Emerging-market multinationals (EMMs), which are companies operating in several countries, have during the last decades, attracted substantial attention from western multinationals for their increasing scale on international level. In 2008 the Emerging economies had 70 multinationals in the Fortune Global 500, an increase of 50 from 1998, and an increase of 9 since 2007; clearly demonstrating the pace of the Emerging multinationals. This development has been possible through a high number of mergers and acquisitions, as well as a focus on Capital (Foreign Direct Investments), Talent (workforce), Resources (commodities etc.), new consumers and Innovation.
For EMMs the multi-polar world creates several layers of complexity that requires the companies to pay attention to their operating model as well as how their organizational capabilities suit this environment.
The complexity of working in today’s multi-polar environment calls for an extra focus on the right operating model, as well as organizational capabilities. Accenture have developed a so called “Global Operating Model” that supports the international strategy by focusing on the relationship between global and local units. The model which is pictured in the right side of the below figure is based on:
- 2 soft components (Leadership and People)
- 3 hard components (Processes/Technology, Metrics and Architecture)
For EMMs with wide multi-polar footprint, primarily the hard components need to be strengthened within the operating model. Developed-market MNEs, also with wide multi-polar footprint, should focus more on the soft components, in order to be successful in emerging economies. Furthermore, it can be seen from the model, that the greatest difference between developed- and emerging-market MNEs is concerning the narrow multi-polar footprint. This makes sense, since the companies are more adapted to local characteristics, either developing or emerging market, and will have to change the operating model to more global characteristics to establish the wider multi-polar footprint (figure 1). Following is an example CommCo, an EMM that managed to refocus its operating model towards a wider multi-polar footprint.
Ex. CommCo Configure its Operational Model
CommCo is an example of an emerging-market telecommunications company that following a privatisation, began a diversification of value-added services and several acquisitions globally to expand to global customers. Today CommCo operates in US, Asia and Europe, with an oversea sale accounting for more than 50%.
The Success is primarily dedicated to strong leadership and its people, with a focus on harmonisation, distributed geographic leadership teams, and “Glocal” talent management. Leaders are spread geographically, to make local teams that effectively can respond to the customer’s needs. This however, does not weaken the dialogue between top managers, since they have developed an efficient way to keep contact globally.
CommCo have had success with a focus on soft components, but do know that hard components are an important element to support the global operating model. Through unified technology that supports internal communication processes, a greater degree of standardization, as well as simple rules and common technology to clarify lines of decision making, CommCo have managed to strengthen organisational capabilities to better cope with developed-market characteristics.
“…all companies would be wise to learn: Those that emphasize the right balance of elements in their global operating model will be best positioned to execute successful multi-polar strategies.”
An increasing amount of emerging contenders are appearing in the global environment, and they are grabbing grater part of the Fortune 500 index. These contenders have shown incredible growth rates (18% average) during the last decade, substantially higher than Western multinationals, and they are very diverse considering country, culture and industry.
An Accenture survey shows that 95% of senior executives don’t believe that their company has an operating model that supports their global strategy. Furthermore several researchers believe that emerging-market companies lack the organizational and managerial capabilities to success Foreign Direct Investments (FDI) globally.
New emerging challengers will have to secure future talent and resources, which will be limited, as well as secure emerging customer segment, industry leadership, and new markets. The current trend for EMMs seems promising, but several factors can influence the trend in both directions. This article just went through one of the crucial elements of EMM’s Global presence, the overall organizational structure and focus areas. Other elements such as overall vision and mission, sustainability and environment, and mergers and acquisitions also have to be considered as part of the global strategy.
Photo by aaronrz