Loading... Top of Form citation_instruction Accessibility Information and TipsRevised Date: 07/2015 The global company's challenge Export Manager SaveE-mail Number of items to be e-mailed: 1 · E-mail from: · E-mail to: Separate each e-mail address with a semicolon. · Subject: · Comments: E-mail a file with citations in: · RIS Format (e.g. CITAVI, EasyBib, EndNote, ProCite, Reference Manager, Zotero) · Generic bibliographic management software · Citations in XML format · Citations in BibTeX format · Citations in MARC21 format Number of items to be saved: 1 Save citations to a file formatted for: · Direct Export in RIS Format (e.g. CITAVI, EasyBib, EndNote, ProCite, Reference Manager, Zotero) · Generic bibliographic management software · Citations in XML format · Citations in BibTeX format · Citations in MARC21 format · Direct Export to RefWorks · Direct Export to EndNote Web · Direct Export to EasyBib · Download CSV Citation Title: The global company's challenge. Authors: Dewhurst, Martin1 Harris, Jonathan2 Heywood, Suzanne Aquila, Kate Source: McKinsey Quarterly. 2012, Issue 3, p76-80. 5p. Document Type: Article Subject Terms: *International business enterprises *Emerging markets *Economies of scale *Contracting out *Risk management in business *Business models *Executives *Financial leverage *Globalization *Research & development Developing countries Company/Entity: International Monetary Fund DUNS Number: 069275188 Aditya Birla Management Corp. Pvt. Ltd. International Business Machines Corp. DUNS Number: 001368083 Ticker: IBM NAICS/Industry Codes: 919110 International and other extra-territorial public administration 928120 International Affairs 541712 Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology) 541711 Research and Development in Biotechnology Abstract: The article focuses on the management of risks, costs, and strategies by international businesses in emerging markets. It states that the International Monetary Fund reported that the ten fastest-growing economies after 2012 will all be in developing countries. It mentions that technology company International Business Machines expects by 2015 to earn 30 percent of revenues in emerging markets compared to 17 percent in 2009, while Indian multinational conglomerate Aditya Birla Group earns over half of its revenue outside India and has operations in 40 nations. It talks about the benefit of economies of scale in shared services enjoyed by large global companies and comments that the ability to outsource business services and manufacturing is benefiting local businesses. Author Affiliations: 1director in McKinsey's London office 2director in the New York office Full Text Word Count: 1632 ISSN: 0047-5394 Accession Number: 78031780 Database: Business Source Complete PlumPrintNo Results Found Translate Full Text: Translation in Progress: Translations powered by Language Weaver Service The global company's challenge  Contents 1. St.

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2. Citation
Title:
The global company's challenge.
Authors:
Dewhurst, Martin1
Harris, Jonathan2
Heywood, Suzanne
Aquila, Kate
Source:
McKinsey Quarterly. 2012, Issue 3, p76-80. 5p.
Document Type:
Article
Subject Terms:
*International business enterprises
*Emerging markets
*Economies of scale
*Contracting out
*Risk management in business
*Business models
*Executives
*Financial leverage
*Globalization
*Research & development
Developing countries
Company/Entity:
International Monetary Fund DUNS Number: 069275188
Aditya Birla Management Corp. Pvt. Ltd.
International Business Machines Corp. DUNS
Number: 001368083 Ticker: IBM
NAICS/Industry Codes:
919110 International and other extra-territorial public
administration
928120 International Affairs
541712 Research and Development in the Physical,
Engineering, and Life Sciences (except Biotechnology)

3. 541711 Research and Development in Biotechnology
Abstract:
The article focuses on the management of risks, costs, and
strategies by international businesses in emerging markets. It
states that the International Monetary Fund reported that the ten
fastest-growing economies after 2012 will all be in developing
countries. It mentions that technology company International
Business Machines expects by 2015 to earn 30 percent of
revenues in emerging markets compared to 17 percent in 2009,
while Indian multinational conglomerate Aditya Birla Group
earns over half of its revenue outside India and has operations
in 40 nations. It talks about the benefit of economies of scale in
shared services enjoyed by large global companies and
comments that the ability to outsource business services and
manufacturing is benefiting local businesses.
Author Affiliations:
1director in McKinsey's London office
2director in the New York office
Full Text Word Count:
1632
ISSN:
0047-5394
Accession Number:
78031780
Database:
Business Source Complete
PlumPrintNo Results Found
Translate Full Text:
Translation in Progress:
Translations powered by Language Weaver Service
The global company's challenge
Contents
1. Strategic confidence and stretch
2. People as an asset and a challenge

4. 3. Scale and scope benefits, complexity costs
4. Risk diversification and the loss of familiarity
5. FOOTNOTES
Full Text
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As the economic spotlight shifts to developing markets, global
companies need new ways to manage their strategies, people,
costs, and risks.
Managing global organizations has been a business challenge
for centuries. But the nature of the task is changing with the
accelerating shift of economic activity from Europe and North
America to markets in Africa, Asia, and Latin America.
McKinsey Global Institute research suggests that 400 midsize
emerging-market cities, many unfamiliar in the West, will
generate nearly 40 percent of global growth over the next 15
years. The International Monetary Fund confirms that the ten
fastest-growing economies during the years ahead will all be in
emerging markets. Against this backdrop, continuing advances
in information and communications technology have made
possible new forms of international coordination within global
companies and potential new ways for them to flourish in these
fast-growing markets.
There are individual success stories. IBM expects to earn 30
percent of its revenues in emerging markets by 2015, up from
17 percent in 2009. At Unilever, emerging markets make up 56
percent of the business already. And Aditya Birla Group, a
multinational conglomerate based in India, now has operations
in 40 countries and earns more than half its revenue outside
India.
But, overall, global organizations are struggling to adapt. A
year ago, we uncovered a "globalization penalty": high-
performing global companies consistently scored lower than
more locally focused ones on several dimensions of
organizational health.[ 1] For example, the former were less
effective at establishing a shared vision, encouraging

5. innovation, executing "on the ground," and building
relationships with governments and business partners. Equally
arresting was evidence from colleagues in McKinsey's strategy
practice showing that global companies headquartered in
emerging markets have been growing faster than counterparts
headquartered in developed ones, even when both are operating
on "neutral turf": emerging markets where neither is based (see
"Parsing the growth advantage of emerging-market companies,"
on page 10).
Over the past year, we've tried to understand more clearly the
challenges facing global organizations, as well as approaches
that are helping some to thrive. Our work has included surveys
and structured interviews with more than 300 executives at 17
of the world's leading global organizations spanning a diverse
range of sectors and geographies, a broader survey of more than
4,600 executives, and time spent working directly with the
leaders of dozens of global organizations trying to address these
issues.[ 2]
Clearly, no single organizational model is best for all
companies handling the realities of rapid growth in emerging
markets and round- the-clock global communications. That's
partly because the opportunities and challenges facing
companies vary, depending on their business models. R&D-
intensive companies, for example, are working to staff new
research centers in the emerging world and to integrate them
with existing operations. Firms focused on extracting natural
resources are adapting to regulatory regimes that are evolving
rapidly and sometimes becoming more interventionist.
Consumer-oriented firms are facing sometimes-conflicting
imperatives to tailor their businesses to local needs while
maintaining consistent global processes.
Another reason no single model fits all global companies is that
their individual histories are so different. Those that have
grown organically often operate relatively consistently across
countries but find it hard to adjust their products and services to
local needs, given their fairly standardized business models.

6. Companies that have mainly grown through M&A, in contrast,
may find it easier to tailor operations to local markets but
harder to integrate their various parts so they can achieve the
potential of scale and scope and align a dispersed workforce
behind a single set of strategies and values.
Although individual companies are necessarily responding
differently to the new opportunities abroad, our work suggests
that most face a common set of four tensions in managing
strategy, people, costs, and risk on a global scale. The
importance of each of these four tensions will vary from
company to company, depending on its particular operating
model, history, and global footprint. (For more on the
implications of these uneven globalization efforts, see
"Developing global leaders," on page 100.) Taking stock of the
status of all four tensions can be a useful starting point for a
senior-management team aiming to boost an organization's
global performance.
Strategic confidence and stretch
Being global brings clear strategic benefits: the ability to access
new customer markets, new suppliers, and new partners. These
immediate benefits can also create secondary ones. Building a
customer base in a new market, for example, provides
familiarity and relationships that may enable additional
investments -- say, in a research center.
But being global also brings strategic challenges. Many
companies find it increasingly difficult to be locally flexible
and adaptable as they broaden their global footprint. In
particular, processes for developing strategy and allocating
resources can struggle to cope with the increasing diversity of
markets, customers, and channels. These issues were clear in
our research: fewer than 40 percent of the 300 senior executives
at global companies we interviewed and surveyed believed that
their employers were better than local competitors at
understanding the operating environment and customers' needs.
And barely half of the respondents to our broader survey
thought that their companies communicated strategy clearly to

7. the workforce in all markets where they operate.
People as an asset and a challenge
Many of the executives we interviewed believed strongly that
the vast reserves of skills, knowledge, and experience within the
global workforce of their companies represented an invaluable
asset. But making the most of that asset is difficult: for
example, few surveyed executives felt that their companies were
good at transferring lessons learned in one emerging market to
another.
At the same time, many companies find deploying and
developing talent in emerging markets to be a major challenge.
Barely half the executives at the 17 global companies we
studied in depth thought they were effective at tailoring
recruiting, retention, training, and development processes for
different geographies. An emerging- market leader in one global
company told us that "our current process favors candidates who
have been to a US school, understand the US culture, and can
conduct themselves effectively on a call with head office in the
middle of the night. The process is not designed to select for
people who understand our market."
One of our recent surveys showed how hard it is to develop
talent for emerging markets at a pace that matches their
expected growth. Executives reported that just 2 percent of their
top 200 employees were located in Asian emerging markets that
would, in the years ahead, account for more than one-third of
total sales. Complicating matters is the fact that local highfliers
in some key markets increasingly prefer to work for local
employers (see "How multinationals can attract the talent they
need," on page 92). Global companies are conscious of this
change. "Local competitors' brands are now stronger, and they
can offer more senior roles in the home market," noted one
multinational executive we interviewed.
Scale and scope benefits, complexity costs
Large global companies still enjoy economic leverage from
being able to invest in shared infrastructure ranging from R&D
centers to procurement functions. Economies of scale in shared

8. services also are significant, though no longer uniquely
available to global companies, as even very local ones can
outsource business services and manufacturing and avail
themselves of cloud-based computing.
But as global companies grow bigger and more diverse,
complexity costs inevitably rise. Efforts to standardize the
common elements of essential functions, such as sales or legal
services, can clash with local needs. And emerging markets
complicate matters, as operations located there sometimes chafe
at the costs they must bear as part of a group centered in the
developed world: their share of the expense of distant (and
perhaps not visibly helpful) corporate and regional centers, the
cost of complying with global standards and of coordinating
managers across far-flung geographies, and the loss of market
agility imposed by adhering to rigid global processes.
Risk diversification and the loss of familiarity
A global company benefits from a geographically diverse
business portfolio that provides a natural hedge against the
volatility of local growth, country risk, and currency risk. But
pursuing so many emerging-market opportunities is taking
global companies deep into areas with unfamiliar risks that
many find difficult to evaluate. Less than half of the
respondents to our 2011 survey thought these organizations had
the right risk-management infrastructure and skills to support
the global scale and diversity of their operations.
Furthermore, globally standard, exhaustive risk-management
processes may not be the best way to deal with risk in markets
where global organizations must move fast to lock in early
opportunities. One executive in an emerging-market outpost of a
global company told us "a mind-set that 'this is the way that we
do things around here' is very strongly embedded in our risk
process. When combined with the fact that the organization does
not fully understand emerging markets, it means that our risk
process might reject opportunities that [the global] CEO would
approve."
Understanding these tensions is just a starting point. Capturing

9. the benefits and mitigating the challenges associated with each
will require global companies to explore new ways of
organizing and operating. The following two articles explore
some of these new approaches -- to organizational design and to
talent management in global corporations, respectively.
FOOTNOTES
1 See Martin Dewhurst, Jonathan Harris, and Suzanne Heywood,
"Understanding your 'globalization penalty',"
mckinseyquarterly.com, July 2011.
2 See "Managing at global scale: McKinsey Global Survey
results," mckinseyquarterly.com, June 2012.
~~~~~~~~
By Martin Dewhurst, Martin Dewhurst is a director in
McKinsey's London office; Jonathan Harris, Jon Harris is a
director in the New York office. and Suzanne Heywood,
Suzanne Heywood is a principal
Contributions by Kate Aquila, The authors would like to
acknowledge the contributions of Kate Aquila and Roni Katz to
the development of this article.
Copyright of McKinsey Quarterly is the property of McKinsey
& Company, Inc. and its content may not be copied or emailed
to multiple sites or posted to a listserv without the copyright
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11. enabled
Week 1 - Assignment: Analyze the International Monetary
System
Write a paper about the International Monetary System that
addresses each of the following issues:
· Define the International Monetary System and outline the
history of the system.
· Describe and provide examples of what is meant by “currency
regimes,” and define selected types of regimes and form an
argument for selecting fixed exchange rate and arguments for
selecting flexible exchange rates.
· Describe and define the creation of the Euro and discuss the
benefits as well as the problems associated with the creation of
this currency.
Support your paper with at least five (5) resources. In addition
to these specified resources, other appropriate scholarly
resources, including older articles, may be included. Your paper
should demonstrate thoughtful consideration of the ideas and
concepts that are presented in the course and provide new
thoughts and insights relating directly to this topic. Your
response should reflect scholarly writing and current APA
standards.
Length: 5-7 pages (not including title and reference pages).
The Global Environment
This week, we explore the forces that motivate the creation of
multinational businesses and the financial environment that has
existing to support these global business initiatives. The
creation of multinational businesses begins with the theory of
comparative advantage. The theory argues that each country
will have resources that allow it to have a competitive
advantage in the production of certain goods. In turn, the
country will use that production to trade for other goods that it
wishes to consume but may not have a competitive advantage in

12. producing.
The multinational firm takes that same collection of resources
from countries and manages them in an efficient manner to
produce those goods in which the country holds that competitive
advantage. However, in order for these goods to be exchanged
across countries, the multinational business relies upon a stable
financial environment that allows for the exchange of
currencies. The international monetary system is comprised of a
collection of currencies with a variety of arrangements by
country for how their currency moves with other currencies.
These important financial structures have critical implications
for multinational businesses.
1. Review the resources listed in the Books and Resources area
below to prepare for this week's assignments.
2. Complete the following Spotlight on Skills if you need
assistance with the tools used to complete your assignments.
Spotlight on Skills: Preparing a Discussion Post
To view the Spotlight on Skills, go to the Course Resources
module in the table of contents and click on Spotlight on Skills.
Spotlight on Skills: APA Form and Style
To view the Spotlight on Skills, go to the Course Resources
module in the table of contents and click on Spotlight on Skills.
Week 1 - Discussion: Discuss International Financial
Management
Initiate a discussion on the theory of comparative advantage and
how you see it as important for a multinational business.
Explain what you feel are the three most important reasons for
why firms become multinational firms, and identify companies
that either do take advantages of those reasons or likely could
take advantage of those reasons for becoming a multinational
firm. Order these three reasons from most important to least
important, and defend your choices and this ordering.
This discussion will be open-ended to afford you the
opportunity to interact with your mentor and possibly other

13. students during the course. Both your content post and your
response post should reflect a collegial attitude, be free of
grammar and spelling errors, and include criteria mentioned
above.
Length: Content post 150-200 words