The changing face of globalization will have a profound impact on the business landscape. A constant challenge for business leaders is to anticipate and interpret how globalization is changing, while understanding the opportunities and risks it creates. Although there may be little they can do to change global demographic shifts or capital flows, business leaders can react effectively to the forces of globalization or, even better, anticipate them to their advantage. Looking beyond the obvious: globalization and new opportunities for growth, looks at the most important elements of globalization for business. Drawing on three sources of research, including Ernst & Young’s 2012 Globalization Index, we explore the trends and issues business leaders must consider to move ahead. In this uncertain world, companies will need to look for growth in new ways and from new places. The businesses that will ride the next wave of economic growth will be those that understand the significance of globalization and tailor their strategies accordingly. www.ey.com/globalization

1. Looking beyond the obvious
Globalization and new opportunities for growth
January 2013

2. Looking beyond the obvious
► Globalization continues to define our business landscape.
► Business leaders need to react to and anticipate these trends.
► Prospering in an environment where globalization is evolving requires
constant refinement of strategy.
► Companies need to explore new markets and establish well-rounded global
portfolios.
► It is time for business leaders to respond with flexibility, speed and
unconventional thinking.
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3. Agenda
► About the survey
► Key themes:
1. Globalization will continue, but it’s different now
2. Companies must make big bets
3. The BRICs are still reliable options for now
4. But the momentum is shifting to other hot spots
5. Are developed markets worth betting on?
6. Operational changes are essential to picking the right big bets and increasing
their chances of a payoff
► Case studies
► Sectors
► The globalization index
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4. About the survey
We conducted quantitative and qualitative research.
Survey demographics:
► 433 respondents from developed markets
► 297 from rapid-growth markets (139 from Brazil, Russia, India and China and 158 from
other rapid-growth markets)
► 23% have annual revenues greater than US$10 billion
► 24% between US$1 billion and US$9.9 billion
► 49% between US$100 million and US$999.9 million
► 4% under US$4 million
Interviews:
► We conducted a series of interviews with CEOs, leading academics and other
globalization experts.
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5. Globalization will continue, but it’s different now
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6. How globalization is changing
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7. Technology will be the driver of globalization
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8. Companies must make “big bets”
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9. Big bets
► Organizations are faced with unprecedented uncertainty.
► It’s not always clear where the next opportunity lies.
► It may be tempting to stick to proven investment destinations.
► To ride the next wave of growth, companies will need to make big bets that
match or complement their existing competencies, on:
► Markets
► Categories
► Technologies
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10. ―You can’t play in every market. If you look at Nigeria with
180 million people and Indonesia with 180 million
people, Indonesia is probably an easier choice than
Nigeria, although maybe in the longer term Nigeria may
have a bigger potential. It’s those sorts of calls that we
have to make.‖
— Ian Hudson, President for Europe, Middle East and
Africa at Dupont
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11. The BRICs are still reliable options for now
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12. The BRICs
► The BRIC countries were the big bets of the previous decade.
► These remain critical markets — both in terms of growth and global integration.
► Yet the challenges of operating in these markets are increasing.
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13. BRIC growth will outpace that of other index
countries
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14. Protectionism remains a concern
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15. ‖ Emerging markets have had a bit of a rough ride over the past 12
months, proving once again that on a cyclical basis they are
vulnerable to disappointments in other parts of the world. China
wobbled this year, but with more stimulus, its growth should come
back on track. India has struggled with a lack of supply, reform and
investment in the right areas. Brazil, always a very cyclical
economy, slowed significantly through the course of this year, and
its recovery will depend to some extent on growth in other parts of
the world.‖
— Stephen King, Chief Economist at HSBC
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16. But the momentum is shifting to other hot spots
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17. Hot growth markets
► Companies need to explore additional growth markets beyond the BRICs.
► Non-BRIC rapid-growth markets are emerging as hot spots for global
business.
► These markets are becoming increasingly important sources of demand —
not just low-cost investment destinations.
► In many of these markets, the business environment is improving significantly.
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18. Non-BRIC markets have high levels of
integration
4.00
3.50
3.00
Rapid Growth
Rapid-growth
Markets ,Ex. BRICs
Markets exc.
BRICs
BRICs
2.50 BRICs
2.00
2004
2007
2010
2000
2001
2002
2003
2005
2006
2008
2009
2011
2012
2013
2014
2015
2016
Source: Ernst & Young 2013 Globalization Index (Economist Intelligence Unit, 2012;
Ernst & Young analysis)
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19. Top competitive drivers for non-BRIC
emerging markets
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20. A source of new demand opportunity
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21. An improving business environment
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22. But concerns about corruption remain
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23. Are developed markets worth betting on?
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24. Developed markets
► Developed markets are still major drivers of world economic activity.
► In certain sectors and areas, mature markets are making a comeback.
► More and more developed market companies are exploring near-sourcing.
► There is a revival of manufacturing in the US.
► Developed markets continue to retain an edge in innovation and technology.
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25. Advanced economies remain key drivers of
economic activity
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26. Developed markets remain key to the bottom
line
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27. Companies plan to bring production
capability back to developed markets
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28. Top export markets take advantage of
technology integration
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29. ―We brought back the manufacture of refrigeration units
from Mexico to the US for one very simple reason. It
takes eight hours to make a refrigerator in Mexico; it
takes two hours to make a refrigerator in Louisville.‖
— Nani Beccalli-Falco
President and CEO of GE International
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30. Operational changes are essential to picking
the right big bets
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31. Operational challenges
1. Strategic planning: allocate resources in a bold and focused way
2. Execution: make your big-bet investments as local and granular as possible
3. Learning: transform your company into a ―learning organization‖
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32. 1. Strategic planning: allocate resources in a
bold and focused way
► Companies need to make sure that they:
► Choose a small number of investments that offer the best chances of payoff
► Make an extended commitment to these investments despite volatility
► Ensure that there is flexibility in place to change course if necessary
► Make use of technology to aid decision-making
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33. 2. Execution: make your big-bet investments
as local and granular as possible
► Companies need to make sure that they:
► Tailor offerings to meet the exact needs of local customers
► Connect with local markets by contributing to their economic development
► Think about commonalities across markets so that economies of scale can be
derived
► Consider which functions do not need local delivery and can be centralized
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34. Big bets based on data
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35. 3. Learning: transform your company into
a “learning organization”
► Companies need to make sure that they:
► Improve data collection and analysis to guide strategic decision-making
► Learn quickly, apply that knowledge to their strategic plan, execute on the
plan, then begin the cycle again
► Use technology to react to change more efficiently
► Bypass traditional hierarchies to enable faster decision-making
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36. Investing in IT
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37. Case studies
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38. Heathrow: global decision-making takes off
► The passenger profile for UK visitors has changed.
► Heathrow’s capital structure has also evolved.
► Investors include CIC, Qatar Holding and Ferrovial.
► International investors also own Heathrow’s debt.
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39. The NFL: scoring with technology
► The NFL has experienced numerous bumps on the road to
globalization.
► It is now focused on a number of key geographies, where it can
create momentum.
► It has also built up local organizations in those markets to drive
interest.
► New technology has been a powerful tool to distribute content.
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40. Tata Power: energizing the community
► Companies that invest in rapid-growth markets need to contribute to
society, not just make a profit.
► Tata Power pays close attention to how it can help communities.
► When investing overseas, Tata Power has one key concern: not to act
like a foreign company.
► This philosophy is embedded in Tata’s governance.
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41. Sectors
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42. Automotive: driving toward a granular
approach
► Automotive companies are looking beyond the BRICs for growth.
► Demographic change and urbanization are key drivers of this.
► Companies recognize that they need to take a granular approach —
often at a city level.
► Partnerships and alliances can be valuable to build the license to
operate and access local knowledge.
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43. Oil and gas: redrawing the global energy map
► Shale gas in the US is redrawing the global energy map.
► Cheap energy in the US will encourage companies to bring back
energy-intensive activities to the US.
► This will make the US more competitive than it has been for decades.
► At some point the US will start to export gas to the rest of the world.
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44. Technology: understanding the four
transformational forces
1. Mobile is creating an entirely different relationship between
companies and their workforce.
2. Social media is enabling companies to build new relationships with
customers.
3. Big data will enable companies to make better decisions.
4. The cloud will allow companies to access storage and computing
resources without the need to invest in infrastructure.
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45. The Globalization Index
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46. The Globalization Index
► Globalization has become more nuanced since 2011.
► There is growth in the integration of goods and services, technology
and capital.
► Labor and cultural integration show less progress.
► The biggest increases continue to be driven by technology.
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47. Updated methodology
► The index was developed in 2009 in conjunction with the Economist
Intelligence Unit.
► As globalization evolves, it is appropriate to review the methodology.
This year, changes include:
► Revisions to the index scoring system, using dynamic normalization
► Several new sub-indicators
► Sub-indicator weights have been redistributed to reflect changes to the variable
► These have created larger-than-normal revisions to the 2011 rankings
but a more robust methodology.
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48. 2012 Globalization Index: 1 – 30
*Special Administrative Region of China
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49. 2012 Globalization Index: 31 – 60
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50. 2012 Globalization Index: indicators, sources
and weightings
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51. Ernst & Young
Assurance | Tax | Transactions | Advisory
About Ernst & Young
Ernst & Young is a global leader in assurance, tax,
transaction and advisory services. Worldwide, our
167,000 people are united by our shared values and an
unwavering commitment to quality. We make a
difference by helping our people, our clients and our
wider communities achieve their potential. Growing Beyond
Ernst & Young refers to the global organization of
member firms of Ernst & Young Global Limited, each of In these challenging economic times,
which is a separate legal entity. Ernst & Young Global
Limited, a UK company limited by guarantee, does not
opportunities still exist for growth. In Growing
provide services to clients. For more information about Beyond, we’re exploring how companies can
our organization, please visit www.ey.com. best exploit these opportunities — by expanding
into new markets, finding new ways to innovate
and taking new approaches to talent. You’ll gain
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EYG No. EX0194 www.ey.com/growingbeyond.
This publication contains information in summary form and is therefore
intended for general guidance only. It is not intended to be a substitute
for detailed research or the exercise of professional judgment. Neither
EYGM Limited nor any other member of the global Ernst & Young
organization can accept any responsibility for loss occasioned to any
person acting or refraining from action as a result of any material in this
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appropriate advisor.
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