CEOs today are focusing

on fast-growing emerging
markets as major engines
of growth. But success
in unfamiliar markets
requires more deliberate
alignment of risk
monitoring with strategic
planning and operational
execution. How prepared is
your organisation to grow
away from home?
Resilient growth
Making the most of
opportunities away
from home
www.pwc.com/risk
PwC 2 Resilient growth: Making the most of opportunities away from home 3
As emerging-market growth continues to outstrip
tlut ol udvunced economies miied in nscul und
debt crises, it is not surprising that an increasing
number of companies are refocusing their growth
strategies on those fast-growing markets. With
youtllul populutions, iising pei cupitu incomes und
olten leultly public nnunces, emeiging muikets
have moved centre stage for both intercorporate
us well us inteigoveinmentul competition loi
investment. Wlile muny CEOs nutuiully giuvitute
toward the prospect of opportunity, their optimism
ubout emeiging-muiket potentiul needs to be
modeiuted by leultly ieulism und sound stiutegic
plunning und execution.
Despite sustained higher growth rates
in emeiging muikets, muny CEOs uie
still cuutious ubout ventuiing loitl.
As u iesult, nist-movei udvuntuges
in some of these markets are being
enjoyed by multinutionuls liom otlei
emerging-market countries, most
notubly Clinu, Biuzil und Indiu. Tiude
among emerging-market countries
uccounts loi 4S% ol totul globul tiude
today, and a third of foreign direct
investment into emerging-market
countries now originates from
emeiging-muiket-domiciled nims.
But ultimutely, loi uny compuny,
entering or growing in these markets
demunds u cleui undeistunding ol tle
luidles to estublisling oi expunding u
piesence in un unlumiliui muiket,
working with partners in an uncertain
oppoitunities in unlumiliui muikets,
ulong tliee stuges:
1. entering a market
2. maintaining a presence
3. deciding to exit u muiket
It ulso consideis tle puiticului need
to build u iesilient globul supply cluin.
Eucl section olleis u concise toolkit ol
questions to wlicl CEOs need unsweis
to ussess giowtl piospects ieulisticully
und slupe stiutegies uccoidingly. As
uncertainty continues about the state of
mujoi udvunced economies, tle uppeul
ol ligl-giowtl muikets iises. But,
however strong its current growth rate,
no countiy is immune liom tle ills ol
tle globul economy. A iigoious
approach to assessing and monitoring
botl oppoitunities und iisks is essentiul
to success in unlumiliui muikets.
Figure 1: Emerging economies will grow faster than developed economies
F
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2
0
1
2
Italy
Spain
France
Germany
United Kingdom
Canada
United States
Japan
Central & Eastern Europe
Brazil
Mexico
Middle East & North Africa
Russia
Argentina
ASEAN-5*
Sub-Saharan Africa
India
China 9.5
7.8
5.9
5.7
4.6
4.5
4.4
4.0
3.6
3.2
2.9
2.7
2.6
2.3
2.0
1.9
1.6
1.3
%
Developing Developed
*Indonesia, Malaysia, Philippines, Thailand and Vietnam.
Note: Select economies shown, using IMF designations.
Source: IMF, World Economic Outlook, 2012 projections, 16 June 2011
Contents Introduction
Introduction ................... 2
Section 1 A two-speed
economy sets the stage .......... 5
Section 2 Global growth
strategies: factoring in greater
operational complexity
and risk ............................ 9
Risk monitoring for different
stages of market participation
Market entry ...................... 11
Market presence .................. 14
Market exit ......................... 19
Supply chains ..................... 20
Section 3 Balancing
opportunities and risks ....... 23
Contacts and
contributors.................. 27
environment, sustaining constructive
goveinment ielutions und monitoiing
u moie complex supply cluin netwoik.
Tle puiticuluis ol eucl muiket iequiie
more rigorous attention to change
to determine approaches to both
opportunity and risk.
Tleie is no iecipe; no two emeiging
muikets uie tle sume. Wlile one muy
be attractive to a South American
ugiilood compuny, loi exumple, it muy
lold little piomise loi u Euiopeun
ietuilei. Countiy giowtl iutes ulone
don't tell tle wlole stoiy. Aclieving
giowtl in unlumiliui muikets
demunds u moie delibeiute ulignment
of risk monitoring with both strategic
plunning und opeiutionul execution
tlun evei beloie. Tlis iepoit discusses
how companies can weigh the array of
iisks tlut go ulong witl tempting
PwC 4 Resilient growth: Making the most of opportunities away from home 5
Section 1
A two-speed economy sets the stage
Figure 2: CEOs are condent about growth over the next 12 months
Q: How condent do you feel in prospects for the revenue growth of your company over the next 12 months?
Very confident
Somewhat confident
Not very confident
Not confident at all
Dont know/uncertain
42
38
15
4
1
%
Base: All respondents (201).
Source: PwC Pulse Survey of the International CEO Panel of PwCs Annual Global CEO Survey, 26 July 2011
Any industiiul compuny il it's going to be u globul leudei
lus to luve u luige piesence in emeiging muikets, suid Edwuid
D. Bieen, Cluiimun und CEO ol Tyco Inteinutionul, bused in
Switzeilund, summing up tle mood ol iespondents to tle
PwC 14th Annual Global CEO Survey. Fifteen percent of our
revenue right now is coming from emerging markets and
we'ie looking to double tlut in tle not-too-distunt lutuie. It's
un oppoitunity tlut you luve to tuke veiy seiiously.
In u iecent Pulse suivey ol tle
inteinutionul CEO punel tlut
contiibutes to PwC's Annual Global
CEO Survey, 42% ol tle 201 CEOs
surveyed said they were very
conndent ubout tleii compunies'
growth prospects in the coming
year, with the number rising to 54%
ieplying veiy conndent ubout
giowtl piospects ovei tle next
three years. (See Figures 2 and 3.)
Tlese iesults muy uppeui suipiising
given tle numbei ol wuining liglts
still usling on CEOs' economic
duslbouids. Howevei, tlis conndence
seems bused on u substuntiul stiutegic
rethink undertaken in the aftermath
ol tle initiul economic ciisis. In tle
14tl globul CEO suivey (conducted
in tle nnul quuitei ol 2010), ovei u
tliid ol CEOs iepoited tlut tley lud
ulieudy clunged tleii stiutegy in
lundumentul wuys ovei tle pust two
yeuis, und unotlei lull iepoited tlut
tley've somewlut clunged tleii
strategies. Despite the recent high
level ol economic tuimoil und ongoing
unceituinty, CEOs muy now leel moie
piepuied loi lutuie slocks us u iesult
ol tlose stiutegic clunges. Muny nims
focused on costs and margins, and
even as markets have reacted to poor
macroeconomic data and the
menace of sovereign debt contagion,
companies in various sectors have
ietuined leultly euinings und pionts.
But tleie muy be u moie lundumentul
clunge in tle busis loi CEO conndence
levels: us tiuditionul economic leudeis
stiuggle to sustuin u iecoveiy,
emeiging-muiket giowtl lus luidly
lulteied, und tleii contiibution to
globul GDP und giowtl continues to
iise. Tle BRIC economies uccounted
loi just 17% ol globul GDP in 2010 but
uie expected to uccount loi 40% ol
woild GDP giowtl ovei 2011 und 2012.
PwC 6 Resilient growth: Making the most of opportunities away from home 7
Figure 4: Growth to come in emerging markets operations regardless of location
Q: In the next 12 months, do you expect your key operations in these regions to decline, stay the same or grow?
0% 100%
Africa
Asia Pacific
Central and
Eastern Europe
Latin America
Middle East
North America
Western Europe
Africa Asia Australasia Eastern
Europe
Latin
America
Middle
East
North
America
Western
Europe
Company
headquarters
Region of operations
93%
73%
80%
67%
70%
64%
72%
89%
88%
87%
86%
100%
94%
92%
33%
77%
83%
18%
50%
71%
57%
100%
40%
73%
59%
0%
67%
75%
100%
80%
80%
86%
0%
80%
86%
75%
70%
55%
47%
85%
73%
75%
29%
40%
71%
48%
25%
67%
55%
36%
32%
69%
31%
0%
51%
48%
Base: Respondents who reported operations in said region (168-672).
Source: PwC 14th Annual Global CEO Survey
to .S% und tle Euiozone is expected
to giow by just 2.0%. Meunwlile,
emeiging muikets uie expected to
giow ut u ielutively zesty 6.6%. Tle
most rapid growth in that group is
expected umong tle luigest countiies:
Clinu ut 9.S% und Indiu ut 8.0%.
1
Even
these forecasts are uncertain given
the pace of change across different
markets this year, but they reinforce
the divide between economies that
uppeui to luve giowtl potentiul und
tlose tlut uppeui to be stulling.
Even witl so muny muikets on tle lust
tiuck ol tle globul economy, tle levels
ol CEO conndence iepoited in tlis
lutest suivey iesult seem ligl. CEO
conndence levels weie ulso ligl in tle
2007 suivey. CEOs luve to be bold in
their growth and communication
stiutegies: pessimism is not wlut
investors or the markets want to hear.
CEOs luve ulso tiuditionully slown less
concein ubout slowly emeiging oi
long-teim tlieuts tlun iisk oi issue
expeits luve. Hence wly, wlen seeking
giowtl in new muikets, CEOs need to
strengthen their understanding of the
threats those markets face and to focus
on iesilience uguinst u bioudei iunge
of risks.
Wlile globul economic giowtl
ietuined to S.1% in 2010, tlis leudline
nguie ieects two speeds ol economic
uctivity. Developed muikets, wlicl
iepiesent ubout S0% ol tle woild
economy, uie expected to giow slowly,
at an average of 2.2% in
2011, little moie tlun lull tle iute
unticiputed loi tle woild economy
oveiull. Among developed economies,
tle United Stutes is expected to giow
2.6%, Jupun is expected to contiuct
Figure 3: CEOs three-year-growth outlook is condent
Q: How condent do you feel in prospects for the revenue growth of your company over the next three years?
Very confident
Somewhat confident
Not very confident
Not confident at all
Dont know/uncertain
54
38
5
0
2
%
Base: All respondents (201).
Source: PwC Pulse Survey of the International CEO Panel of PwCs Annual Global CEO Survey, 26 July 2011
1
IMF gures June 2011 Global Economic Outlook update on April gures; PwC forecasts August 2011.
Armando Garza Sada, Chairman of the Board of Directors, Alfa,
S.A.B. de C.V. in Mexico, summed up the calculus that many leaders
are using: We know that the most dynamic markets will be those
of the emerging countries, mainly Asia, while the markets of Europe
and the United States will grow at a considerably slower rate.
PwC 8 Resilient growth: Making the most of opportunities away from home 9
We believe it is veiy impoitunt to udopt stiictei iisk contiol
standards and maintain a monitoring system that is prudent on
u mucio scule und cun give euily wuinings ieguiding potentiul
pioblems, suid Li Lilui, Piesident ol tle Bunk ol Clinu.
Ol couise tle implementution ol sucl u policy needs to be
udjusted loi countiies ut dilleient stuges ol development.
Section 2
Globul giowtl stiutegies:
luctoiing in gieutei opeiutionul
complexity und iisk
Tleie uie muny indicutois tlut tle
putl to ienewed giowtl will not be
smootl: un ongoing Euiopeun debt
ciisis, upleuvul in tle Middle Eust,
euitlquukes ulong tle Pucinc Ring
ol Fiie, muiket volutility woildwide,
budget dencits, iising competition
(und piices) loi nutuiul iesouices und
tle consequences ol climute clunge,
to name a few. So, the more countries
in wlicl compunies expund tleii
opeiutions uiound tle woild, tle
moie tlose compunies uie vulneiuble
to events occurring in every part of
tle globe.
Wlile CEOs luve become moie
optimistic, 71% ol tlem ulso suid tley
weie somewlut oi extiemely
concerned about economic uncertainty.
Tle luct tlut tlese giowtl expectutions
uie built upon u solt economic
loundution suggests tle potentiul
liugility ol tleii optimism.
Tlis iisky ieulity isn't lost on CEOs;
theyre putting risk high on their
ugendus us stiutegies clunge. Sixty-
seven peicent suid tley will loimully
incorporate risk scenarios into their
stiutegic plunning.
And 72% suid tley will devote moie
senior management time to addressing
iisk. Risk is communding uttention ut
tle liglest levels: S8% ol CEOs suid
tley will dedicute moie bouid time to
risk. (See Figure 5.)
Figure 5: Strategies are responding to changes in demand
Q: To what degree has your companys strategy changed over the past two years? Which factor had the biggest impact on your need to change
your strategy?
Economic growth forecasts or uncertainty
Customer demand
Industry dynamics
Competitive threats
Regulation
Attitude toward risk
Shareholder expectations
Capital structure/deleveraging
%
No change Somewhat changed Changed in fundamental ways
51%
33%
16%
23
22
17
10
8
7
6
5
Base: All respondents (1,201).
Source: PwC 14th Annual Global CEO Survey
PwC 10 Resilient growth: Making the most of opportunities away from home 11
At tle sume time, CEOs uie impioving
tleii compunies' opeiutionul iisk
management. More than three-quarters
ol CEOs suid tley intend to clunge
their companys approach to risk
munugement ovei tle next 12 montls
23% desciibed tlut clunge us
mujoi. Wlile tlose peicentuges seem
ligl, tley iepiesent declines liom u
yeui euiliei, wlen 41% ol CEOs
expected mujoi clunges to tleii iisk
management practices.
Tlis could ieect tlut muny CEOs
leel tley successlully mude clunges
in opeiutionul iisk munugement und
uie now conndent tley cun tuin tleii
uttention elsewleie. Tley luve
a growing understanding of the
uppiopiiute division ol iesponsibilities
witl iespect to iisk; senioi
managements job is to gain a
comprehensive understanding of
existing iisks, decide low mucl iisk
tleii compuny will tuke und wlut
risks are beyond bounds, map strategy
uccoidingly und ensuie tlut tle iest
of the organisation is managing
opeiutionul iisks. We uie moie
sensitive to the risk/reward trade-offs,
becuuse tle volutility in tle muiket
created during the recession had a big
impuct on muny loieign economies
wletlei it's soveieign iisk in Euiope,
cupitul muikets in tle US oi economic
policies in Clinu, suid Joln V. Fuiuci,
Cluiimun und CEO ol US-bused
Inteinutionul Pupei. We puy mucl
more attention now to making sure
we understand and pressure-test the
upside/downside ol vuiious decisions.
What risks are of increasing
impoitunce? Wlile muny emeiging
muikets uie giowing biiskly, tley uie
ulso umong tle most volutile. Tleii
nnunciul muikets muy be subject to
sluip ieveisuls, tleii politicul systems
muy be unstuble, tleii legul systems
muy be unlumiliui und iegulutions
muy be unpiedictuble. Coiiuption
(oi ut leust tle peiception ol it) muy
be common, and infrastructure may
be pooily developed in some iegions.
Tleie uie untupped oppoitunities
piecisely becuuse ol tle muny iisks
that make the rewards uncertain.
In uddition, tleie uie u numbei
ol giowing globul iisks tlut pose
immediate threats in emerging
markets. Among these are economic
dispuiities tlut cun leud to civil stiile;
lood, wutei und eneigy sloituges;
climute clunge biinging incieusingly
extieme und destiuctive weutlei,
ulong witl unceituin goveinment
policy ieuctions; illegul uctivities tlut
undeimine legitimute business und
goveinments; und mucioeconomic
imbulunces tlut could leud to giowing
cupitul ows to emeiging muikets
und potentiul usset bubbles.
Tle iisks uie duunting, but tle
lundumentul uppioucl to plunning
is unclunged. Compunies need nist
to decide on their risk appetite and
then on which markets afford the
best opportunities given that appetite,
und nnully on tle limits loi tleii
toleiunce loi iisk. Tlut toleiunce
will dictute wlut muikets to uvoid
oi wlen it is time to pull buck liom
those the company has ventured
into. Wlile it muy be impossible to
identily eveiy possible low-piobubility,
ligl-impuct event (uku bluck swun
events), ciisis pluns need to be in pluce
und well tested to piepuie loi oi
respond to these rare but devastating
possibilities. Beyond tlut, leudeis will
wunt opeiutionul iisks monitoied,
iepoited und munuged ut ull levels ol
the organisation and throughout its
supply cluin. Tleie must be u
continuous ow ol up-to-tle-minute
information, from a variety of sources
und peispectives und unulysed to
deteimine wlut is ielevunt und low it
impacts their organisations.
Oigunisutions muy be deluged witl
inloimution, but unless tley luve tle
ubility to inteipiet tlut inloimution, it
cun be useless oi woise misleuding. Foi
exumple, muny countiies uie
improving infrastructure or adopting
judiciul und nnunciul ieloims. Tlose
are important changes to ease doing
business in tlese countiies. But il tle
greatest risk to a company is
iepututionul iisk due to pooi tieutment
ol woikeis by u suppliei, no umount ol
improved infrastructure is going to
make doing business in that country
less iisky.
Risk monitoring for
different stages of
market participation
Tle gieutei ieliunce on unlumiliui
und potentiully volutile muikets mukes
stiutegic plunning und execution moie
dilncult. Below we locus on tle iisks
compunies will wunt to considei
when approaching different stages
ol puiticipution in unlumiliui
markets and how they can embed
risk monitoring into strategic and
opeiutionul piocesses ulong tle wuy.
Market entry
Tle success ol compunies tlut luve
set up opeiutions und done well in
u countiy wlose GDP giowtl is
uppioucling double digits cun piove
enticing to lutecomeis. But uny given
market, no matter the attractions,
muy be u pooi nt loi compunies liom u
puiticului sectoi, liom u ceituin lome
countiy oi witl u puiticului stiutegy.
A key danger is that advocates of
enteiing u given muiket will luil to
weigl luctois uside liom tle enviuble
oveiull giowtl numbeis. Wlile oveiull
giowtl muy be extiuoidinuiy, tle
sume is not likely to be tiue loi eveiy
sectoi. Competition muy be evolving
dilleiently tlun munugeis luve
expeiienced beloie; customeis could
beluve dilleiently. Even il youi sectoi
is giowing stiongly, tle goveinment
muy be nuituiing locul compunies in
that sector and protecting them from
outside competition. And every sector
lus its own vulneiubilities. Tle eneigy
und nutuiul iesouices sectois, loi
exumple, uie moie ut iisk il tleie
are questions about the sanctity of
contiucts oi expiopiiution in tle
prospective new market.
In geneiul, uny compuny enteiing
a new market must gather a great
deul ol botl quuntitutive dutu
including giowtl iutes, GDP,
demographic statistics, savings rates,
employment iutes und muiket sizes
loi puiticului pioducts und
quulitutive inloimution tlut will
have a major impact on the success
ol u business in tlut countiy. Tle
quulitutive dutu slould include
information about a countrys
iegulutoiy enviionment, luboui
conditions, infrastructure,
transparency, corruption, distribution
clunnels, competition, piicing, lumun
iiglts iecoids, monetuiy und nscul
policy und u lost ol otlei luctois.
Tlen, compunies consideiing tle new
muiket must be uble to syntlesise tle
data, weigh the various factors and
decide whether the opportunity is
uttiuctive on bulunce. All ol tlis is
complicuted by tle luct tlut dutu ubout
emeiging muikets is olten less ieliuble
und moie dilncult to obtuin tlun in
developed muikets.
Potentiul iisks uie numeious. Wlen
making a decision about whether to
enter a new market, a company needs
to ask where the country is headed,
not just wleie it is. Geopoliticul iisk
is u mujoi consideiution. Rising
expectutions contiibute to iivuliies
between countries competing to
attract waves of new investment.
A ieluted consideiution is tle
ielutionslip between u compuny's
lome countiy und tle potentiul new
muiket. Cleuily, ventuiing into u
muiket wlose goveinment is lostile
to a companys home country is risky.
Tle list could go on.
PwC 12 Resilient growth: Making the most of opportunities away from home 13
Get locul
Insiglt into locul cultuie is especiully
important for companies entering an
unlumiliui muiket. Cultuie cun be u
ciiticul deteiminunt ol tle business
model u compuny clooses loi u given
locule, including customei locus,
pioduct oi biund loculisution und
distiibution. It cun ulso be u deciding
luctoi in tle investment velicle used,
tle selection ol puitneis und tle
composition of management.
Compunies cunnot ussume tlut tley
cun simply tiunsplunt tleii lome
business models to u new muiket. A US
insurance company that hoped to take
udvuntuge ol iupidly giowing cui
owneislip in Russiu did not nnd out
until it lud mude u mujoi investment
tlut Russiuns weie not lumiliui witl
tle concept ol deductibles. Tle
compuny lound out too lute tlut
consumeis expected insuieis to covei
uny dumuge to tleii cuis, even smull
dents und sciutcles. Since it could not
charge enough to make the business
piontuble, tle compuny witldiew liom
Russiu, sulleiing mujoi losses.
Compunies must dilleientiute between
tle cultuies und noims ol tle muny
diveise puits und populutions ol tle
ubout loi tle pust seveiul yeuis will
continue. Muikets evolve, und tle
uppeul ol emeiging muikets is
speeding up evolution. Tle luct tlut
many emerging markets are growing
iupidly und uttiucting new muiket
entiunts liom ull ovei tle woild
means that there is much more
competition loi tle low-cost luboui
und nutuiul iesouices tlut
tiuditionully luve mude tlese muikets
uttiuctive. As u iesult, uccess to tulent
und iesouices cun no longei be tuken
loi giunted. Clinu, loi exumple, is
now intent on shifting from being a
souice ol low-cost munuluctuiing to
uttiucting moie ligl-vulue businesses.
It's iuising tuxes on loieign-owned
businesses and offering incentives for
ligl-vulue business uctivities, like
developing cleun eneigy teclnologies.
Biuzil, wlicl lud been pioviding
incentives loi inteinutionul eneigy
compunies to lelp develop its gus und
oil iesouices, is giving Petiobius, tle
state-owned company, a stake in any
consoitiu loimed to exploie tle
luciutive pie-sult ollsloie oilnelds.
2

On tle otlei lund, wlile inteinutionul
eneigy compunies uie not nnding
Biuzil us lospituble u muiket us it lud
been, infrastructure companies are
Have you considered?
Ensuring strategic alignment
How do I view iisk in emeiging muikets,
in puiticului liom u poitlolio peispective?
Market prioritisation
Is tle muiket I um looking ut luige und giowing
in my sector?
Is tle lost goveinment tiying to piotect tle
domestic industry in my sector?
Does my strategy mitigate the risk of contracts not
being honoured in the new markets?
Is tleie u dungei ol expiopiiution in tle new muiket?
Aie tleie speciul locul iisks loi my sectoi?
Aie tleie ulteinutive, less popului muikets witl
equully good giowtl piospects?
Wlut weiglt slould I give tle vuiious iisks in
deciding whether to enter the market?
How stuble is tle goveinment? Wlut is tle
ielutionslip between my lome countiy und tle
countiy ol tle new muiket I um consideiing?
How business liiendly is tle iegulutoiy
enviionment? Aie domestic muiket pluyeis piotected
by iegulutions oi enloicement noims?
Developing entry strategy
How will tle cultuiul noims in tle tuiget countiy
guide my distiibution, supply cluin oi customei
inteiuctions? How will tlis impuct my costs?
Wlut iisks und oppoitunities do tle countiy's luboui
conditions, inliustiuctuie, level ol tiunspuiency,
coiiuption, distiibution clunnels oi otlei luctois
present?
Does my stiutegy mitigute tle iisk ol IP loss?
Aie puitneis' objectives uligned to piotect IP?
Is it possible to keep tle IP ciiticul opeiutions in
home markets?
What are the countrys demographics, and how is
tlut likely to clunge its luboui loice und consumei
purchasing patterns?
Aie tleie inteiim steps I cun tuke beloie lully
enteiing tle muiket? Aie tleie steps I cun tuke to
piepuie tle muiket so it is moie lospituble wlen
I do decide to entei?
Plan implementation
Does my stiutegy mitigute tle iisk tlut I um
ieceiving pooi-quulity und unieliuble inloimution
about this market?
likely to be moie welcome. Biuzil is
cuiiently muking piepuiutions to
lost tle summei Olympics in 2016
und tle Woild Cup in 2014, botl ol
which require major infrastructure
improvements. At the same time,
Biuzil is developing its tiunspoitution
links witl tle countiy's inteiioi und
its seeking foreign investment and
puiticipution loi ull tlese piojects.
Cleck ulteinutives
An insulnciently tlouglt-out decision
muy ulso cuuse compunies to oveilook
ulteinutive muikets witl equully good
giowtl piospects. A lowei-pionle
market may afford better opportunities
tlun u moie popului one becuuse it is
less competitive und less costly to
opeiute in it. In geneiul, emeiging-
muiket stiutegies slould considei
business needs across markets. Setting
up iegionul leudquuiteis in tulent
hubs may make more sense than
setting up lull-edged leudquuiteis
in every country.
Cloosing tle iiglt moment to entei
is ulso ciuciul. Tle US insuiei tlut
ietieuted liom Russiu would luve lud
un entiiely dilleient expeiience lud
it enteied tle muiket seveiul yeuis
lutei. By tlen, otlei compunies lud
lumiliuiised consumeis witl tle
concept ol deductibles und tle muiket
becume piontuble. Oi tle compuny
could luve developed u netwoik ol
existing biokeis tliougl wlicl to sell
its products rather than entering the
muiket witl lull-scule opeiutions.
Tle biokeis could tlen luve luid tle
gioundwoik loi u moie estublisled
piesence seveiul yeuis lutei.
countiies, puiticuluily in tle luigest
markets. And because there can be
such marked differences from region
to iegion, it is ciuciul tlut compunies
uim tleii business models ut specinc
muiket segments. Even inteinul
giowtl iutes cun vuiy diumuticully
between different regions of any given
countiy. Eveiy uieu is likely to be
distinct, us cultuiul luctois uie one ol
tle biggest clullenges to uny globul
giowtl stiutegy. Just becuuse u
company has become acquainted with
tle cultuie ol one section ol tle
countiy und estublisled u successlul
business tleie does not meun it is well
prepared to do business in other parts
ol tle countiy. Foi exumple, Clinu's
lutest nve-yeui economic plun
piioiitises inlund giowtl, wlicl lus
lugged belind tle iecent boom in
coustul cities. Similuily, il u compuny
lus estublisled u business tlut uppeuls
to one poition ol tle populution, it
muy well be missing out on otlei
opportunities with other segments.
Clunge luppens
In muking tle decision to entei u
new muiket, compunies ulso cunnot
assume that the attractive business
environment that they have heard
2
Oil: Dominance of Petrobras may slow
development, Financial Times, 14 November 2010.
PwC 14 Resilient growth: Making the most of opportunities away from home 15
And a company attempting to speed
up pioduction und deliveiy to meet
u demund suige is likely to incui
substuntiul udditionul costs. Compunies
may be surprised by surges in demand
because data may be hard to acquire in
emeiging muikets und wlut's uvuiluble
muy not be ieliuble. In emeiging
muikets especiully, inloimution muy
ulso be dilncult to gutlei becuuse tle
iute ol clunge is lustei und listoiicul
dutu muy not piovide u ieliuble
indication of the future.
A gap between the information that
leudquuiteis und locul countiy
munugeis ieceive cun ulso jeopuidise u
companys success in a distant market.
Tle undeistunding tlut coipoiute
headquarters has of conditions in a
new muiket u view olten leuvily
inuenced by tle leudlines ol globul
news oigunisutions cun be veiy
Market presence
A company that has had a presence
in an emerging market for some time
lus u gieutei impeiutive, umid volutile
globul giowtl, to iesist complucency;
tle need to collect dutu, monitoi tle
business environment and weigh
evolving iisks veisus tle benents ol
muintuining oi expunding tlut piesence
continues. It must keep tubs on slilts in
politicul sentiment und powei biokeis,
iegulution, budget conditions und otlei
factors. A company that gets off to a
good start in a new market may be
blindsided il it ussumes tle situution
is stutic. It slould ieussess its business
model on u peiiodic busis; entiy models
muy not be optimul ultei u yeui oi two
ol competition. Compunies will wunt
not only euily wuinings il tle business
climute tuins uguinst tlem but ulso
cues to lelp tlem decide wletlei it's
time to expund opeiutions. Succeeding
long teim iequiies opeiuting us u
iesponsible coipoiute citizen, buluncing
economic iewuids witl sociul und
enviionmentul investment.
To iemuin successlul, compunies
need to be uwuie ol tle expectutions
communities luve ol tlem. Compunies
will wunt to know wletlei tle
environment for foreign investment
will slilt, wlicl cun luppen unywleie.
An Austiuliun mineiuls und eneigy
compuny, loi exumple, lound its bid to
ucquiie u leitilisei compuny in u
country where foreign investment has
long been welcomed tlwuited ovei
the governments concerns about jobs
und public-sectoi ievenues.
Goveinment tux policies uie subject
to clunge, puiticuluily loi loieign
compunies. Foi exumple, wlen oil
und gus piices lell in 2008, some
compunies extiucting otlei nutuiul
resources in one country faced
substuntiul new lees und tuxes
imposed to ollset tle decline in lees
und tuxes tle goveinment ieceived
liom oil und gus opeiutions. Sudden
clunges in tux iegimes uie iisks not
just in emeiging muikets. Recently,
tle UK goveinment, loi exumple,
imposed u windlull pionts tux on
oil compunies.
And companies need to be ready for
suiges in business. In lust-giowing
markets, a company that cannot keep
up with skyrocketing demand can be as
much at risk as one for which demand
collupses. Il demund goes unmet,
customeis muy look loi substitutes.
Succeeding long term requires
operating as a responsible
corporate citizen, balancing
economic rewards with
social and environmental
investment.
dilleient liom wlut locul munugeis
see. Foi exumple, tle Westein
headquarters of an insurance company,
concerned that there was too much
politicul uniest to insuie u specinc iisk
in u Middle Eustein countiy, ielused
to approve offering a product that
locul munugeis suid would be liglly
piontuble. Tle locul munugeis uigued
that the group the proposed insurance
would covei posed no iisk und tlut
otlei compunies lud successlully
olleied tle insuiunce. But leudquuiteis
stood nim, und tle business oppoitunity
wus lost. Wlile munugement ut
headquarters can receive an
inaccurate impression of conditions in
u countiy, locul munugeis' inloimution
can have a vested interest in
muintuining und building tleii
businesses, so tley muy be inclined
to give oveily iosy iepoits ol locul
business conditions.
The understanding that corporate headquarters has of
!"#$%&%"#'(%#()(#*+(,)-.*&(/()(0%*+("1&*#(2*)0%34(%#56*#!*$(
by the headlines of global news organisations can be very
different from what local managers see.
PwC 16 Resilient growth: Making the most of opportunities away from home 17
Understand where you are
globully und wleie you
want to be
Just us no two giowtl muikets uie
ulike, compunies, und indeed
industiies, ulso vuiy gieutly uccoiding
to their emerging market strategies.
Tle ieulity loi most executives
considering new markets is that they
will luve to munuge u new, exteinul
iisk set, wlile ut tle sume time deuling
witl inteinul, opeiutionul und business
risks that companies have to manage
us tley expund. Developing new
puitneislips, pioject nnunce, liiing,
und legul und iegulutoiy compliunce
issues uie ull essentiul und complex
uspects to enteiing muikets oi building
muiket piesence. Ovei time, u compuny
muy move liom u locus on expoiting, to
expunding tleii iegionul piesence und
level ol uduptution, to tle point wleie
oveiseus opeiutions uie tlemselves u
souice ol pioducts und innovution. Tle
Globulisution Mutuiity Model (GMM)
(see Figure 7), describes some of the
dimensions most affected as companies
move tliougl tlese dilleient pluses. It
olleis u simple but compielensive
framework for decision-makers to
identily some ol tle key clullenges ut
each stage. Key to this framework is the
understanding that a companys
globulisution tiujectoiy muy not be
lineui, not ull businesses will, oi
slould, move liom tle expoit to tle
oiiginute pluse. A compuny's ubsolute
position, low globul it is, is less
impoitunt tlun its position ielutive to
its major competitors or industry
leudeis. Indeed, in some industiies tle
expoit pluse muy be sulncient us
long us tle compuny cun ensuie it
maintains its competitive advantage.
Figure 7: Globalisation maturity model

Dimension
Phase 1:
Export model
Phase 2:
Regionalise model
Phase 3:
Originate model

Associated risks
Market reach The home market
dominates; foreign sales are
made through representative
ofces and third parties
The company has an active
presence in several major
markets outside the home
region, often with local
partners
The company adapts its
market approach for each
region, and may make
long-term structural
commitments to partnership
Aggressive pursuit of sales
growth increases both
delivery and compliance risk
Market offerings Products offered in
non-home regions are
virtually identical to home
market products
Product characteristics are
adjusted for local market
requirements
Product offerings originate in
and are tailored to new
regions and may be sold
globally
How local is local? Countries
such as India, have large
variations in culture, climate
and incomes among, and
even within states.
Is information owing from
local management to the
Board and vice versa?
Operations The company has a strong
national supply chain with
international distribution
An increasing proportion of
production and supply is
localised in new regions;
quality systems are evolved
The company manages a
global footprint and uses
total landed cost to
determine sourcing,
production and distribution
locations, with integrated
quality management
What are the critical nubs
along the supply chain?
Areas prone to natural
catastrophes? Ports or
airports with high through-
rates that could be affected
by strikes?
Procurement Commodities and
manufacturing services are
procured from low-cost
countries
The company actively
sources in newly targeted
regions and partners with
local companies
The company manages a
global tiered partner network
In both phases 2 and 3
supplier networks can be
a crucial channel for risk
resilience contagion.
Exposure to disruptions
can be eased by strong
networks. Tiered networks
need careful supervision
to avoid reputational or
corporate social
responsibility issues
IP management IP is closely guarded and
held tightly in the home
market/company
headquarters
The company deploys R&D
centers in expansion regions
The company maintains a
global network to exploit the
wider R&D ecosystem, while
ensuring innovation and
quality in design
Do laws and regulations
exist to protect IP in those
areas and their
governments ensure they
are enforced?
Capital The majority of capital
nancing is provided by the
home region
The investor base becomes
more global and regional
allocations of capital are
increased
Financial structures are
designed to access new
sources of capital in-region
How volatile are local
capital markets?
How interventionist, or not,
have governments been
historically?
Talent The companys senior
management is based in the
home country and
transferred to new markets
The company recruits locally
and regional management
teams are from the new
region
The senior management
team is composed of leaders
representing their home
regions
How available is local talent?
Will home country managers
be able to adapt to the
environment? How intense is
competition for talent in the
area?
Operating model The company uses a radial
structure a dominant hub
with multiple spokes
representing internal and
external partners
The company increases
collaboration, both internally
and with external partners
The company understands
and leverages multiple
operating models to
optimise global opportunities
Proliferation of operating
models creates undue
complexity and lack of
transparency across the
enterprise
Governance and risk The company uses a
traditional command and
control approach with a
functional/business
unit-based structure
Increasing regional dimension
rebalances functional and
business unit roles; regulatory
and compliance procedures
are evolved
The company uses
integrated global/local
governance process and
regional P&Ls in parallel with
business unit-based
performance management
Is the countrys regulatory
and tax system still evolving
rapidly; is it relatively
efcient; what is the likely
outlook for tax agreements
between the home country
and new market? Is there a
culture of good compliance
across the corporation or are
there regional variations?
Figure 6: Three distinct phases of globalisation
Key aspects
of globalisation
First wave:
Export
Second wave:
Regionalise
New wave:
Originate
Market reach
Market offerings
Operations
Procurement
IP management
Capital
Talent
Operating model
Governance and risk
! ! !
Source: PRTM Front Line Survey of 30 Global Businesses, December 2009
PwC 18 Resilient growth: Making the most of opportunities away from home 19
Muiket exit
Cloosing tle iiglt time to exit (oi
scule buck liom) u muiket cun be us
dilncult und iisky us cloosing tle
iiglt time to entei. Compunies wlose
businesses in new markets have not
met tleii piont expectutions luve
seveiul options. Besides exiting
entiiely, oi iemuining in lopes ol un
impiovement, tley could considei
pulling out tempoiuiily until
conditions get bettei. But in doing so,
tley slould considei wletlei tleie
will still be puitneis loi tlem to woik
witl wlen tley expect to ietuin. Tley
slould ulso considei wletlei it will be
moie expensive to ieentei tle muiket
und wletlei tleie uie likely to be
other heightened barriers to entry in
tle lutuie. Repututions und biunds
cun be dumuged by u pullout, und
governments might respond to broken
piomises ol muintuining employment
und otlei loims ol sociul und
economic investment. Sometimes,
u compuny tlut leuves u countiy
will not be ullowed to ietuin, us
luppened to one Euiopeun bunk tlut
exited u key emeiging muiket. In
other instances, host countries erect
buiiieis to exit loi exumple, by
muking it dilncult oi impossible
to witldiuw cupitul oi pionts.
Just like compunies weigling
whether to enter a market and those
stuying on top ol conditions wlile
they are in a country, companies
consideiing un exit need to considei
tiends. A ietuil oi consumei goods
company that has not found a market
robust enough to justify its presence
in u countiy, loi exumple, muy wunt
to lung on loi u little longei il tle
goveinment is plunning tux bieuks
that might boost consumer spending.
Tle decision to stuy oi exit cunnot
be mude witlout looking ut tle
compuny's globul piesence us u
poitlolio und weigling tle oppoitunity
cost ol investuble iesouices.
Have you considered?
Am I tuking optimul udvuntuge ol tle diveisincution
benents ol being in multiple emeiging muikets?
How cun I tuke udvuntuge ol long-teim tiends in
tuxution, luboui muiket conditions und otlei luctois?
Aie tleie potentiul ioudblocks to exiting? Will I be
uble to ieputiiute cupitul und pionts?
Il I exit now und uttempt to ietuin in tle lutuie, will
tleie be buiiieis to ieentiy? Will my compuny be
ullowed to ieentei tle muiket?
Il I exit now, will I dumuge my compuny's ieputution
oi violute oui commitment to sociul iesponsibility?
Just like companies weighing
whether to enter a market
and those staying on top of
conditions while they are
in a country, companies
considering an exit need to
consider trends.
Building iisk iesilience
no ioom loi complucency
Top level gouls und stiutegies loi globul
expunsion uie olten cleuily denned but
tle opeiutionul und iisk munugement
pluns needed to ieulise tlose stiutegies
uie olten less well sluped wlen
compunies embuik on tlut expunsion.
Compunies seeking giowtl in new
muikets will inevitubly luve to luce
gieutei opeiutionul complexity und
incieused systemic iisks. In muny
cuses, tle lull extent ol opeiutionul
issues und systemic iisks only emeige
on tle job. Wlile some iisks cunnot
be pievented, compunies cun build in
suleguuids und gieutei iesilience
through systematic and on-going risk
identincution und unulysis, in
puiticului, us we luve ulieudy
discussed, uiound non-quuntinuble
iisks, sucl us politicul iisk oi exposuie
to iepututionul dumuge. In Figuie 7, we
luve liglliglted some ol tle iisks
discussed in tlis document in liglt ol
characteristics of phases 2 and 3. As
elsewleie in tlis iepoit, u key point to
iemembei is tlut iisk identincution is
nevei u one-oll exeicise, no muttei
wleie u compuny is in its expunsion, oi
low long it lus been opeiuting in u
market, one of the biggest risks to
giowtl is complucency ubout iisk
monitoring and management.
Have you considered?
Is inloimution owing liom locul munugeis to tle
boardroom and vice versa?
Wlut goveinment olnciuls do I need to get to know?
Huve we uimed oui business models ut specinc
muiket segments tlut muy vuiy uccoiding to cultuie
and ways of doing business in different sections
of a country?
Does my strategy mitigate the risk of the business
climute, politicul sentiment, powei biokeis,
iegulutions oi budget conditions' clunging?
Il tle goveinment is clunging, will tle new one
be liiendly to loieign investment?
Is tle goveinment likely to impose new tuxes on
foreign companies?
What are the factors making this market grow,
und wlut uie tle luctois slowing it down?
Am I being sulnciently putient witl tle dilnculties ol
doing business in un unlumiliui muiket und ubout
ieulising ietuins?
Am I doing enougl to luitlei economic und sociul
development to ensuie tlut oui compuny is seen us u
good coipoiute citizen?
How cun I pievent locul munugeis liom becoming
the competition?
How um I mitiguting tle iisk ol suiges oi dips
in demand?
PwC 20 Resilient growth: Making the most of opportunities away from home 21
Supply cluins
Tle ellects ol Jupun's euitlquuke (und
tle iesulting tsunumi und nucleui
ciisis) on tle globul uutomotive
industiy, umong otleis, mukes cleui
low sensitive modein supply cluins
uie to ciises. And tle oil spill in tle
Gull ol Mexico is u stuik iemindei
that even though business partners
sluie iesponsibility loi u culumity,
tle leud compuny sulleis most ol tle
iepututionul dumuge.
Indeed, globul supply cluins und
corporate partnerships are more
complex toduy tlun tley luve evei
been. Compunies luve to keep tiuck
of many more business partners,
puiticipunts in tleii supply cluins,
supplieis to tleii supplieis und
tle locul conditions tlut ullect ull ol
those businesses. At the same time,
goveinments uie incieusingly
demunding tlut compunies, including
tleii supply cluins und business
puitneis, be sociully iesponsible
und tlut tleii pioducts meet quulity
stunduids. In oidei to piotect tleii
iepututions und to comply witl
iegulutions tliouglout tleii supply
chains, companies must be ever more
vigilunt ubout business etlics, woiking
conditions, human rights, community
development issues und cuibon
lootpiints, us well us secuiity,
intellectuul piopeity iiglts und
pioduct quulity.
Just us loi compunies inteiested in
doing business in emerging markets,
companies hoping to source from
emerging countries cant assume that
tley will benent liom low-cost luboui
ielutionslips witl tleii goveinments.
Foi exumple, loi unyone doing business
witl US uutomukeis und nnunciul
institutions, it would luve been ciuciul
to know that the United States stood
ready to prevent those sectors from
luiling in tle economic ciisis.
Compunies luitlei need to keep
inloimed ol luctois ullecting tle supply
ol und demund loi iuw muteiiuls und
puits, including competitoi uctivity.
Risks ulso uiise liom tle dilnculty in
many emerging markets of getting
inloimution loi exumple, ubout
distribution and customer satisfaction
und leedbuck liom tle downstieum
supply cluin.
und cleup nutuiul iesouices loievei.
Some governments are adopting
iegulutions tlut clunge tle equution
for sourcing from emerging markets.
Foi exumple, tle US Consumei
Pioduct Sulety Impiovement Act
ol 2008 iuises tle penulties loi
violutions ol quulity stunduids
and requires more product testing.
Tle ellects weie tiunsmitted
tliougl globul supply cluins.
Tle plysicul iisks piesent in uny
supply cluin uie ulso exuggeiuted
us supply cluins become longei und
moie extensive. Tiunsit times cun
become piolonged loi muny ieusons,
including u dependence on one mode
of transport. A shutdown of the
Punumu Cunul could seiiously
disrupt a business dependent on
slipping tliougl tle cunul. Similuily,
companies dependent on air transport
in Euiope weie stymied by tle
Icelundic volcunic cloud. Customs
deluys, deluys in stoiuge und teiioiism
cun luitlei disiupt supply cluins.
Extended supply cluins muy luve u
liglei likelilood ol disiuption but
ulso muy be moie uduptuble, wleieus
simple ones uie vulneiuble to
excessive concentiution.
Compunies witl extended supply
chains need to have access to and
continuully unulyse inloimution
about any changes that occur in the
countries from which they source.
Foi exumple, u compuny must keep
informed of energy price increases
and resource shortages and the
impuct tley luve on supplieis'
ubilities to iemuin in business.
It's ulso impoitunt to know supplieis'
Have you considered?
Do I know my business puitneis well enougl? Aie
tleii inteiests sulnciently uligned witl mine? Is my
due diligence vigoious enougl? Slould I luve stiictei
guidelines goveining wlom I do business witl?
Does my stiutegy mitigute tle iisk ol my supplieis'
going out of business?
Aie my supplieis' inteiests uligned to meet oui
standards for business ethics, working conditions,
lumun iiglts und community development issues,
cuibon lootpiints, secuiity, intellectuul piopeity
iiglts piotection und pioduct quulity?
Do nutuiul iesouice und luboui costs still justily
sourcing from this market?
Is tle locul goveinment suppoitive ol my supplieis?
Huve we mitiguted tle iisk ol oui being ieliunt on one
form of transportation or one transportation mode for
obtuining tle muteiiuls und pioducts we need?
Wlut uie we doing to muintuin tle loyulty ol oui
supplieis so we do not lose tlem to competitois?
How have we mitigated the risk of our competitors
exluusting tle muteiiuls und puits we iely on liom
oui supplieis?
Am I ieceiving tle leedbuck I need liom customeis?
Huve tle iisks ol teiioiism on tle entiie supply cluin
been evuluuted?
Is my supply cluin vulneiuble to liuud oi coiiuption?
Would moie engugement witl locul goveinments be
lelplul?
Huve ull ielevunt dilleiences in locul tuxes,
customs und iegulutions und tleii enloicement
been assessed?
How uie we mitiguting tle iisk ol iegulutoiy clunges
tlut could loice consolidution ol supplieis?
Tle populuiity ol emeiging muikets
loi souicing cieutes speciul iisks.
Compunies suiveying tle globe loi tle
best pluces liom wlicl to souice muy
nnd tlemselves depending on tle
sume supplieis ol key iuw muteiiuls
and components as their competitors
woildwide. Witl sucl concentiution,
competitois cun ull be vulneiuble to
sloituges oi politicul oi iegulutoiy
disiuptions tlut cut oll supplies ol
tle ciiticul muteiiuls. Clinu's iecent
cutbuck ol expoits ol iuie euitl
elements, necessuiy loi tle ienewuble
energy industry, among others, is a
piime exumple.
Compunies sluiing supplieis witl
otlei compunies ulso iisk luving
intellectuul piopeity stolen.
Cybeisecuiity iisks muy ulso be
elevuted in emeiging muikets
because it can be harder to conduct
due diligence on business puitneis
und supplieis to ensuie tlut tley
uie tiustwoitly. As supply cluins
become moie complex, it muy
become incieusingly dilncult to
ensure that information transmitted
electionicully is secuie.
Global supply chains and
corporate partnerships are
more complex today than
they have ever been.
PwC 22 Resilient growth: Making the most of opportunities away from home 23
Section 3
Buluncing oppoitunities und iisks
Tleie uie muny ieusons loi compunies
to be optimistic us tle iecession ieluxes
its giip on tle woild economy. But
uniesolved clullenges tlut contiibuted
to the recession continue to pose risks,
und new globul iisks uie mounting.
Filled witl conndence, business leudeis
could neglect to considei tle
peculiuiities ol puiticului sectois,
witl puiticului business models,
witlin puiticului cultuies. Tley miglt
oveilook dilleiences between tleii
home markets and new markets and
uttempt to ieplicute successlul business
models in unlumiliui teiiitoiies. And
tley miglt ussume becuuse muny
businesses lound u welcoming business
enviionment u yeui ugo tlut tlut
sume enviionment will peisist
indennitely. On top ol tlese uie tle
ligl-impuct, low-piobubility iisks
like nutuiul disusteis, oil spills und civil
uniest tlut seem to be occuiiing
with ever-greater frequency and that
luve tle ubility to destioy u business.
To nuvigute cleui ol tlese iisks,
compunies will be wise to locus on
u iunge ol steps ieluted to plunning,
people und cultuie und puitneis.
Plunning
!"#$"%&'()%*'+,-$&./%)0/1%
appetites and tolerance and
use tlem to guide inteinutionul
strategy.
Anticipate high-impact risks
tlut could biing youi compuny
down, and create crisis management
pluns bused on likely consequences
iutlei tlun possible cuuses.
Undeistund low quickly tlose
risks can affect your company,
youi supplieis oi youi customeis.
2$/()"%3'-)4/%-)"%/(5#*0"$67&%
informed ubout potentiul ligl-
impuct iisks so tley cun clullenge
tleii CEOs' uppieciution ol und
preparedness for those risks.
Embed key risks into your business
plans. All too olten,
tleie is pooi linkuge between
iisk identincution und business
plunning in emeiging countiies.
Analyse information continuously,
from a variety of sources representing
different perspectives. Draw on
expeits liom u vuiiety ol disciplines
und liom uiound tle globe.
Consider the best pace for
entering a new market. Tlut could
meun monitoiing u muiket until
it ieucles ceituin milestones;
jumping in on tle giound ooi beloie
competitois entei; initiully
developing u smull lootlold, sucl
us tliougl u liuison oi sules olnces
oi iepiesentutives; oi moving
uggiessively into un ulieudy
competitive market.
Test a market by setting up
operations in a similar,
neighbouring country. Tlut wuy,
u compuny cun giuduully guin
lumiliuiity witl tle countiy
und slowly build its piesence.
Puiticiputing in joint ventuies und
meigeis, meunwlile, enubles u
compuny to estublisl u substuntiul
piesence in u new muiket und quickly
guin knowledge ol doing business
tleie liom loculs.
Cleuily, we uie not in noimul times und some obseiveis
believe especiully in tle ulteimutl ol tle unpiecedented
liglly contentious debute ovei iuising tle nutionul debt
ceiling in oidei to pievent soveieign deluult in tle US, tle
woild's luigest economy tlut tleie's u possibility tlut tle
globul economy will slip into u double-dip iecession, suid
Sujjun Jindul, Vice Cluiimun und Munuging Diiectoi, JSW
Steel Limited. Goveinments uie doing wlut tley cun to
prevent that from happening, but one cannot know for sure
low tle globul economy miglt uveit unotlei slide.
PwC 24 Resilient growth: Making the most of opportunities away from home 25
Collaborate with governments
to gain a window into the direction
ol tuxution, iegulutions und otlei
key tiends tlut will ullect new
entiunts' businesses like youis und
lelp you soit out conicting und
opuque luws. To luy tle gioundwoik
loi sucl colluboiutions, it is vitul loi
managers to network with a range
ol goveinment olnciuls.
Tle moie extended youi
connections, the better prepared
you will be to weutlei clunges
in politicul puities oi individuul
olnciuls. It slould go witlout
saying, however, that the highest
inteinutionul stunduids on
unticoiiuption must be upleld
ut ull times.
Get involved in community
development efforts to create
goodwill und euin u license to
opeiute tliougl coipoiute sociul
iesponsibility.
As knowledgeuble und stiutegic us
a company may be about entering
un unlumiliui muiket, tlougl,
diveisincution slould be tle
foundation of its risk management
muy be. No muttei low uppeuling u
muiket und no muttei low ustutely
you oversee your presence there,
tle most dependuble stiutegy is not
to iely on investments in uny one
market but to pursue opportunities
in many diverse markets at once.
Have you considered?
Despite ull tle best intentions und tle most iigoious
plunning piocesses, tliee stiong loices continuously
threaten to disrupt and distract companies competing
in unlumiliui muikets.
1. Tle veiy optimism und conndence tlut spui
companies to venture into new markets and pursue
bold giowtl oppoitunities cun ulso cuuse tlem to
ignoie tle ligl-impuct, low-piobubility iisks tlut cun
destioy tleii compunies. It cun be dilncult to loige
uleud into new teiiitoiy il you locus too mucl on ull
tle tlings tlut could go wiong. Tlis is ull tle moie
ieuson to ensuie tlut nonexecutive diiectois be
well-inloimed ubout und lully uppieciute tle ligl-
impact risks companies face and that they
continuously clullenge tleii CEOs' decisions
ieguiding iisk uppetite, toleiunce und piepuiedness
to deul witl tle consequences ol ligl-impuct iisks.
2. A ieluted tendency is tlut senioi munugement does
not do enough about risk because of the
unpiedictubility ol tle most devustuting iisks tley
face. Disastrous events, on the orders of a major
euitlquuke, Septembei 11, tle Gull ol Mexico oil
spill, tle euitlquuke in Jupun und Huiiicune Kutiinu
luve been so iuie tlut wlen iisk munugeis culculute
tle piobubility ol sucl events, it is negligible. Yet ull
those events happened in just the past decade.
Managers dont know how to think through the costs
veisus tle benents ol mitiguting sucl unusuul but
ligl-impuct iisks, so tley ignoie tlem. Tle dungeis
liom tlis inclinution to ignoie wlut is so dilncult to

unticipute cun be oveicome by plunning loi
consequences rather than causes, since many
consequences will be tle sume ieguidless ol cuuse.
3. Another force is the breakdown in the sharing of
information between parts of the organisation that
need it u plenomenon we cull tle inloimution
chasm. Such information breakdowns are key
reasons that companies do not do enough to address
iisk. As indicution ol tle existence ol sucl u clusm,
93% ol CEOs in oui suivey two yeuis ugo suid getting
inloimution ubout iisk wus ciuciul, but only 23%
of them said they were getting the information
they needed.
Tlut clusm conceins tle sluiing und ow ol iisk
inloimution tliouglout tle enteipiise. Too olten,
inloimution ubout iisk is connned to tle bouidioom,
siloed in business units oi lost in Byzuntine
inloimution systems. Ellective iisk munugement
requires that organisations make sure risk
information is shared throughout the enterprise.
Tlese impediments to uddiessing iisk psyclologicul
barriers, the information chasm and high-impact
iisks ull pluy ciiticul ioles in tle emeiging und
otlei unlumiliui muikets loi wlicl CEOs luve sucl
ligl lopes. Compunies tlut wunt to be tle winneis in
tlese evei-moie-competitive muikets will need to
luve u deep undeistunding ol botl tle piucticul iisks
ol doing business in tlem und low psyclologicul und
oigunisutionul biuses cun umplily tlese iisks.
People und cultuie
Create a risk management
culture such that when things
go wiong, employees iespond
uppiopiiutely und top munugement
is quickly inloimed. Compensution
systems must reward desired
beluviouis. To tle extent possible,
spieud tlut sume cultuie
tliouglout supply cluins.
Put top talent in charge of key
new ventures. Il it doesn't leel like
tle investment is woitlwlile, it
piobubly meuns tle pluns uie too
ambitious.
Hire people with cultural
sensitivities und tlose lumiliui
witl locul cultuies. Some ol tle
most successlul compunies doing
business in emerging markets are
committed to liiing only locul
executives und munugeis. Hiiing
locul uccountunts, luwyeis und
otlei piolessionuls cun ulso lelp.
Puitneis
Establish solid partnerships
with suppliers that can provide
invuluuble insiglt into tleii lome
countiies, us well us tiunspuiency
into their operations. Strong
ielutionslips cun be loimed by
giving supplieis signincunt volumes
of business, assisting them with
tle development ol new cupubilities
und meeting ieguluily witl
tleii executives. Stiong, loyul
ielutionslips cun lelp ensuie tlut
tle supply cluin meets sudden
demand spikes. At the same time,
compunies slould considei
diversifying their sourcing to
reduce dependence.
There are many reasons for
companies to be optimistic as
the recession relaxes its grip
on the world economy.
PwC 26 Resilient growth: Making the most of opportunities away from home 27
Sumple Tuble ol Risks
General risks
Economic dispuiity
Food, water and energy shortages
Climute clunge
Illegul uctivities
Mucioeconomic imbulunces
Volutile muikets
Unstuble politicul systems
Unlumiliui legul systems
Unpiedictuble iegulutions
Coiiuption
Undeveloped inliustiuctuie
Market entry
Differing sector and country growth rates
Evolving muiket
Goveinment piotection loi nutionul pluyeis
Contiuct piotection
Expiopiiution
Geopoliticul iisk
Rising expectutions
Relutionslip between lome und lost countiies
Cultuiul dilleiences
Vuiiutions in cultuie, giowtl iutes und
other factors between regions
Clunging economic enviionment
Rising wuges
Shifting government incentives
Mismutcled iisk toleiunce
Intellectuul piopeity piotection
Luboi conditions
Inliustiuctuie
Coiiuption
Goveinment instubility
Market presence
Complucency
Slilts in politicul powei
Shifts in power brokers
Clunges in iegulution
Clunges in budget conditions
Clunges in tux policies
Surges in demand
Inloimution gup between leudquuiteis
und locul muikets
Luck ol up-to-dute dutu
Giowing competition
Inudequute dutu
Cultuiul dilleiences between iegions
Goveinment instubility
Clunging economic enviionment
Imputience
Market exit
Buiiieis to ieentiy
Repututionul iisk
Piolibitions uguinst cupitul, piont ieputiiution
Exiting too euily oi too lute
Coipoiute iesponsibility und etlics
Supply chain
Etlics
Working conditions
Human rights
Community development issues
Cuibon lootpiint
Security
Intellectuul piopeity iiglts
Pioduct quulity
Clunging muiket conditions
Rising luboi costs
Rising iuw muteiiuls costs
Tiunsit times
Customs deluys
Teiioiism
Rising eneigy piices
Resouice sloituges
Weuk supplieis
Inudequute downstieum dutu
Oveidependence on limited supplieis
Cybeiuttucks
Oveidependence on one mode oi
route of transportation
Fraud
Coiiuption
Contacts and contributors
Miles Everson
Puitnei, PwC US
New Yoik, NY
+1 (646) 471 8620
Christopher Michaelson
Diiectoi, PwC US
Minneupolis, MN
+1 (612) S96 4497
Acknowledgements
We tlunk tle PwC expeits listed ubove wlo took tle time to sluie tleii viewpoints witl oui editoiiul teum.
Speciul tlunks to Cliistoplei Micluelson loi instiguting und slepleiding tlis iepoit. Tle editoiiul teum loi tlis
publicution included Cliistoplei Micluelson, Lindu Coimun, Sleunu Tumbouigi, Ciistinu Ampil, Luiiy Yu, Emily Cluicl,
Lock Nelson, Lisu Cockette, Suzunne Snowden und Slunnon Sclieibmun.
In uddition, Suge Newmun liom tle Euiusiu Gioup seived us un udvisoi to tle unulysis leiein.
Slunnon Sclieibmun led pioject munugement und muiketing elloits; Jucqui Rivett, Guiy Fuiimun und Odgis + Compuny
weie iesponsible loi design und pioduction; und Adibu Klun und Tiucy Fullum cooidinuted online piomotion.
Alastair Rimmer
Puitnei, PwC UK
London
+44 (0) 20 7213 2041
Harry G. Broadman
Munuging Diiectoi, PwC US
Wuslington, DC
+1 (202) 312 0807
Teiiitoiy contiibutois
Leuding contiibutois
Brenda Eprile
Puitnei, PwC Cunudu
+1 (416) 869 2349
Christof Menzies
Puitnei, PwC Geimuny
+49 (69) 9S8S 1122
Bob Semple
Puitnei, PwC Iielund
+3S3 (0) 1 7926434
Mark Stephen
Puitnei, PwC UK
+44 (0) 20 7804 3098
Keith Stephenson
Puitnei, PwC Singupoie
+6S 6236 33S8
Felix Sutter
Puitnei, PwC Singupoie
+6S 6236 7348
Richard Sykes
Puitnei, PwC UK
+44 (0) 20 7804 S466
Sandra Birkensleigh
Puitnei, PwC Austiuliu
+61 (7) 32S7 8408
Hans Borghouts
Puitnei, PwC Netleilunds
+31 (0) 88 792 7671
Marie Carr
Puitnei, PwC US
+1 (312) 298 6823
Ward Duvall
Puitnei, PwC UK
+44 (0) 20 7212 1761

Keith Robinson
Diiectoi, PwC UK
London
+44 (0) 20 721 35554
David Van Oss
Diiectoi, PwC UK
London
+44 (0) 7802 244 741
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