The World Is Not Flat: The Changing Role of Finance in ... · The Changing Role of Finance in Today’s Global Economy 3 Far from Flat In 2005, New York Times columnist Thomas Friedman

The Changing Role of Finance in Today’s Global Economy

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The World Is Not Flat:


The World Is Not Flat: The changing Role of Finance in Today’s Global EconomyThe World Is Not Flat

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Introduction

It’s an increasingly complex world. Economic growth rates vary widely from country to country, as do consumer preferences, competitive landscapes, regulatory regimes and infrastructure maturity.

Not only is the world complex, it’s unpredictable as well. As many businesses learned in the wake of the Japanese earthquake and tsunami, supply chains and customer bases have never been more global, and more prone to be affected by events on the other side of the world.

As the function tasked with allocating funding for growth and driving expense management, finance is central to the task of successfully navigating the global business environment. Yet today’s finance functions may not meet the demands of this changing role. What is required is a new generation of finance: Chief Financial Officers (CFOs) must transform their functions to support strong,

flexible and scalable global operating models that allow organizations to find advantage and growth in the midst of volatility and uncertainty.

As we describe in the pages that follow, making that transformation requires a fundamental shift in perspective, a commitment to global growth supported by the next generation of finance capabilities and a renewed focus on four key areas: balanced focus on cost control and growth; repeatable acquisition integration capability; performance management that adapts to changing market conditions; and liberating the finance professional.

The World Is Not Flat


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Far from Flat

In 2005, New York Times columnist Thomas Friedman published a book entitled The World is Flat. Friedman’s central thesis: Due to technological and economic shifts, the global competitive playing field has been leveled1.He was partly right. Globalization is an unstoppable trend, and it is reshaping the world of commerce. Today’s supply chains stretch from Dalian to Des Moines, retailers sell goods from Moscow to Manila, and CFOs from Santiago to Stockholm are trying to analyze profitability across a host of global markets.

However, from the perspective of the C-suite—and in particular, of CFOs—the world is not even close to being flat. Divergent economic growth rates, distinctive consumer preferences, varied competitive environments, and different currencies, cultures, tax regimes and regulations require strategies, management processes

and operating models that can adapt to diverse and volatile market environments. Furthermore, the degree to which organizations now are connected to the rest of the world is demanding new approaches to management—particularly in the finance function.

Consider first the heightened volatility and economic diversity with which finance leaders now must contend. (See Figure 1.) According to Accenture’s 2011 High Performance Finance Study, permanent volatility is one of the major issues finance executives face today—and they expect it to continue for the foreseeable future.

Organizations also must adapt to a much more diverse marketplace. Instead of focusing on the relatively affluent markets in North America and Western Europe that have driven global economic growth for half a century, today organizations must deliver profitable growth across a broad range of markets with very different requirements for success. For instance, a consumer products company wanting to do business in India may have to work with hundreds of thousands of small,

independent retailers to reach potential customers across the country. While in the U.S., a broad market footprint could be achieved by working with five or less very large retailers2. Those seeking growth in the hot emerging markets of China, Brazil and India have to navigate through economies that are ranked 91, 126 and 132 respectively by the World Bank in terms of ease of doing business3.

Success depends upon navigating the diversity these companies encounter: McDonald’s, for example, offers no beef burgers in India, and replaces the bun with pita bread in Greece. Heinz CEO Bill Johnson commented on the failure by some of Heinz’s competitors to adapt to different markets: “They’ve rushed in with Western brands, Western package sizes, Western pricing, without understanding the nuances of the markets4.”

Conversely, by adapting to local market conditions—offering ketchup made from bananas in the Philippines, for instance—Heinz expects to see emerging sales grow from 20 percent of sales in 2011 to 30 percent in 20155.

Figure 1

Complexities companies face as they grow their market footprint

Geographical & Cultural DiversityAs the absolute number of countries a company operates in increases, the demands it puts on a company’s operations change dramatically

Variables

• Languages • Supply Chain Dispersion • Geographic Distance • Talent • Operations

Diversity of Market ConditionsComplexity of market footprint is dependent on the extent to which operations stretch across macroeconomic groupings (i.e., emerging and developed)

Variables

• Economic Growth • Country Infrastructure • Regulatory Environment • Taxation Policies

Diversity of Business Models EmployedA company’s footprint complexity depends on the extent to which the countries it operates in have different customer, product, channel and earnings environments

Variables

• Customer Behavior • Channel & Supply Chain Environment • Earnings/Pricing Environment • Product Demand



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Engagement is no longer optionalEngagement with new markets is no longer a choice for many companies, with globalization bringing events and trends originating on the other side of the world much closer to home. Whether volcanic ash disrupting European airspace in 2010, the Japanese earthquake of 2011, or flooding in Thailand in 2012, commercial impacts now reach far beyond their origins. A consumer in North America buying a European car in the summer of 2011 was quite likely, for example, to find that certain computerized vehicle features were not fully enabled due to supply interruptions related to the Japanese earthquake. While it was not surprising that car production in Japan declined by 65 percent following the quake, the fact that production shutdowns also occurred in the U.S., U.K. and many other countries illustrates the globally connected nature of today’s supply chains6.

One reason for this heightened degree of global interconnectedness is companies’ intensified dependence on new markets for growth. Near market saturation and relatively slow economic growth in the home markets of most large global corporations, combined with rising income levels and a growing middle class in other parts of the world, are driving a fundamental realignment of the world economic order.

In fact, according to the Organization for Economic Co-Operation and Development (OECD), in 2009 spending by middle-class households totaled $21.3 trillion, 64 percent of which was in North America and Western Europe. By 2030, the total is projected to grow to $55.7 trillion, with only 30 percent in these mature markets. In contrast, OECD projects that emerging-market spending will grow more than eightfold7.

In addition, companies now have more global economic dependency across all elements of the business model—from sourcing, to manufacturing, logistics, financing, sales, marketing, R&D, compliance, risk management, and talent management—even if they don’t think of themselves as “global.” Adding fuel to the fire is technology, which in recent decades has dissolved once impermeable barriers to cross-border commerce.

Yet Accenture’s report, Fast Forward to Growth: Seizing Opportunities in High-Growth Markets, published in January 2012 uncovered a paradox: While the study affirmed that companies see continued growth coming from emerging economies, it also showed they feel that the window of opportunity to participate in these markets may be closing. Indeed, seventy-three percent of respondents to our survey said they must accelerate their efforts— or believe they already have missed their chance—to build satisfactory market share in these high-growth markets8.

Pulling ahead in the midst of volatilityWho will be the high performers in the next phase of global competition? Accenture believes it will be organizations that can use transformations in today’s business environment to position themselves for growth tomorrow. In particular, success will come to companies that engage in global growth strategies with focused local market execution, delivering products and services that directly meet the needs of each market’s customers. Balancing global aspirations with local execution will require organizations to develop an agile operating model, anticipating and capturing growth opportunities and rapidly adjusting tactics in response to market events.

Such an operating model must flex in response to volatility and unexpected market disruptions. And at the heart of defining and operating such a model is an agile finance function delivering insightful analytics, analyzing risk, identifying growth opportunities and optimizing cash and capital allocation in a constantly changing environment.

Finance will play a key role for these market leaders, helping them achieve profitable growth and manage expenses in the face of global volatility. The changes are profound. Traditionally, to support global growth, companies established a local presence in a target market and developed a country-centric business model with a full complement of business support services. However, this is both expensive and inefficient. In the past 20 years, many companies have moved to a more regional model, with financial shared services centers providing middle- and back-office support to business units in multiple countries. Yet this model still links costs to the economic fate of a particular region—exposing global companies to volatility-related risks and limiting scalability and responsiveness.

In contrast, high-performing finance organizations now are moving to a truly global and cross-functional model of Integrated Business Services (IBS). (See Figure 2.) IBS organizations leverage the geographic footprint of the overall organization and its strategic partners (outsource providers) to deliver consistent,


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high-quality services at a competitive cost while still maintaining proximity to the customer. This allows resources to be rapidly redeployed to match the changing revenue profile of the business. Instead of having a European center carrying excess capacity while an Asian center struggles to cope with rapid growth, such companies can balance their workload more effectively across the global business.

Tomorrow’s leaders also will focus on making finance more effective. Accenture’s 2011 High Performance Finance Study9 reveals that much work remains to be done to improve the effectiveness of the finance function and fully capture the business value that it can deliver (Exhibit 1). Major gaps remain between the perceived importance of key finance organization capabilities and the maturity of those capabilities, including overall function effectiveness, workforce effectiveness, risk management, the ability to drive enterprise performance, finance function efficiency, and preparing for growth.

Figure 2

From a regional shared services to an Integrated Business Services delivery model

Operating Units/Regions

Regional Shared Services

Regional Support Centers

N/A EMEA APAC

Regional Support Centers

Global Hub

From: Regional Shared Services To: Integrated Business Services

Shared Services Front Office

Operating Units/Regions

Decision Support

Standard Reporting and Analytics

Local Support / Specialization

Transaction Processing and Language Support

Global Hub

Exhibit 1

Top organizational capabilities gaps

87%

71%

84%

68%

84%

67%

83%

71%

82%

70%

79%

67%

12% 12%

12%17%16%

16%

Capability Gaps

Finance Function Effectiveness

Workforce Effectiveness

Risk Management

Driving Enterprise Performance

Finance Function Efficiency

Preparing For Growth

Importance Satisfaction

Source: Accenture 2011 High Performance Finance Study


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The next generation of financeTo help the larger organization win in a dynamic global marketplace, finance must embrace a new scope focused on growth and operational excellence, and it must generate value well beyond the walls of the finance department.

At a minimum, finance must help provide assurance regarding the integrity and accuracy of accounting statements, while ensuring compliance with diverse global financial regulations, including statutory reporting, tax rules, and risk management requirements. Of course, finance also must provide efficient management of cash and capital resources and deliver high-quality finance services at optimal cost.

True market leadership, however, will require a new generation of finance functions that will drive the development of a robust, flexible and scalable global operating model, which, in turn, can adapt to a volatile environment and changing global business patterns. How can one function do all that?

For starters, finance can empower the business to manage persistent revenue volatility across different lines of business and markets, and support a more flexible cost structure in which costs can vary with business activity levels. For example, in IT, the use of outsourcing, the cloud and software-as-a-service can more directly align expenses with the level of business activity, supporting a pay-per-use model. For Human Resources, the right blend of full-time, part-time, temporary or contract labor and third-party sourcing can more closely align labor costs with activity levels. In the supply chain, the combination of open-item purchasing and selective hedging can mitigate volatility in purchased costs.

As Table 1 shows, opportunities abound for finance to generate such value across the enterprise, fostering greater alignment between expenses and business activity.

Just as important, finance can play an important role in boosting the organization’s responsiveness to changing global conditions and rapidly shifting opportunities. In partnership with other functional leaders in areas such as HR, IT, and supply chain, finance executives can establish a global IBS organization that balances cost-efficient, high-quality service delivery with the specialized support required to meet local market and business needs.

Activity Less Variable More Variable

Sourcing Insource Outsource

Software Own Software-as-a-service

Facilities/Equipment Own Lease/Rent

Global expansion Build/Buy Partner

Manufacturing Own Contract

Specialist expertise Build Buy

Commodity pricing Forward contract/Hedge Spot/Option

Purchasing Fixed contract Open item

Insurance Purchase insurance Self-insure

Debt funding Fixed Floating

Equity Preferred Common

Distribution/Retail Company-owned Franchised

Staffing Employ Contract

Specialist skills In-house Contract

Organization Centralized Decentralized

Table 1:

Boosting alignment between expenses and business activity levels


Balanced focus on cost control and growthIn recent years, the sole aim of many organizations has been surviving “The Great Recession.” For finance, this has translated into a duel focus on cost control and cash conservation. However, as the global economy recovers—albeit at very different rates—this focus is shifting to integrating the search for growth opportunities with continued cost and cash discipline.

For CFOs, the challenges of effectively balancing cost control with a growth agenda on a global basis are complex, and require answers to many different questions. CFOs must consider which markets to invest in, and how to allocate resources, manage risk, and measure and manage performance. They also must devise ways of effectively translating strategies into local market action plans, and organize and staff the finance function. These challenges are in addition to the need for CFOs to help the business determine where and how to sell its products and services, where to make them, and where to source inputs.

The key insight for many leaders emerging from the recent downturn and looking to execute a successful global growth strategy is that the discussion of the need to control costs or invest in growth is not an “either/or” discussion but an “and” discussion. Success requires that companies sustain a globally efficient cost structure regardless of where growth occurs. Discipline around cost optimization not only provides funds and resources to invest in growth but also ensures that such growth is profitable. Finance leaders play a crucial role in establishing a disciplined approach to cost containment while also ensuring that growth-oriented investments receive appropriate scrutiny throughout their lifecycle. One thing major financial services companies can do is conduct quarterly reviews of all projects and investments. The objective is not just to measure performance against time and budget metrics but also to ensure that the original business rationale for the investment remains valid. Each investment has clearly defined “criteria for abandonment” that state the circumstances under which the investment would no longer make sense. Such disciplined evaluation of investments can be a valuable tool for finance to deploy in ensuring that growth-oriented investments remain relevant.

Four Key Focus Areas

Positioning finance to add such value demands excellence in four areas: a balanced focus on cost control and growth, a repeatable acquisition integration capability, performance management processes that adapt to changing market conditions, and deploying finance talent for maximum value by liberating finance professionals from low- value activities.


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Repeatable acquisition integration capabilityFor many companies, a key element of global growth has been making targeted acquisitions. According to Accenture’s research on The Role of Finance in Successful Serial M&A, the most commonly cited reasons for mergers & acquisitions (M&As) among respondents was to gain market share and drive top-line growth. This can happen in one of three ways. The first is by increasing geographic reach by establishing a presence in new markets. For example, in 2011 brewer Molson-Coors formed a joint venture and took controlling interest in Cobra Beer of India and acquired StarBev in Eastern Europe in 2012 as part of its global growth strategy.

The second approach is extending the product or service portfolio via acquisition. One example is Kellogg’s acquisition of Pringles from Procter & Gamble, and another is Procter & Gamble’s own acquisitions in the health food (New Chapter Inc.) and pet food (Natura Pet Products) segments.

Companies also can spur global growth by using acquisitions to gain innovative capabilities. Technology leaders such as Apple, Google and Cisco have done this repeatedly. For example, Apple acquired the face recognition technology used in the iPhone, as well as voice recognition software used in the iPhone 4S.

Unfortunately, however, M&As do not enjoy a solid track record of driving such value. Thus, leading companies are developing more systematic and repeatable acquisition integration capabilities that can aid the realization of projected synergies. Such capabilities also can help companies deal with the many cultural and behavioral challenges involved in combining two different organizations, which often are operating in very different markets across the globe.

Finance teams can positively impact M&A success in a number of ways. They can conduct early-stage research on the relative attractiveness of new markets and maintain a continuously updated acquisition assessment on a list of possible targets in those markets. Experienced finance professionals also can provide disciplined due diligence, and they can support a repeatable acquisition integration capability that spans pre-close planning, day-one operations, and long-term synergy realization. Accenture’s work with leading companies and research in this area has revealed that a steadfast focus on target realization is one of five critical integration enablers that companies’ finance functions should focus on when planning and executing their next merger or acquisition.



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Performance management that adapts to changing market conditionsAs alluded to earlier, one of the challenges of thriving in a more global and volatile environment is managing performance across a broad range of markets. To help companies address this challenge, finance must implement and monitor metrics, processes and tools that recognize the differences between each geography and segment.

Figure 3 provides an example of the different characteristics of mature, fast-growth, and emerging markets, and the possible implications in terms of the drivers of value, growth, innovation and cost. For example, companies can drive growth in mature markets via innovative new products that customers value and for which they will pay. Conversely, in an emerging market it may not matter how great the product is or how much is invested in marketing if the per capita income of the population is too low. In this situation, growth expectations will be governed by the rate of income creation.

Finance can help companies manage these dynamics by matching performance measures to the relative maturity of products and services in each market. The function must ensure performance measurement reflects the fact that growth from well-established products is more likely to come from more frequent purchases by existing customers than by the acquisition of new customers. However, the same product being launched into a new market must be evaluated using different metrics. By considering the combination of product maturity and market maturity, finance teams can identify the most appropriate business drivers and metrics, and select the right analytical tools to evaluate performance.

Finance also can help translate strategy into local action. This means orchestrating a performance management process that addresses uncertainty and volatility through the use of scenario planning and sensitivity analysis, which allows business managers to have confidence in their ability to make rapid decisions as opportunities and threats present themselves. By anticipating uncertainty during the planning process, finance can provide a platform for modeling responses ahead of

time, thereby increasing the speed and confidence of decision-making (to learn more, see Managing the Unthinkable—Scenario-Based Enterprise Performance Management)10.

Another key challenge of global growth—and another opportunity for finance to provide differentiating value—involves the increasing demands being made upon traditional operating models. For instance, finance must help global companies redeploy resources to the areas of greatest opportunity, attract and retain talented professionals who combine local market knowledge with exceptional analytical skills, and develop a scalable back-office infrastructure that can adapt to rapidly changing business patterns.

Finally, companies can support global growth by deploying a technology architecture that can meet the diverse needs of each market while also addressing variability in basic infrastructure (such as reliable electric power and communications) and security (both physical and logical). The powers of emerging technologies such as cloud computing and mobility services to transform the economics of IT are both potent and growing.

Figure 3

Diverse needs of global markets

Type Mature Fast Growth Emerging

Markets North America Western Europe Japan Australia New Zealand

Brazil Russia India China South Africa

South East Asia Eastern Europe Latin America Africa

Characteristics Slow growth Competitive Multi-channel Open markets Increasing regulation

Fast growth Emerging local competition Variable access Weak intellectual property protection

Volatile Immature Fragmented Small but growing middle class Lack of political stability

Value Margin/Cash flow Sales/Share Opportunistic

Growth Marketing/Innovation Market Access/Channel Income per capita

Innovation Technology/Feature/Function “Glocalization” Redeploy

Cost Driver Minimization Scalable Minimization


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Liberating the finance professionalIn the past 20 years, the combined effects of process simplification, automation, shared services, business process outsourcing and best practice deployment have fueled dramatic improvements in finance function efficiency. In fact, about ten years ago the average company spent around 2 percent of sales on finance, today the number is closer to 1 percent11.

Yet in some cases, cost cutting may have been taken too far. One of the findings of Accenture’s 2011 High Performance Study was that organizations reporting the smallest finance budget (in terms of percentage of overall company revenue or operating budget, in the case of public-sector entities) also reported having less-sophisticated finance capabilities—suggesting it is possible to reduce costs too much, to the point at which it impedes the development and maintenance of key finance capabilities.

So while the cost efficiency of the finance function has improved, unfortunately the same cannot be said for the productivity of the finance professional. Far too much professional staff time still is consumed by mundane tasks such as collecting and consolidating data, organizing it into spreadsheets, creating formulas to analyze it, and formatting the output into reports for business management. In the typical finance organization, we can assume that such tasks can consume about 50 percent or more of professional staff time.

The effects of such inefficiency are twofold. Developing useful reports and insightful analysis is time-consuming, prone to error and limited by the truly productive time finance professionals have to spend on the higher value tasks. Minimizing mundane tasks will enable finance professionals to spend more time delivering such valuable reports and analyses. Secondly, because the best finance professionals will migrate to those high-performing organizations that equip their finance staffs with information, tools, technology and time to deliver real value to the business, organizations in which productivity remains low will find it difficult to attract and retain talent.

In today’s global marketplace, this is ineffective. Instead, finance must supply the high-quality decision support required to succeed in fast-moving emerging markets, support effective local and global risk management, and deliver the timely reporting needed by managers in different markets to be successful. The behaviors and capabilities required of finance professionals (Figure 4) focus on those skills that support fast confident and agile decision-making to capture upside growth and mitigate risk.

The payback from improving finance staff productivity can be significant. Consider, for example, a $25 billion global consumer products company with 2,500 finance staff—a roughly average headcount for an organization of that size. Of that staff, we can assume around 60 percent are professionals with accounting or business qualifications, and approximately 75 percent of their time will be spent on data collection, consolidation and reporting tasks.

In this hypothetical company, the equivalent of 750 full-time employees perform strictly mundane tasks. Assuming a conservative fully loaded cost of $100,000 per year per employee, that adds up to $75 million annually. It follows that simply reducing the time spent on low-value tasks to 25 percent can generate productivity improvements worth $37.5 million. Typically, such improvements can be realized through a combination of cost reductions and investments in high-value analytics and decision support.

Capturing these opportunities requires that finance organizations finish the job that was started with the first benchmark and reengineering projects. Three steps are essential to complete the transformation, starting with gaining leadership commitment to build a talented and scalable finance function that attracts, develops and retains high-caliber finance professionals capable of delivering insightful guidance and advice to business leaders. Companies also must focus their enterprise performance management processes (strategic planning, operational planning, budgeting, reporting and forecasting) on those elements that drive growth at acceptable risk. Finally, it’s critical to provide finance professionals with the time and tools (e.g., reporting, analytics, risk management, mobility) to do the job effectively.


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Average World Class

Measures of Success

• Business partner satisfaction • Opportunities/risks identified

• High ratio of high to low value work • Offers accepted rate/high potential retention • Spans of control/layers of management • Unplanned employee turnover • Engaged and aligned staff

• Finance cost as a % of revenue • Planning cycle time • Proportion of needs being met • Control failures by type • Productivity per Full Time Equivalent, cost per transaction • Completeness of technology footprint

Attributes Business Value• High partner satisfaction • Insightful analytics

Talent & Organization• Leveraged professional staff • Attracts/retains the best talent • Flat organization • High associate satisfaction • Effective communication

Operational Excellence

Business Value

Talent & Organization

Operational Excellence• Low finance operating costs • Dynamic integrated planning • Quality, accessible information • Effective controls • Efficient transaction processing • Best in class technology

Excellence Scale

Figure 4

Behaviors and capabilities needed for global excellence

Figure 5

The new measures of success for finance

Behaviors• Market focused • Analytic • Tolerant of ambiguity • Collaborative • Questioning • Decisive

CapabilitiesThe Basics • Transaction processing • Consolidation • Reconciliation • Reporting • Control • Compliance

The Differentiators • Insight • Analytics • Collaboration • External focus • Risk awareness • Agility

The Global Finance Organization

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The World Is Not Flat: The changing Role of Finance in Today’s Global Economy

Any corporate leader navigating stormy and unpredictable global markets would agree that the demands on finance have changed. Today, finance must support flexibility, scalability, and responsiveness to a multiplicity of global opportunities and challenges. It must empower the organization to deliver products and services that delight each market’s customers. And it must support an agile operating model that rapidly adjusts to unforeseen developments.

Conclusion

Finance can play this role, but to do so CFOs must drive excellence along several critical dimensions: The balance between cost control and growth, building repeatable integration capabilities that support effective M&A, implementing robust performance management, and unlocking the latent potential of finance talent.

These are challenging goals that can help define new measures of success for finance. (See Figure 5.) However, by striving to build the next generation of finance, CFOs can elevate the contribution their function makes toward growth, value, and high performance.


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CFO Checklist for Global GrowthThe following key questions can help CFOs ensure they are placing the right bets on global growth opportunities:

Is the opportunity real?

• Is there real demand for our products and services?

• Can potential customers pay?

• Can we protect our intellectual property?

Can we get our products/services to market in a cost effective manner?

• Can we price our products competitively when tariffs and duties are taken into account?

• Are the logistics practical?

• Can we gain access to the primary channels for reaching the customer?

• Can we support the customer in terms of language, service, etc.?

• Can we build an economic local operating model to capture the market opportunity?

Can we use our money profitably?

• Do local exchange controls permit the free flow of funds?

• How do we optimize our tax position?

• Can we repatriate funds to our home market?

• Are there opportunities to use the funds locally?



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businesses had total revenues of $62 billion, of which 18 percent ($11 billion) came from emerging markets. By 2011, revenues had grown by 50 percent to $93 billion, and emerging market revenues had more than tripled to $34 billion, or 37 percent of the total13. Likewise, at Unilever emerging market growth has delivered a compound annual growth rate of 9 percent over the last 20 years. Unilever’s view of emerging markets extends beyond the commonly defined “BRIC” markets of Brazil, Russia, India and China to include markets such as Turkey, Pakistan, Poland, Vietnam and Indonesia14.

In March 2012, Chrysler Group announced plans for a new plant to be built just outside St. Petersburg, Russia for its Jeep brand, with capacity for 120,000 vehicles annually. The move marked a significant investment in global growth, especially considering that 86 percent of the company’s 2011 sales were in the United States and Canada15. And, as shown in Figure 6, several other leading companies exhibit a similar shift toward new global markets.

The consistent theme from all these global players: The most successful companies will be those that combine innovation with global growth.

Company Growth Aspirations

Sony 40% sales growth from BRIC markets16

Ford 70% of growth from Asia Pacific over 10 years17

Philips 40% of sales from emerging markets by 201518

Figure 6

Global growth aspirations of leading companies

Global growth strategiesDuring the first quarter of 2012, Accenture completed research on the global growth strategies of 50 large global companies with revenues in excess of $25 billion. Forty percent were in North America, 36 percent were in Europe, and 24 percent were based in Asia. In terms of industries, 24 percent were in communications and high technology; 22 percent were in energy, chemicals and natural resources; 16 percent each were in automotive, consumer products and retail, and other; and 6 percent were in life sciences.

The study revealed a clear increase in focus on growth expectations and strategies in emerging markets. Of the 50 companies surveyed, 15 (30 percent) explicitly discussed differentiated growth strategies for emerging markets outside of North America, Western Europe, Japan and Australia. Twenty-eight percent of the companies also communicated specific growth targets for emerging markets to investors12.

Reflecting these findings, General Electric (GE) in March of 2012 held a separate investor meeting specifically to discuss its global growth aspirations for markets including Latin America, China, Middle East, Africa, and Australia. In 2001, GE’s industrial

The high performance finance reading List• 2011 High Performance Finance Study.

Accenture, November 2011. Access at: http://www.accenture.com/us-en/Pages/insight-finance-study-delivering-value-complex-world.aspx

• Fast Forward to Growth: Seizing Opportunities in High-Growth Markets. Accenture, January 2012. Access at: http://www.accenture.com/us-en/Pages/insight-fast-forward-growth-seizing-opportunities-high-growth-markets.aspx

• Integrated Business Services: Taking Shared Services to New Heights of High Performance. Accenture, September 2011. Access at: http://www.accenture.com/us-en/Pages/insight-integrated-business-services.aspx

• Managing the Unthinkable—Scenario-Based Enterprise Performance Management (EPM). Accenture, April 2012. Access at: http://www.accenture.com/us-en/Pages/insight-managing-unthinkable-scenario-based-enterprise-performance-management.aspx

• Starting with the End in Sight: Integrating Finance After a Merger. Accenture, May 2012. Access at: http://www.accenture.com/us-en/Pages/insight-starting-end-sight-integrating-finance-after-merger.aspx

• Best Practices in Planning and Performance Management, David A.J. Axson, Wiley 2010


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1 Friedman, Thomas L., The World Is Flat, Farrar, Straus and Giroux (New York 2005), p.82 “World Retail Data and Statistics 2008/2009, 5th Edition”, Euromonitor International, Table 2.3. Ycharts, US Retail Sales, accessed at: http://ycharts.com/indicators/

retail_sales. Market Report, “BMI India Retail Report Q4 2010”, accessed at: Market Report, “BMI India Retail Report Q4 2010”, published | PRLog. “Meet the 15 biggest Retailers in America”, Business Insider – Money Game, July 5, 2011, accessed at: http://www.businessinsider.com/here-are-the-top-15-retailers-2011-7?op=1

3 The World Bank and the International Finance Corporation, Doing Business in a more transparent world, 2012, Accessed on May 21, 2012 at: http://www.doingbusiness.org/rankings

4 Johnson, Bill, “The CEO of Heinz on Powering Growth in Emerging Markets,” Harvard Business Review, October 2011, p.505 Ibid6 Reuters (Detroit), March 21, 2011, Japan lost auto output to hit 338,000 Friday: HIS. Accessed on May 21, 2012 at: http://www.reuters.com/article/2011/03/21/

us-japan-quake-ihs-idUSTRE72K652201103217 Kharas, Homi, The Emerging Middle Class in Developing Countries, OECD Development Center, January 20108 Fast Forward to Growth: Seeing Opportunities in High-Growth Markets. Accenture, January 2012. Accessed at: http://www.accenture.com/us-en/Pages/

insight-fast-forward-growth-seizing-opportunities-high-growth-markets.aspx9 Accenture 2011 High Performance Finance Study: Delivering Value in a Complex World. Accenture, November 2011. Accessed at: http://www.accenture.com/us-en/

Pages/insight-finance-study-delivering-value-complex-world.aspx10 Managing the Unthinkable-Scenario-Based Enterprise Performance Management (EPM). Accenture, April 2012. Accessed at: http://www.accenture.com/us-en/

Pages/insight-managing-unthinkable-scenario-based-enterprise-performance-management.aspx11 “Financial fitness: benchmark the total cost of your function”, Insights, The e-magazine for Management Accountants, Chartered Institute of Management

Accountants. Accessed at: http://www.cimaglobal.com/Thought-leadership/Newsletters/Insight-e-magazine/Insight-Archive/ Financial-fitness-benchmark-the-total-cost-of-your-function/

12 Research and analysis of a select group of global companies completed in April 2012 by Accenture Research13 GE Global Growth and Operations, Investor Meeting, March 7, 201214 Unilever 2011 Investor Presentation and 2012 CAGE Presentation15 Bennett, Jeff, Jeep Readies Global Push, Russian-Built ‘Dzhip’ Takes Chrysler’s Warhorse to New Customers. The Wall Street Journal, March 29, 2012.

Accessed on May 21, 2012 at: http://online.wsj.com/article/SB10001424052702303816504577307943936828580.html16 Sony 2011 Annual Report. Accessed on July 18, 2012 at: http://www.sony.net/SonyInfo/IR/financial/ar/2011/p07.html17 Dividend Monk, Ford Motor Company (F) Stock: Worth the Risk, February 13, 2012. Accessed on July 18 at: http://dividendmonk.com/

ford-motor-company-f-stock-worth-the-risk/18 Philips, Vision 2015 – Our Strategic Focus. Accessed on July 18, 2012 at: http://www.annualreport2010.philips.com/content_ar-2010/vision_2015.asp

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About the Author

David A. J. Axson

David is an Executive Director – Finance & Enterprise Performance, based in Cleveland, USA. David has more than 27 years of consulting, industry and entrepreneurial experience working with clients and enterprises in more than 40 countries. An accomplished author, David specializes in advising clients on the challenges of doing business in an uncertain and volatile global marketplace focusing on strategy, performance management, risk management and analytics and guiding them on their journey to high performance.

About Accenture Management Consulting, Finance & Enterprise Performance

Accenture is a leading provider of management consulting services worldwide. Drawing on the extensive experience of its 16,000 management consultants globally, Accenture Management Consulting works with companies and governments to achieve high performance by combining broad and deep industry knowledge with functional capabilities to provide services in Strategy, Analytics, Customer Relationship Management, Finance & Enterprise Performance, Operations, Risk Management, Sustainability, and Talent and Organization. Accenture Finance & Enterprise Performance consulting services help finance organizations maximize the value they create for their enterprises.

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

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Documents

The World Is Not Flat: The Changing Role of Finance in ... · The Changing Role of Finance in Today’s Global Economy 3 Far from Flat In 2005, New York Times columnist Thomas Friedman