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 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 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 the benefits and mitigating the challenges associated with each will require global companies to explore new ways of organizing and operating.

byMartin Dewhurst, Jonathan Harris, and Suzanne Heywood

McKinsey Quarterly

Post-readin:

I. Find in the text the Russian equivalents for the following:

Volatility of local growth; emerging-market leader; scale and scope benefits; to align; to be locally flexible; to struggle to adapt; exhaustive risk-management processes; far-flung geographies; cloud-based computing; M&A.

II. Fill in the gaps with suitable words:

1. The International Monetary Fund confirms that the ten fastest-growing economies during the years ahead will all be in e… m… .

2. A year ago, we uncovered a “g… p…”: high-performing global companies consistently scored lower than more locally focused ones on several dimensions of organizational health.

3. Global companies h… in emerging markets have been growing faster than counterparts headquartered in d… ones.

4. More than 300 executives at 17 of the world’s leading global organizations s… a d… r… of s… and geographies.

5. Complicating matters is the fact that l… h… in some key markets increasingly prefer to work for local employers.

6. Local c…’ b… are now stronger, and they can offer more senior roles in the home market.

7. A mind-set that ‘this is the way that we do things around here’ is very strongly e… in our risk process.

8. Many companies find d… and developing talent in emerging markets to be a m… c… .

9. Many companies find it increasingly difficult to be locally flexible and adaptable as they broaden their g… f… .

10. Consumer-oriented firms are facing sometimes conflicting i… to t… their businesses to local needs.

III. Match the expressions to their meanings:

1. to mitigate- to make less severe or painful

2. to pursue- to find or employ measures to obtain or accomplish

3. to clash- to come into conflict

4. to chafe at- to feel irritation, discontent, or impatience

5. to comply with- to conform as required or requested

6. to avail- to be of use or advantage

7. to cope with-to manage to do something

8. to select for-to choose

9. round-the-clock-day and night

10. “neutral turf”-uncharged field

IV. Say if the statements are true or false.

1. Nowadays we observe changing with the accelerating shift of economic activity from Africa, Asia, and Latin America to markets in Europe and North America

2. IBM expects to earn 50 percent of its revenues in emerging markets by 2017

3. R&D-intensive companies, are working to take over more companies which take part in researches of the emerging market.

4. A common set of four tensions in managing strategy which many individual companies face are people, costs, and risk on a global scale.

5. Executives reported that just 2 percent of their top 200 employees were located in Asian emerging markets.

V. Answer the questions:

1. What are the reasons of business shifting to the developing countries?

2. What factors made possible new forms of international coordination within global companies?

3. What is the difference between R&D-intensive companies and M&A-oriented ones?

4. What assets, from the executives’ point of view, are the most invaluable ones?

5. How does cloud-based computing contribute better coordination of the global companies?

6. What changes do global companies face becoming bigger and more diverse?

7. Why is risk-management infrastructure so important for the global companies?

8. Why do global companies need to explore new ways of organizing and operating?

VI . Render the given article according to the suggested plan

Date: 2015-01-12; view: 1125