The globalization of business sometimes seems like a fait accompli rather than the work in progress it really is. With "made in China" (or in Mexico, or in Romania) stamped on much of what we buy, with more than half the revenues of giant companies such as General Electric and IBM coming from outside the U.S., with the offshoring of business functions to different places around the world now almost routine and with a high-altitude conference staged in Davos, Switzerland, every January to spotlight the stars of the global economy, what else remains to be done?
If you're an executive at a company with around $1 billion in sales, your answer is likely: quite a lot. In multiple ways, companies of this size are feeling the same pressures to be multinational that drove the larger ones abroad -- pressures to control costs, or secure materials, or get into new markets, or tap the best technology or talent, or all of the above. What it comes down to is this: They can either participate internationally -- especially in the world's fastest-growing economies -- or they can risk being overtaken by a rival that is.
It's not that these firms are purely domestic. A recent KPMG survey of 1,013 executives at middle-market companies found that on average, their companies are generating 23% of their revenue from overseas. Still, that's far short of where the multinational giants are. No wonder 57% of these middle-market executives said they intend to increase the international proportion of sales over five years.
Inevitably, their efforts will require them to form partnerships and joint ventures and make acquisitions in markets that differ in a hundred ways from those in which the companies grew up. And unlike their counterparts at much larger organizations, when dealmakers from middle-market firms get off the plane they have to sort through these differences in law and custom with far fewer local resources available to them.
But there is some good news, as we show in this
two-part report. First, there are the trails blazed by the biggest multinationals in previous emerging-market deals over the years. When Juan Figuereo helped companies like PepsiCo and Wal-Mart build their presence in emerging markets, he didn't just learn the lessons that he shares in the profile that follows. He also helped change the climate and base of experience in countries such as Brazil and China, to the benefit of future dealmakers arriving from out-of-country.
Then there's the help available from the U.S. and state governments. Don't scoff. As you'll see in the report, the U.S. Department of Commerce has a major presence in China (among many other countries). Plenty of dealmakers at companies that are middle-market or even smaller have used it to their advantage.
Business isn't really borderless, at least not yet. That it's trending in that direction is partly the result of a lot of hard work by folks with their sleeves rolled up, toiling far from the peaks of Davos.
-- Kenneth Klee
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Juergen Lasowski
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