The Whole World Is Buying

By McDermott, Michael J.; Benchley, Robert S. | Chief Executive (U.S.), August 2000 | Go to article overview

The Whole World Is Buying


McDermott, Michael J., Benchley, Robert S., Chief Executive (U.S.)


Developing a globalization strategy is now one of the CEO's key responsibilities. Your bottom line will thank you.

While society in general may not yet be living in a world without borders, from a business perspective it's already here. Thanks in large part to the explosive and continuing growth of Internet usage worldwide, having a global strategy is no longer an option for most companies. It is a necessity.

"Globalization represents a permanent change in the way business is conducted, and the Internet is part and parcel of that process," says Michael S. Levin, chairman, founder and CEO of e-Steel Corp. "There are no more `furthest reaches' of the world.

It's no longer possible for one corner of the world to be isolated from another. It may be an exaggeration to say there are no longer any regional markets, but it's not too much of an exaggeration."

At the organizational level, research shows a strong correlation between the adoption of a global strategy and successful financial performance. Moreover, it reveals a direct link between a CEO's involvement in a company's global strategy and that strategy's success.

DON'T UNDERESTIMATE THE IMPACT

A multiyear research project conducted by the World Economic Forum and Deloitte Touche Tohmatsu has quantified the impact that going global has on corporate enterprise value. The findings show that 84% of companies ranked highly according to a proprietary Globalization Index have outperformed the S&P 500 over the past five years. (The Index ranks six key organizational capabilities: governance and responsibility; strategy and finance; marketing, sales and service; operations and technology; research and development; and human resources management.)

The project, "Innovative Leaders in Globalization," confirms that becoming a truly global company serves the interests of all stakeholders, reported Jacques Manardo, Deloitte Touche Tohmatsu's Global Managing Partner, Strategic Clients, who presented the results earlier this year in Davos, Switzerland. "Required, however, is a steadfast commitment from a corporation's most senior leadership that globalization be a vital component of all operational and strategic activities," he said. Other key findings included:

Global leadership is key to global success. Senior executives and board members must have global business experience to succeed at globalization in the long term.

The marketing and R&D functions are the least global at most companies.

The Internet is fundamentally realigning perceptions about markets and customers. Opportunities that were once considered too remote due to distance and language are now prime targets for doing business.

LOOK BEYOND THE NUMBERS

It is instructive for business leaders to look at what an "e-census" of our global village actually reveals. For starters, only a tiny fraction of the Earth's 6 billion population is online-no more than 4%-and half are Americans. That's changing rapidly, though. International Data Corporation (IDC) projects that Americans will make up only about one-third of the connected world by 2003.

According to IDC, the number of Internet users in Western Europe is projected to grow to 168.4 million in 2003 from 40.9 million in 1998. In Japan the growth will be to 32 million users in 2003 from 8 million five years earlier, and in Latin America it will be to 14.8 million from 3 million.

All those new users translates into a lot of buyers and sellers. The most explosive growth in global e-commerce sales is taking place in Europe, according to IDC. From just $5.6 billion in 1998 sales, volume is expected to skyrocket to $430.4 billion in 2003. Japan's e-commerce sales will increase to $44.9 billion from $2 billion over the same period; Latin America's to $8 billion from $200 million.

Meanwhile, IDC also reports that 70% of U.S. companies' e-commerce Web sites make more than 90% of their sales at home. …

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