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Success in a global marketplace requires a fine balance of two essential capabilities—a global approach to the business and a local view of the customer.
Leading retailers know and understand their customers exceptionally well. But when it comes to global retailing, the sheer diversity of customers can confuse the best of brands. Success in a global marketplace requires a fine balance of two essential capabilities—a global approach to the business and a local view of the customer. Winning companies view their organization as a single worldwide entity. They build standardized, integrated back-office operations to secure the economies of scale that can handle the complexities of selling in multiple markets. Even more importantly in such a customer facing industry, they take a view of the customer that leverages the core brand and offering in each local marketplace.
No longer just passive partners in a world economy dominated by the United States, Europe and Japan, countries like China, India and Brazil represent increasingly robust consumer markets. Emerging economies will account for more than half of global consumption by 2025, adjusted for differences in purchasing power. Emerging markets for many products and services already rival those of industrialized countries. Indeed, our research suggests that by 2010 China and India together will contain 123 million middle-class households, all of them potential consumers of the retail industry’s products and services.
Yet going global is also becoming more and more challenging. Rapidly emerging markets are home to nimble competitors that are getting better at copying and commoditizing innovations, as well as developing innovations of their own. Moreover, there’s fierce competition for talent and other resources. Not only are emerging market employers competing head-to-head with overseas multinationals for new recruits and experienced managers, they are also trying to lure home workforces that left when conditions were less promising than they are today. Retailers seeking to leverage new opportunities in multiple markets where the sources of competitive advantage are in constant flux must grapple with multiple risks.
Accenture research on high performance businesses reveals that international expansion is integral to the “relentless growth agenda” that distinguishes high performance in the retail industry. Our extensive experience of working with retailers that have gone global confirms that successful globalization can significantly boost revenues and eventually profitability as well. It can also help repel unwanted suitors.
Globally minded retailers have attacked new markets in different ways. What distinguishes the success stories in every case is a striking degree of mastery over two core and inter-related capabilities:
Successful companies will build a plan that mirrors their desire to be global into their corporate strategies. By striking just the right balance between a global view of the business and a local view of the customer, these companies can move swiftly and successfully into new markets. They become profitable more quickly and capture market share. What’s more, they exhibit just that combination of capabilities—simplicity on the inside and differentiation on the outside—that Accenture research suggests will underpin high performance in a multi-polar world.
Winning global retailers centralize management of non-core functions like planning, IT and procurement that drive standardization globally. They also maintain central control of the core brand, decentralizing customer-facing functions like customer insight, merchandizing, marketing and local product procurement.
These retailers ensure successful centralization by standardizing business processes to support operations globally. They support a common business process with a standardized IT platform, which allows them to manage the complexity of operating globally. There are different approaches to this process and much depends on cost effectiveness. However, as a general rule, globally optimized business processes and IT sustain global retailers’ ability to handle complexity. Equipped with a simplified global footprint in terms of systems, infrastructure and planning, they can tackle various challenges—success being contingent upon continually improving and updating both business processes and the operating model.
Simplicity of approach is also fundamental. The more customer-focused retailers become, the more complex their operating models. But it’s critically important to avoid creating working environments that are too complicated for individuals to handle. Everything, from structuring tasks and designing roles to creating a business model capable of accommodating new trading circumstances, must be clearly designed and easily understood. Most importantly, people must feel empowered to live up to their responsibilities: Responsibility and support must align with planning and accountability. And if employees in disparate geographies are to stay connected, organizations must maintain constantly open lines of communication.
It is time to go global if you have exhausted the growth potential of your home market (or are close to doing so), your domestic competitors are starting to expand abroad and foreign competitors are arriving on your home turf in sufficient numbers to pose a challenge.
Plainly, there is no single route to success for globally minded retailers. All successful companies, however, will have maintained the integrity of their core brand by combining a global view of the business with a local view of the customer. Their success, moreover, will reflect a strategic planning process that is fully aligned with their globalization goals and an operating model that is standardized, streamlined and globally integrated.
By making globalization integral to your strategic planning, standardizing and streamlining your operating model and being prepared to differentiate your face to the customer you too will be able to tackle the challenges of globalization successfully.
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