiuurcs market where speculators were taking long positions.

9. Ministers insisted that the market was well-supplied with oil
and that OPEC' would not allow an' shortages in wf)rld oil
markets, but ihey seemed tocuseii on keeping invent()ries
low and prices high. White House and US Department of
Energy officials criticized C^PEC"'s production cuts while
prices were high. Meanwhile, Venezuela, Nigeria, and Iran
argued for tbe need to raise the price band, causing disagree-
ment within OPEC.
In ihc face ol growing oil dcinanil and attacks on oil
facilities in Iraq and Saudi Arabia, oil prices rose above
USS40 per barrel in May. Naimi finally began calling for
a produciion increase. He got Iiis wish at ilie June 3 meet-
ing in Beirut when O P E C raised its production ceiling for
the OPEC-10 by 2 mbd to 25.5 mbd from July 1, and by a
11 A R - A R D I N T E R N A T I ( ) N A t. R E V 1 E W • W
i n t e r 2005
THE PERFECT STORM: OPEC AND THE WORLD OIL
MARKET
further 500 Icilobarrels per day (kbd) from August I. This
was a compromise between Saudi Arabia, which wanted
an immediate increase to 26 mhd, and Tr;in, which would
initially only accept 2S.5 mhd.
T h e measures were instituted "to ensure adequate supply
and give a clear signal of OPF.Cs commitment to market
stability and to maintaining prices at acceptable levels tt) botli
producers and consumers," according to a June 7 O P E C
eommuniqtie. Actual OPEC-10 output was reported as 26
reduced to about one mhd in Saudi /Vrabia, O P E C sought

10. to remedy high prices by antiouncing an increase in its
production ceiling from 26 to 27 mbd effective November
1. Ihis was more a signal than an actual change because
current production from the OPEC-10 was already known
to be 28 mhd.
Despite interest by several members, a ilccision was
postponed on whether to raise the price hand, whicb by this
point had become irrelevant. Naimi clearly opposed the raise,
"OPEC ACTIONS TO INCREASE PRODUCTION
HAVE NOT BFFN SUFFICIENTTO
DAMPEN THE PRICE ESCALATION,
WHICH...UNCHECKED,WILL SLOW ECONOMIC
GROWTH AND DIMINISH FUTURE OIL DEMAND."
mbd in April increa.singtoabout27 mbd injune, with Saudi
.'Vrahia increasing to 9.1 mbd. Asa result, remaining O P E C
spare capacity was significantly reduced to about one mbd
in Saudi Arabia, and only a small amount in perhaps two
other producer nations, limiting the ability to deal with any
future supply disruptions.
Very tight market conditions continued in the summer of
2004, reinforced by continuing high oil demand and geopo-
litical uncertainty. In July, the IEA increased its oil demand
projection for the year by an additional 2.5 mbd. O P E C
canceled its July meeting but proceeiled with its planned
August increase in supply of 500,000 barrels to a ceiling of 26
mbd. Yet OPEC actions were insufficient to prevent liirther
price increases. Tlie WTT oil price moved above USS40 per
barrel in July and hit record highs of US$44.7.? on August
5 and US$48.75 on August 19.^

11. Among the factors increasing the risk premium was
continuing uncertainty' ahout the future of Yukos, the Rus-
sian oil company that normally produces 1.8 mbd, after it
was threatened with a government take-over because of
tax evasion charges. T h e insurgence in Iraq heated up and
spread to the oil-rich southern regions with attacks on the
South Oil C]onipany pipelines. US oi! inventories were still
low compared sith demand. Refineries continued at peak
production. And there was continuing concern about the
small OPEC; spare capacity (between one and 1.5 mbd)
to meet any supply disruption. Sauili Arabia continued to
defend tbe price band. But other countries, including Iran,
Nigeria, and Venezuela, were content with oil prices in the
US$30 to US$4() range.
Faced with continuing high prices, O P E C was in a weak
position at its St-'ptcmbcr 15 meeting. With spare capacity'
saying it should only be raised if there was a structural change
in the market. Sauiii Arai>ia, now producing 9.5 mbd. did
announce just before the meeting tliat it would add 800,000
barrels per day of production capacity in two new fields by
the end of September. Kuwait is also planning;! more mod-
est expansion. The W T l crude price fell slightl)' after the
meeting to USS43.58, influenced by a report ofa decline in
US crude oil stocks and by oil rig shutdowns in the Gulf of
Mexico because of Hurricane Ivan.
OPEC Finances
OPEC^ has benefited greatly from increased oil export
revenues in the past two years as a result of higher oil prices
and expanded produciion. I n j u n e 2004, the Energy In-
formation Administration projected O P E C net oil export
revenues for 2004 at US$286 billion, up from US$240 bil-
lion in 2003 and US$195 billion in 2002. These revenues

12. have helped OPEC^ in its recovery from the price collapse
of 1998 and 1999.
However, adjusting for inflation and rapid population
growth, OPEC!] has much lower per capita income today
(USS53O projected for 2004) than in the peak days ofthe late
1970.S and early 1980s (USSl,691 in real [ler capita export
revenues in 19S0). It should be noted that many countries
are heavily indebted from the period of lower oil priees from
the mid-198()s to the late 1990s. And many OPEC, countries
are moving slowly on necessary economic reforms.
Saudi .rabia, OPEC's largest oil producer and a leader
in O P E C production decisions, will probabl)' earn US$100
billion from oil export revenues in 2004 based on average
oil production of 8.7 mbd. Earnings for 2003 were USS86
billion. Last year, Saudi Arabia experienced healthy gross
V V i m o r 2 0 0 5 • T I . K K D I N I" K R N A I 1 (> N A
L R K V ! K. VV [ T T
Fuel tor ilujuglu ENERGY
domestric product (GDP) growth and a government sur-
plus, greatly iniproing the countrjs econtjmic situation.
However, Saudi Arabia's 200.3 surplus was only the second
surplus in the past 20 years, during which time the govern-
ment ran deficits and trade iml)al;uices. Total government
debt has been nearly 100 percent of GDP. Surpluses in 2003
and 2004 are expected to i)e used to increase foreign assets
and p;i off some government debt. In Saudi .Vialiia, oil
exports contribute over 90 percent of ex^iort earnings, 70 to
80 percent of state revenues, and about 40 percent of (7nP.
Oil export revenues per capita were about US$.^6^i3 in 2003,

13. which in real terms is much lower than the per capita figure
for 19H0 at the high point of oil prices (US$22).
Saudi jVrabia continues to face serious economic chal-
lenges of fast population growth (about 3 percent per year)
and high uiiumplcninent (15 to 20 percent.) More reccntK,
the threat ot domestic terrorism has provided a new challenge
and will require more government spending on security. Oi!
price volatility makes Saudi state planning difficult, as the
income varies yearly. T he large fmaneial needs of tlic state
CRUDE CAPITAL
5OO
The figure above depicts the per capita revenue for crude oil
exports in OPEC countries.AII prices are adjusted to the val-
ue of the 2004 US dollar. Because many OPEC countries are
experiencing population growth, the per capita revenue does
not follow the general rise in total export revenue shown on
page 7O.The increasing population size has created additional
demands on the government for public service expenses.This
also does not take into account the actual distribution of the
export revenues, which are frequently concentrated in a few
hands as opposed to the growing population.
Energy Information Administration
have heen estimated to require a stable oil price of T.'S$30
per barrel, whicli helps explain recent Saudi reluctance at
OPKC; meetings to press for lower oil prices. Other O P E C
members face similar challenges with e en larger populations
and heft)' financial needs. The only exceptions are Kuwait
and the United Arab Emirates, whicb have small populations
and large G D P per capita.

14. A Clumsy Cartel
()PF.C proiluction cuts in 2002 were reasonably effective
at restoring oil prices to the price hand after die shock and
price collapse following the September 11 attacks. In 2003,
after effectiv'ely raising production to account for the strikes
in ene7Aiela and the loss (jf production in Iraq during the
war, (^PEC sharply cut production injune and Septemher
before Iraq's production could Fully recover.
I h e cartel seenieti unwilling to allow sufficient stock-
building to stabilize the market. This shortage helped drive
the price ahovc the price haml by the enil of the year. In
2004, O P E C misread the market and cut production again al-
though demand was increasing. Deepening instabilit)' in Iraq
anti low spare capatitv' increased political risks in the minds
of traders as oil prices soared above USS40 per barrel.
Stock traders in New York, London, and Singapore,,
guidetl b̂ both economic fimdamcntals and geopolitical
risks, ultimately set the price ot oil. In recent months the
risk premium on the oil price may have grown to USSlO to
L'SSI.^ per barrel, OPEC actions to increase jirodiiction have
not been sufticicnt to dampen ihe price escalation, which
if left unchecked, will slow economic growth and diminish
future oil demand.
O P E C continues to be liampcrcd by the lact that as a
group of sovereign countries, it has no enforcement mecha-
nism. Therefore, exceeding quotas is a constant problem
w hich undermines its efforts to manage the market. The
financial needs of Saudi Arabia and other O P E C countries
ajipear to require oil prices well alir)c (he price hand,
as reflected in the debate ahout raising the hand. et the
members have postponed making a decision about whether
to aiimit this and thisdela" has undermined OPEC's market

15. credibility'. It is hard to believe continuing Saudi statements
that they would he content with an oil price at US$25 per
harrel for the O P E C basket w hen the- clearl arc not press-
ing to achieve this and tlieir iinancial needs demand a higher
price. OPEC^ cannot control sudden shifts in demand or
gL'<)i>()iitical risks. The oil market is dJlhcuU to manage, and
OPI'X; has limited instruments and otten imperiect data.
OPEC^ continues, as Massachusetts Institute of Technology
economics professor Morris Adelman once put it, to act like
a "clumsy cartel." IB
, 7 2 1 I . R V . R D I N I K R N A T I O N W L R E V I E W
• W i n t e r 2 0 0 5
a
s the global account manager position is
very complex, companies need a specific
breed of manager in this position. The
desired characteristics and skills for a GAM will
differ in each company and even each account
situation, but in general there is a set of skills most
companies like to see in their GAMs. A survey
of more than 200 companies by the Strategic
Account Management Association and Sales
Research Trust identified 10 GAM competencies
in descending order of importance:
1. Communication skills
2. Global team leadership and management

16. skills
3. Business and financial acumen
4. Relationship management skills
5. Strategic vision and planning capabilities
6. Problem-solving capabilities
7. Cultural empathy
8. Selling skills, both internally and externally
9. Industry and market knowledge of one’s
company and customer
10. Product/service knowledge
The desired competencies, added with account-
specific desired characteristics, would create a
rather impressive list of requirements in a job
vacancy advertisement. Many companies state
that it is hard to find people who fit all these
requirements, and therefore companies often
have to choose people who need to grow into
the GAM position and develop the required
skills after obtaining it. Even though knowledge
of the industry and product are respectively Nos.
9 and 10 on the SAMA/SRT list above, these
two points often lead companies to choose an
existing employee to fill the GAM position.
An existing employee has the benefit of
knowing the products, the industry and
sometimes even to some extent the account.

17. Furthermore, an insider will have the head
start of knowing other people in the different
departments of his organization, which will
make it easier to create the necessary network
of relationships. Obviously an outside candidate
for a GAM position could have competencies
that far outweigh the benefits of choosing an
existing employee. Especially when a supplier is
able to hire a customer’s former employee, there
will be similar benefits to appointing an existing
supplier employee—but the benefits materialize
at the other end of the relationship dyad. Royal
Dutch Shell PLC’s GAM for Wärtsilä Corp.
is a former Wärtsilä employee based close to
his former employer’s headquarters in Finland.
The relationship contact manager at Wärtsilä
explained how pleased he was with having an
ex-colleague as GAM for his company.
“This person speaks our language—not just the
editor’s note: this article
is an adapted excerpt from
Managing Global
Customers: An
Integrated Approach
(oxford University Press
USA, 2007), by George S.
yip and Audrey J.M. Bink.
V e l o c i t y ® • • � 5 • • Q 1 � 0 0 8
Copyright© �008 StrategiC aCCount ManageMent aSSoCiation.
all rightS reServed. reproduCtion or diStribution without
expreSSed perMiSSion iS StriCtly prohibited.
Key characteristics

18. and skills of global
account managers
As the globAl Account mAnAger
position is very complex,
compAnies need A specific breed
of mAnAger in this position.
Finnish language but also the company
language. He understands what is
important for us, and that gives him
the opportunity to offer us a customer
value proposition that is exactly what
we need.”
On the other hand, The Regus Group
PLC, a leading worldwide office rental
company, uses mainly homegrown
GAMs, as it finds it hard to recruit the
right people from outside Regus.
Even though it is not always possible
to find a GAM with all the necessary
competencies, some characteristics are
particularly interesting when looking at
the position and will be discussed in the
rest of this article. They are cultural
sensitivity, flexibility, location, seniority
and experience.
Cultural sensitivity
Cultures differ not only between
countries but also between companies.

19. Due to the border-crossing nature of
the GAM position, both in a geographic
and corporate sense, the GAM needs
some feeling for the cultures involved
and a high level of cultural empathy.
He has to be at ease working within
different cultures and have the
knowledge to handle this in an effective
way. Knowledge about the cultures in
different countries where the customer
operates can make the difference
between having a strong relationship
and facing a lot of frustration in trying
to make a deal but not getting there.
Initially it is most important to have
thorough knowledge about the culture
of the customer’s home country, as this
will to some extent influence the culture
of the account itself. Especially when
companies work with a large number of
expatriates from their home country, the
home country culture can have a major
influence. A GAM serving German
technology company Bosch Corp.
commented that because this customer
has many German expatriates at middle-
and high-level management positions in
its 50 countries of operations, there is a
distinct German culture in the company,
which means agreements should always
be observed and work needs to be done
thoroughly. So a GAM who deals with
Bosch needs to be sensitive to this
culture and able to help the local supplier

20. contacts adhere to it, as it might clash
with the supplier’s own local culture.
flexibility
To be able to seize all opportunities
available with the global account, a
GAM needs to be flexible. Most
GAMs spend a considerable amount of
their time outside their home country,
notably when they are not based
in the country of their customer’s
headquarters. If a candidate GAM is
not willing to travel this frequently, he
should seriously reconsider applying for
the position. Another form of flexibility
is being able to stay as a constant factor
for the account, even during times of
organizational change.
In terms of length of tenure, it
is obviously wise not to change a
particular account’s GAM too often.
Many companies say five years is the
period they aim to have the same GAM
on an account. Most firms undergo
regular organizational changes, but
the customer will have no interest in
the internal changes of its supplier. A
GAM needs to ensure that the supplier’s
internal changes do not overly influence
the way of doing business with the
customer.
location

21. The GAM’s geographic location is
an important strategic decision. Even
though the account is supposed to be
global, there will be locations that are
more important than others, and the
country of the customer’s headquarters
will be a significantly important
place for having local contact. Some
companies do not enjoy the luxury of
having local activity and enough sales
support in all possible countries, so they
must fall back on having all their GAMs
in one or two central locations. Most
companies, however, try to locate the
GAM as close as possible to the nation
of the customer’s headquarters. This has
the benefit of easing frequent personal
contact with the customer’s global
relationship managers. The downside is
that in some cases the GAM might lose
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the desired competencies, Added with Account-specific
desired chArActeristics, would creAte A rAther impressive
list of requirements in A job vAcAncy Advertisement.
direct connection with and therefore
influence on the central resources of his
own company.

22. Hewlett-Packard Co. bridges this
gap by installing two versions of GAM.
First, HP locates the key GAM at the
country of the customer’s headquarters.
And secondly, HP has a headquarters
account manager who is responsible for
representing the global account at HP’s
headquarters in California. This way,
there is good balance between having a
local presence with the global customer
and having power and influence at the
supplier on a central level. Sometimes
economics influences the choice of
location. For cost reasons and because of
its Asian heritage, Standard Chartered
PLC, a major U.K.-based international
bank, locates in Singapore many of its
GAMs who serve European customers.
seniority
As a GAM will need to influence other
departments and colleagues without
having actual authority over them, it
is beneficial to give him some level of
seniority. Possessing a certain level of
experience and natural pre-eminence will
make it easier for the GAM to get other
employees on board if something has to
be arranged for the global account, even
without being their direct line manager.
In many cases the desired track record
of a successful account manager or
experience with the required accounts
for this position will ensure that the

23. chosen candidate has some seniority,
but it helps to keep in mind why this is
important.
Another reason seniority is preferable
is the consideration of turnover time
for GAMs at any one account. As
mentioned, many companies prefer to
have a GAM in place at each account
for approximately five years. Managers
at the start of their career mostly aim
to change positions much more often
than that to climb the career ladder and
gain experience. A senior manager will
be more likely to stay in the position
for the desired five years, working
on the long-term development of the
relationship, and less likely to pursue
short-term career goals. Consider the
Xerox Corp. GAM for Volkswagen AG.
With 25 years of Volkswagen-related
experience under his belt, he has earned
the knowledge and seniority needed to
deal with such a big, important client,
and he is less likely to change positions
within a short time than a younger, less
experienced colleague.
experience
T he G A M’s experience and
background are very important to account
management success. Even though he is
essentially an account manager, a sales
background is not necessarily required.

24. As mentioned earlier, the actual sales
responsibilities are only a small part
of the total job description. Although
many sales skills – such as negotiation
skills and business and financial acumen
– will be required to successfully fill the
position, other attributes might be just
as important. The GAM’s experience
within the account company’s industry
or, even better, at the company itself can
be especially beneficial in building the
knowledge base he needs to successfully
manage the account.
For instance, Xerox sees suitable
experience and background as an
important part of desired GA M
characteristics. The company’s current
GAM for Volkswagen has been working
with and for Volkswagen in different
functions and companies for 25
years. This gives him a lot of valuable
knowledge about the account’s company
culture, industry characteristics and key
employees. Another example of Xerox’s
preference for a suitable background
is its GAM for the British global bank
HSBC Holdings PLC. His background is
not in sales but finance, and his financial
industry knowledge made him attractive
as an account manager for financial
institutions. This executive first had a
brief stint as the U.K. account manager

25. for Lloyd’s of London, then took on the
GAM position for HSBC.
Conclusion
When thinking about the necessary
qualities a GAM should possess,
managers need to focus on more than
just excellent sales skills. The GAM is
not an upgraded sales manager, and
realizing that some non-sales qualities
may be far more important will help
in finding the right person for the job.
Some best practices with respect to
GAMs are to:
• Define a set of criteria for the GAM
based not only on your company’s
situation but also on the specific
account’s situation.
• Realize that it may be impossible to find
someone who meets all the criteria, but
try to find someone who will be able to
grow into them.
• Recognize that your company, the
account and the account’s industry are
good hunting grounds to find a GAM
with the necessary background and
knowledge.
• Aim to have a GAM stay in the position
for approximately five years to ensure
continuity and long-term relationship
benefits.

26. • Carefully choose the GAM’s location, if
possible keeping close to the account’s
central operations.
• Ensure that the GAM is a loyal team
player not working for short-term
personal gain but long-term success of
the account.
George S. Yip will give a presentation about
structuring global account management programs at
SAMA’s 44th Annual Conference in May in Dallas.
Additional resources
For more information on this subject in SAMA’s
library, the editors recommend: David Bowerin,
“Managing Global Customers: An Integrated
Approach,” Velocity®, Vol. 9, No. 4, Fall 2007,
www.strategicaccounts.org; and Christoph
Senn, “Making GAM a mission possible,” Pan-
European Conference, Feb. 26, 2007, www.
strategicaccounts.org.
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the gAm is not An
upgrAded sAles mAnAger.