- In This Issue
Assessing Opportunities for Global Business Expansion
Today's global business environment offers unsurpassed opportunities … but also enormous risks
This article was published in the Q1 2012 issue of Aon One, April 2012.
Growth is at the center of every company's business strategy. It defines an enterprise and determines how customers, shareholders and employees view it. But maintaining a healthy organization amid expansion is no simple task, particularly in an era of rapidly changing business conditions, economic volatility and political instability in many regions of the world.
Plenty of organizations discover that the road to performance and profits is paved with potholes. "Too often, growth winds up derailed by factors that a company's executives never anticipated or didn't adequately acknowledge," says Stephen Cross, chairman, Aon Global Risk Consulting. "It's critical to understand the relationship between opportunity and risk, and design a business strategy that reflects real-world issues and concerns."
These days, smart CEOs and seasoned corporate boards do strategize ways to grow and manage a business. But somewhere between mapping out a plan and achieving desired results lies a vast netherworld of natural and human-induced disasters, political uprisings, labor conflicts, logistics challenges and economic factors. According to Chris Baudouin, CEO of the Aon Global Client Network, based in Chicago, "It's impossible to eliminate risk. The goal is to mitigate it to the extent possible through analysis and planning."
So how can you navigate your organization through tricky and fast-changing market conditions? How can you conduct an analysis and determine where it's best to locate plants, offices and workers? And what's necessary to put a growth plan into action and keep it relevant and functional?
Leave nothing to chance. As Baudouin explains, "Growth is never an accident. It's the result of successful preparation and planning."
A New Era Emerges
In decades past, business conditions evolved at a far slower and more predictable pace. Innovation was measured in months or years rather than days or weeks—and margins hadn't yet been squeezed to razor-thin levels. Today's supply chains are complex and deeply intertwined. Meanwhile, companies face performance and financial pressures that would have been unimaginable a quarter century ago.
"Most companies are attempting to grow by stepping outside their comfort zones," says Rakesh Malik, a principal at Aon Hewitt in Gurgaon, India. "In order to succeed, it's necessary to venture into new markets and uncharted territory."
For some organizations, a focus on bottom-line growth means relocating plants and facilities to other states, provinces or countries that have lower labor or materials costs. Finding the right locations is paramount. For others, a growth strategy means entering lucrative high-growth markets such as China, India and Brazil where large populations wield a rising discretionary income.
Regardless of which part of the world you target for expansion, it is necessary to address three primary areas in order to achieve long-term growth: strategic decision making, human resource management, and risk mitigation that includes natural and human-caused catastrophes. Understanding growth opportunities starts with identifying how these key factors affect your top line and bottom line. "There are always tradeoffs and it is critical to acknowledge them. The constant is that disruption kills growth," Cross points out.
Adding to the challenge is the fact that conditions are constantly in flux. Yesterday's hot country may become passé as other companies move in, wages rise and conditions change. For years, the so-called BRIC countries—Brazil, Russia, India and China—were hot spots for international investment. In recent years, they've remained viable but lost some of their luster as other countries—including Indonesia, South Korea, Colombia, Vietnam, Mexico and South Africa—have emerged (See "Beyond the BRICs" on page 46).
Malik points out that there's no template for determining where and how to invest. Many areas of the world are advancing rapidly and increasingly educated populations are competing for work. East Africa, for example, is now attracting companies ranging from Starbucks and Google to Macy's and Costco. Business consulting firm McKinsey reports that consumer spending in Africa reached USD860 billion in 2008 and will rise to USD1.4 trillion by 2020.
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