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Research digest
GLOBALISATION
Almost two-thirds of chief executives believe globalisation will have a positive impact on their organisations over the next three years, according to the 9th Annual Global CEO Survey by accountancy firm PricewaterhouseCoopers.
Serving existing customers and finding new ones – rather than cost-cutting – is the main aim of developed economy CEOs in expanding their operations abroad (78 per cent versus 48 per cent). The same percentage regard China as offering the most significant opportunities, and 64 per cent plan to do business there in the next three years, compared with 43 per cent for India.
Of those attracted by China, 62 per cent said they planned to form alliances with partners and 40 per cent intended to develop unique products for the Chinese market. This compared with a third each who expected to outsource manufacturing or support services to third parties, or relocate the same in-house activities there.
Overregulation was seen as the main barrier to globalisation, followed by trade protectionism, political instability and social issues. Terrorism and the anti-globalisation movement were of least concern (see chart, below).
Globalisation is also seen as the biggest contributor to increased complexity. Sixty-five per cent of the 1,400 CEOs in 45 countries surveyed agreed that extending operations to countries such as China, India, Russia and Brazil added significant complexity to their organisations.
www.pwc.com
MERGERS & ACQUISITIONS
Companies have a hugely exaggerated view of the value their M&A deals create for shareholders, according to research by KPMG International. Ninety-three per cent of those interviewed believed their deal had enhanced value, compared with only 31 per cent that objective assessment showed actually had. The remainder either had no impact or reduced value
(see chart, below)
.
Acquisitions were more likely to enhance value where synergy and performance improvement targets were met or exceeded, and vice-versa, said the report,
The Morning After
. Despite this, less than a third of firms said they had conducted a robust analysis of potential synergies prior to completion.
The complexity of merging two businesses, dealing with different cultures and integrating IT and reporting systems were the biggest challenges post-merger. Only one in five companies said they were well prepared to manage the cultural issues.
www.kpmg.com
CORPORATE SOCIAL RESPONSIBILITY
More than four out of five business executives (84 per cent) believe that large companies should contribute to “the public good”, rather than only generating the highest possible returns for investors (16 per cent), says McKinsey.
Sixty-eight per cent were positive about the contribution companies made in practice, with healthcare and pharmaceuticals regarded as the leading lights
(see chart, below)
. However, the global survey of over 4,000 executives in 116 countries found that only 8 per cent thought big firms championed social or environmental causes out of “genuine concern”. Most attributed involvement in corporate social responsibility (CSR) initiatives to a desire to boost their public image or profitability
When it came to anticipating social pressure or criticism of their business activities, only 3 per cent of respondents said their companies did a “good job”; almost half thought they had “substantial room for improvement”. Media exposure and lobbying were the most widely used tactics for managing CSR issues, but greater transparency and developing and implementing policies were regarded as more effective.
www.mckinseyquarterly.com
SUPPLY CHAIN MANAGEMENT
Companies are getting better at forecasting and fulfilling customer demand for their products, but most still have some way to go to synchronise this with the supply side of their operations, according to a study by IBM Business Consulting Services and
IndustryWeek
magazine.
Customer-facing practices such as continuous replenishment and shared real-time demand and inventory data were being used effectively by most of the US companies surveyed
(see chart, below)
. And the use of demand and inventory planning applications had grown by 9 per cent since 2003.
Two-thirds of the 650 respondents to the study,
Follow the Leaders
, reported a lead time of less than seven days for customer orders, compared with 55 per cent in 2003; while on-time delivery and stock turn rates also improved.
However, only a third of companies gave suppliers visibility of their demand and inventory data, and only 31 per cent took a collaborative approach to supply chain planning. Both are required to fully match supply and demand, says IBM.
The top three objectives of supply chain executives were increased profitability (75 per cent), reduced cost (52 per cent) and greater responsiveness (41 per cent).
www.ibm.com
PROCUREMENT STAFFING
World-class procurement functions have a much higher concentration of skilled staff than those in typical companies, according to research by the Hackett Group. Seventy-six per cent of employees in world-class functions are considered to be “professional” (against 58 per cent in the rest) and only 9 per cent “clerical” (against 24 per cent).
“Fully loaded” average wage rates are 41 per cent higher among the top performers ($98,557 versus $69,783), but because they employ half the number of staff, operating costs are 20 per cent lower overall. World-class functions also dedicate 74 per cent more hours to training and development – 61 hours per employee per year, against 35 hours for the rest.
www.thehackettgroup.com
