CEO Priorities for 2007

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    The Economist Intelligence Unit has published its annual report, "CEO Briefing: Corporate priorities for 2007 and beyond." The global nature of work and markets is a major emphasis in the survey.


    The report is drawn from the results of a survey done with more than 1,000 senior executives around the world, as well as in-depth interviews with people from well-known companies.


    Overall, the researchers say that respondents are "more buoyant than they have ever been," primarily driven by optimism about the opportunities inherent in emerging markets. But as anybody involved in outsourcing offshore knows, working globally presents its own set of challenges.


    For example, 77% of respondents said they will seek to differentiate themselves more on quality than on cost; yet how doable is that in countries where the average income is a pittance compared to even the most modest Western-level incomes? Likewise, a quarter of the executives reported that a lack of customer insight is a barrier to growth in emerging countries.


    Where do the greatest opportunities lie? According to the majority of this group, it’s Asia. Western countries — the United States and Western Europe — present the problems of high labor wages and saturated markets. A whopping 70% see the prospects for business in India ("the globe’s back office") as "very good"; another 27% say it’s "good." In China ("the workshop of the world") 78% say prospects are good and 3% say very good.


    You might ask the rather obvious question: Why are companies driven to expand into Asia? It’s not all about gaining new markets — though that’s part of it. "Although expansion in both emerging and developed markets is primarily motivated by the goal of increasing sales, companies’ secondary motives for going into these types of market vary widely. Executives tend to see emerging markets more as a route to reducing costs and developed markets as a source of ideas and innovation."


    As the report authors point out, however, "being fired up can also lead to overheating. Inflation in India has almost doubled in the past 12 months, housing prices are skyrocketing and strong wage gains are fuelling buoyant domestic demand." Talent shortages, trade and investment barriers and a lack of understanding of customers should temper exuberance about expansion across the Pacific.


    Yet, for all of its challenges, obstacles and oftentimes dubious practices, globalization is an unstoppable force. Here’s an interesting anecdote that speaks to the nature of globalization in a way I’d never considered it:


    As [Asia Netcom’s CEO Bill Barney] recounts: "I recently met the CIO of a group of US hospitals that does not do a single dollar’s worth of business outside of its home country, but it had moved its entire customer service infrastructure to Bangalore. In today’s economy, you don’t have to be a global company in order to globalise."

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