The global company’s challenge (2022)

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Managing global organizations has been a business challenge for centuries. But the nature of the task is changing with the accelerating shift of economic activity from Europe and North America to markets in Africa, Asia, and Latin America. McKinsey Global Institute research suggests that 400 midsize emerging-market cities, many unfamiliar in the West, will generate nearly 40 percent of global growth over the next 15 years. The International Monetary Fund confirms that the ten fastest-growing economies during the years ahead will all be in emerging markets. Against this backdrop, continuing advances in information and communications technology have made possible new forms of international coordination within global companies and potential new ways for them to flourish in these fast-growing markets.

There are individual success stories. IBM expects to earn 30 percent of its revenues in emerging markets by 2015, up from 17 percent in 2009. At Unilever, emerging markets make up 56 percent of the business already. And Aditya Birla Group, a multinational conglomerate based in India, now has operations in 40 countries and earns more than half its revenue outside India.

But, overall, global organizations are struggling to adapt. A year ago, we uncovered a “globalization penalty”: high-performing global companies consistently scored lower than more locally focused ones on several dimensions of organizational health.1 For example, the former were less effective at establishing a shared vision, encouraging innovation, executing “on the ground,” and building relationships with governments and business partners. Equally arresting was evidence from colleagues in McKinsey’s strategy practice showing that global companies headquartered in emerging markets have been growing faster than counterparts headquartered in developed ones, even when both are operating on “neutral turf”: emerging markets where neither is based (see “Parsing the growth advantage of emerging-market companies”).

Over the past year, we’ve tried to understand more clearly the challenges facing global organizations, as well as approaches that are helping some to thrive. Our work has included surveys and structured interviews with more than 300 executives at 17 of the world’s leading global organizations spanning a diverse range of sectors and geographies, a broader survey of more than 4,600 executives, and time spent working directly with the leaders of dozens of global organizations trying to address these issues.2

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Clearly, no single organizational model is best for all companies handling the realities of rapid growth in emerging markets and round-the-clock global communications. That’s partly because the opportunities and challenges facing companies vary, depending on their business models. R&D-intensive companies, for example, are working to staff new research centers in the emerging world and to integrate them with existing operations. Firms focused on extracting natural resources are adapting to regulatory regimes that are evolving rapidly and sometimes becoming more interventionist. Consumer-oriented firms are facing sometimes-conflicting imperatives to tailor their businesses to local needs while maintaining consistent global processes.

Another reason no single model fits all global companies is that their individual histories are so different. Those that have grown organically often operate relatively consistently across countries but find it hard to adjust their products and services to local needs, given their fairly standardized business models. Companies that have mainly grown through M&A, in contrast, may find it easier to tailor operations to local markets but harder to integrate their various parts so they can achieve the potential of scale and scope and align a dispersed workforce behind a single set of strategies and values.

Although individual companies are necessarily responding differently to the new opportunities abroad, our work suggests that most face a common set of four tensions in managing strategy, people, costs, and risk on a global scale. The importance of each of these four tensions will vary from company to company, depending on its particular operating model, history, and global footprint. (For more on the implications of these uneven globalization efforts, see “Developing global leaders.”) Taking stock of the status of all four tensions can be a useful starting point for a senior-management team aiming to boost an organization’s global performance.

Strategic confidence and stretch

Being global brings clear strategic benefits: the ability to access new customer markets, new suppliers, and new partners. These immediate benefits can also create secondary ones. Building a customer base in a new market, for example, provides familiarity and relationships that may enable additional investments—say, in a research center.

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But being global also brings strategic challenges. Many companies find it increasingly difficult to be locally flexible and adaptable as they broaden their global footprint. In particular, processes for developing strategy and allocating resources can struggle to cope with the increasing diversity of markets, customers, and channels. These issues were clear in our research: fewer than 40 percent of the 300 senior executives at global companies we interviewed and surveyed believed that their employers were better than local competitors at understanding the operating environment and customers’ needs. And barely half of the respondents to our broader survey thought that their companies communicated strategy clearly to the workforce in all markets where they operate.

People as an asset and a challenge

Many of the executives we interviewed believed strongly that the vast reserves of skills, knowledge, and experience within the global workforce of their companies represented an invaluable asset. But making the most of that asset is difficult: for example, few surveyed executives felt that their companies were good at transferring lessons learned in one emerging market to another.

At the same time, many companies find deploying and developing talent in emerging markets to be a major challenge. Barely half the executives at the 17 global companies we studied in depth thought they were effective at tailoring recruiting, retention, training, and development processes for different geographies. An emerging-market leader in one global company told us that “our current process favors candidates who have been to a US school, understand the US culture, and can conduct themselves effectively on a call with head office in the middle of the night. The process is not designed to select for people who understand our market.”

One of our recent surveys showed how hard it is to develop talent for emerging markets at a pace that matches their expected growth. Executives reported that just 2 percent of their top 200 employees were located in Asian emerging markets that would, in the years ahead, account for more than one-third of total sales. Complicating matters is the fact that local highfliers in some key markets increasingly prefer to work for local employers (see “How multinationals can attract the talent they need”). Global companies are conscious of this change. “Local competitors’ brands are now stronger, and they can offer more senior roles in the home market,” noted one multinational executive we interviewed.

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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 (and perhaps not visibly helpful) 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.”

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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.

FAQs

What are the 7 global challenges? ›

We will focus on urgent global challenges that must be addressed to reduce poverty, grow economies and protect natural systems: food, forests, water, energy, cities, climate and the ocean. Because these seven challenges are inextricably linked, our strategies often address more than one, cutting across programs.

What are the top 3 challenges that all companies face globally? ›

The Top Three Challenges Global Companies Face, And How To Solve Them
  • Challenge #1: Difficulties Analyzing and Reporting on Performance. ...
  • Challenge #2: Lack of Financial Control. ...
  • Challenge #3: Ensuring Local Compliance. ...
  • Cracks in the Technology Foundation. ...
  • A Single Source of Truth. ...
  • Standardize Globally, Configure Locally.
13 Sept 2018

What are global challenges? ›

The Global Challenges Foundation's main focus are three interconnected global risks: Climate change, other large-scale environmental degradation and weapons of mass destruction, along with three underlying forces that increase the probability and impact of these risks: population growth, extreme poverty and politically ...

Why is global business important? ›

The Benefits of Global Business

The primary benefit of expanding business operations beyond your borders comes down to numbers. Operating in more countries means access to more customers, which means more revenue and profit. If you sell goods, higher volumes can reduce costs.

What is a global company definition? ›

Really, a global company is any company that operates in at least a country other than the country where it originated. Realistically, expanding to even just one additional country is a lot of work and is therefore a great achievement.

What are the 5 major global problems? ›

These are five crises the world can't ignore in 2020.
  • Food Insecurity. Food is more than a meal. ...
  • Refugees. In 2021, more children will be on the move than ever before in history. ...
  • Climate Change. ...
  • Child Marriage/Gender Discrimination. ...
  • Child Labour and Trafficking.

What are the five global challenges? ›

Our mission is to tackle five major challenges the world is facing today: achieving a sustainable economy, managing the digital revolution, overcoming the globalization crisis, reducing poverty and inequality, and developing effective public policies.

What is the biggest challenge facing the world today? ›

The climate crisis
  • Biodiversity loss and species extinction.
  • Marine ecosystem deterioration.
  • The hunger crisis and COVID-19.
  • The hunger crisis and the war in Ukraine.
  • Water scarcity.
  • Children's health and education.
6 Jun 2022

What is the biggest challenge for companies? ›

Some of these challenges span sectors and industries and are common among different companies and organizations.
...
Business challenges
  • Maintaining quality customer relationships.
  • Meeting customer needs.
  • Preserving a good reputation.
  • Retaining employees.
  • Finding an effective brand.
  • Marketing in a saturated marketplace.

What is the biggest challenge for most businesses? ›

Developing a plan that will progress their businesses is the greatest obstacle that organizations face while going online. One of the issues with small business owners is that some of them feel how they can automatically acquire clients, but until that can occur, initiatives seem to be developed.

How could we prevent or minimize the challenges of a global firm? ›

5 tips to overcome barriers to international business growth
  • 1 - Harnessing local market expertise. Moving into a new market requires local knowledge. ...
  • 2 - Cultivating partnerships in the region. ...
  • 3 - Navigating new legislation. ...
  • 4 - Managing expectations. ...
  • 5 - Cross-border knowledge sharing.
11 Apr 2018

How do you deal with challenges? ›

10 Ways to Overcome Challenges in Life
  1. Make A Plan. While you don't know what is going to happen in the future, you can always plan ahead. ...
  2. Know You're Not Alone. Every person in this world has their low points. ...
  3. Ask For Help. ...
  4. Feel Your Feelings. ...
  5. Accept Support. ...
  6. Help Others. ...
  7. Think Big. ...
  8. Positive Mindset.

What are the challenges in global marketing? ›

What are the biggest challenges facing global marketers?
  • Global vs local teams. The bigger the brand, the more links in the chain. ...
  • Reaching local customers. ...
  • Measure, report and improve. ...
  • Handle creative development. ...
  • Understand customer wants and needs. ...
  • Digital and social performance. ...
  • Use of technology.

What are the global challenges of sustainable development? ›

Global challenges identified by OCHA-PDSB include: climate change, extreme poverty and inequality, financial and economic crisis, food crisis, water scarcity, energy security, migration, population growth and demographic shift, urbanization and health pandemics and infectious diseases.

How do global businesses help the economy? ›

Globalization has enabled firms to specialize – and to increase the intensity of R&D, innovation and capital in their output. Globalization has made it easier for new companies to start competing with old incumbents. The trade sector has increased the number of people that it employs, both through exports and imports.

What is global business solution? ›

GBS was established in 2008 with a vision of focused and quality consultancy in Utility, Advanced Metering Infrastructure(AMI) and Manufacturing domain. Over the years GBS team has served the Utility Company and Trading industries for SAP consultancy.

What are global business strategies? ›

A global strategy is a strategy that a company develops to expand into the global market. The purpose of developing a global strategy is to increase sales across the world. The term "global strategy" includes standardization, and international and multinational strategies.

What makes a global company successful? ›

Brands enjoy greater success on a global scale by adapting to what consumers in a certain country or region prefer. When it comes to marketing, global brands adapt their campaigns to include the target audience's language, as well as relevant images and graphics that reflect the audience's demographics and geography.

What is the most global company? ›

The Top 10
  • 1Walmart.
  • 2Amazon.
  • 3State Grid.
  • 4China National Petroleum.
  • 5Sinopec Group.
  • 6Saudi Aramco.
  • 7Apple.
  • 8Volkswagen.

What are the types of global company? ›

Multinational corporations can be categorized into four different types: decentralized multinational corporations, centralised global corporations, international companies, and transnational enterprises.

Why are global issues important? ›

Awareness of Global Issues Can Help Us Improve as a Society

Awareness of social, political, and economic issues is equally important. There are several disturbing facts about certain sections of the human population that can move any person: Two billion people in the world suffer from food insecurity.

What world problems should be solved? ›

Our list of the most pressing world problems
  • Risks from artificial intelligence. ...
  • Catastrophic pandemics. ...
  • Building effective altruism. ...
  • Global priorities research. ...
  • Nuclear war. ...
  • Epistemics and institutional decision-making. ...
  • Climate change. ...
  • Great power conflict.
3 days ago

What is current issue? ›

A current issue is something happening right now that affects a specific group or society at large. These issues are often controversial, with strong opinions on all sides. A current issue doesn't necessarily mean that the question is new. Some topics, such as abortion, have been discussed in society for decades.

Which is the biggest challenge before the world? ›

Explanation:
  • Poverty.
  • Unemployment.
  • Terrorism.
  • Environmental issues.
  • Rasicsm.
12 Feb 2021

What is one of the biggest challenges when companies are committed to sustainability Brainly? ›

One of the biggest challenges that the companies are committed to sustainability faces are; Operations are impacted the most due to a reduction in procurement. The surrounding community needs to understand the environmental impact of the changes.

What are the challenges of development? ›

The Challenges of Development Projects
  • Poor project planning.
  • Inadequate management skills.
  • Lack of accountability.
  • Lack of stakeholder involvement.
  • Unrealistic plans.
  • No measure to evaluate quality.
  • Poor, inconsistent project management discipline.
  • Duplication of efforts.

What is the most common problem in the world? ›

The 10 Biggest Issues in the World
  • Poverty. More than 70 percent of the people in the world own less than $10,000 — or roughly 3 percent of total wealth in the world. ...
  • Religious Conflict & War. ...
  • Political Polarization. ...
  • Government Accountability. ...
  • Education. ...
  • Food and Water. ...
  • Health in Developing Nations. ...
  • Credit Access.
21 Aug 2018

Can one business make a difference to a global problem? ›

But when organizations work together, change can happen. Business leaders know how to go about transforming their companies to seize opportunities or meet major challenges — even if that's easier said than done.

How do you face challenges in the company? ›

Tips for overcoming workplace challenges
  1. Remain positive.
  2. Admit when you need help. There are times when you will need to ask for help. ...
  3. Look at the challenge from all sides. ...
  4. Know when to delegate. ...
  5. Set small goals. ...
  6. Job search challenges. ...
  7. New hire challenges. ...
  8. Challenges after receiving a promotion.

What are strategic challenges in business? ›

The term “strategic challenges” refers to those pressures that exert a decisive influence on an organization's likelihood of future success. These challenges frequently are driven by an organization's future competitive position relative to other providers of similar products.

What is the biggest challenge for most businesses online? ›

What's the Biggest Challenge for Most Businesses When Going Online? (1) Planning a Budget (2) Developing a Plan (3) Optimising a Website (4) Defining a Customer Base.

What are the top 3 challenges you face in operating your business? ›

Here are five of the most common challenges you may encounter.
  • Lack of Funds. Nothing can hold a business back like money problems. ...
  • Lack of Time. ...
  • Trouble Finding Good Employees. ...
  • Difficulties Balancing Growth and Quality. ...
  • Ineffective Web Presence. ...
  • How Can You Manage These Challenges?

How can a company expand globally? ›

THE TOP TEN DO'S
  1. Consider international trade as a growth opportunity.
  2. Investigate franchising for global expansion.
  3. Evaluate your competition's international business.
  4. Develop a master international marketing plan.
  5. Dedicate personnel, a budget, and appropriate procedures.

Why do many businesses avoid doing business globally? ›

Why do many small businesses avoid doing business globally? Financing is often difficult to find. Many people don't know how to get started and do not understand the cultural differences in foreign markets. The bureaucratic red tape is often overwhelming.

What are the things a company should consider when going into a global marketing? ›

5 Factors You Must Consider While Your Company is Entering to a New Market
  • Economic Factors: Not all countries will be attractive for all companies. ...
  • Social and Cultural Factors: ...
  • Political and Legal Factors: ...
  • Market Attractiveness: ...
  • Capability of the Company:

Why is it important to overcome challenges? ›

Facing challenges and navigating one's way through them builds resilience capacity. Knowing that one can overcome obstacles, learn from struggles and benefit from mistakes lays a solid foundation for success in later life.

How do you deal with challenges interview question? ›

Key Takeaways
  1. Focus on process over results. The outcome is important, but so too is how you arrived at it.
  2. Opt for relevant challenges. When possible, aim to share a situation that shows off a learned skill that will benefit the company you're interviewing with.
  3. Describe the challenge quickly.

What is often a challenge to globalization brands? ›

One of the biggest challenges the globalizing brands face is to manage the multipoint competition. When brands enter new national markets, they invariably have to compete with many of the local market leaders and regional brands that are firmly entrenched with the institutions and infrastructures of that market.

What are main problems of international business? ›

Communication difficulties and cultural differences. Political risks. Supply chain complexity and risks of labor exploitation. Worldwide environmental issues.

How can global sustainability improve? ›

Universalize access to basic services such as water, sanitation and sustainable energy. Support the generation of development opportunities through inclusive education and decent work. Foster innovation and resilient infrastructure, creating communities and cities able to produce and consume sustainably.

What are the reasons why global development is hard to achieve? ›

7 Issues Affecting the Progress of Global Development
  • Lack of Feedback and Data. ...
  • Fake It Till You Make It. ...
  • Short-Term Thinking. ...
  • Overemphasis on the New and Shiny. ...
  • Organizational Structure. ...
  • Bureaucratic Inertia. ...
  • Destructive Competition.

How can the challenges of sustainable development be overcome? ›

This is Expert Verified Answer
  1. Measures for overcoming the challenges of Sustainable development goals are as follows:
  2. Technology:
  3. Reduce, Reuse, and Recycle:
  4. Improving Quality of Life:
  5. Promoting Environmental Education and Awareness:
  6. Resource Utilization:
18 Jan 2021

What are the changing trends and challenges of global business? ›

The Global Trends are: Empowering the Workforce: Increasing productivity in the digital workplace. Smarter Business: Innovating in the as-a-service economy. Digitalisation and Disruption: Competing in the Gigabit Society.

What are the challenges in global marketing? ›

What are the biggest challenges facing global marketers?
  • Global vs local teams. The bigger the brand, the more links in the chain. ...
  • Reaching local customers. ...
  • Measure, report and improve. ...
  • Handle creative development. ...
  • Understand customer wants and needs. ...
  • Digital and social performance. ...
  • Use of technology.

What is often a challenge to globalization brands? ›

One of the biggest challenges the globalizing brands face is to manage the multipoint competition. When brands enter new national markets, they invariably have to compete with many of the local market leaders and regional brands that are firmly entrenched with the institutions and infrastructures of that market.

What are the challenges of international trade? ›

To be specific, there are seven major challenges to global trade and investment the world is facing now.
  • Economic Warfare. ...
  • Geo-politicization. ...
  • State Capitalism. ...
  • Lack of Leadership. ...
  • Power Distribution. ...
  • Weaker Underdogs. ...
  • Price Fluctuations of Natural Resources.

What are five global business trends? ›

Here we look at the 5 biggest global trends: Focus on our environment, economic power shifts, growing divergence and polarization, shifting demographics, and social, cultural and workplace shifts.

What is the current global business environment? ›

The global business environment can be defined as the environment in different sovereign countries, with factors exogenous to the home environment of the organization, influencing decision making on resource use and capabilities.

What are the factors causing globalization of business? ›

Some of the most important globalisation drivers are outlined below.
  • Containerisation. ...
  • Technological change. ...
  • Economies of scale. ...
  • Differences in tax systems. ...
  • Less protectionism. ...
  • Growth Strategies of Transnational and Multinational Companies.

What is one of the biggest challenges when companies are committed to sustainability? ›

One of the biggest challenges that the companies are committed to sustainability faces are; Operations are impacted the most due to a reduction in procurement. The surrounding community needs to understand the environmental impact of the changes.

How can international business overcome challenges? ›

5 tips to overcome barriers to international business growth
  • 1 - Harnessing local market expertise. Moving into a new market requires local knowledge. ...
  • 2 - Cultivating partnerships in the region. ...
  • 3 - Navigating new legislation. ...
  • 4 - Managing expectations. ...
  • 5 - Cross-border knowledge sharing.
11 Apr 2018

What are the biggest challenges in marketing today? ›

10 common marketing challenges
  • Recruiting talent. ...
  • Maintaining a sufficient budget. ...
  • Generating leads. ...
  • Finding the right tools. ...
  • Being risk-averse. ...
  • Moving into new markets. ...
  • Retaining customers. ...
  • Retaining and training staff.
8 Oct 2021

Why is globalization a challenge? ›

Globalization presents challenges for multinational corporations in terms of capital investment and leadership. Setting up a business in a new country, especially a developing country, requires substantial upfront capital. The needed infrastructure may not be in place.

What is globalization in your own words? ›

Globalization is the word used to describe the growing interdependence of the world's economies, cultures, and populations, brought about by cross-border trade in goods and services, technology, and flows of investment, people, and information.

Why is globalization important? ›

Globalization has benefits that cover many different areas. It reciprocally developed economies all over the world and increased cultural exchanges. It also allowed financial exchanges between companies, changing the paradigm of work. Many people are nowadays citizens of the world.

What are the current challenges? ›

What are the current major issues in India?
  • Corruption. The most widely spread endemic in India is corruption, which must be handled quickly and wisely. ...
  • Illiteracy. The percentage of illiteracy in India is alarming. ...
  • Education System. ...
  • Basic Sanitation. ...
  • Healthcare System. ...
  • Poverty. ...
  • Pollution. ...
  • Women's Safety.
18 Apr 2022

Why do many businesses avoid doing business globally? ›

Why do many small businesses avoid doing business globally? Financing is often difficult to find. Many people don't know how to get started and do not understand the cultural differences in foreign markets. The bureaucratic red tape is often overwhelming.

Why is global governance important? ›

The goal of global governance, roughly defined, is to provide global public goods, particularly peace and security, justice and mediation systems for conflict, functioning markets and unified standards for trade and industry.

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