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News Release from: Economist Intelligence Unit | Subject: Overseas customers report
Edited by the Manufacturingtalk Editorial
Team on 09 October 2006
Give more control to local managers
To understand overseas customers better, get local, new report tells multinationals
Executives within multinational firms agree their organisations would perform better if they gave more control to local managers in overseas markets, finds a new Economist Intelligence Unit survey and report commissioned by UK Trade and Investment A majority of the 298 respondents worldwide admit that they understand customers and employees in overseas markets less well than those in home markets
This article was originally published on Manufacturingtalk on 21 Nov 2006 at 8.00am (UK)
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However the report also reveals that the biggest consideration in giving more independence to overseas operations is the quality of local management.
This deficit in customer understanding matters more and more: 25% of the companies in the survey employ more than half their staff outside of their home country, while 33% generate more than half their revenue abroad.
"Think global, act local is hardly a new idea but many firms have yet to strike the right balance between local autonomy and central control," said Andrew Palmer, the editor of the report.
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Andrew Cahn, Chief Executive of UK Trade and Investment, commented: "This survey highlights the challenges that globalisation poses for international business".
"Companies need to understand their overseas customers and the context in which they are working better".
"Identifying good quality local staff and management is crucial in achieving this".
"Doing this is rarely easy and requires reliable and timely advice - national trade and investment organisations and independent consultants can both play key roles".
The survey found that more than two-thirds of companies vary the degree of autonomy they allow overseas managers and that the level of decentralisation depends crucially on the quality of local management.
Some business cultures clearly prefer tighter control of overseas operations-only 18% of Asian respondents disagree that more local control would improve performance, but in North America the proportion jumps to 40%.
Executives expect to see increased devolution of customer-facing functions within their business-customer service and support, sales, marketing and public relations, as well as human resources, are all expected to become more decentralised over the next three years.
Head office isn't dead yet, however-nearly two thirds of respondents think that the role of HQ was as important as ever.
Furthermore, executives think that functions such as business planning and growth strategy, finance, IT and compliance are likely to become more centralised, not less.
Other key findings of the report include:.
* Localisation entails risks - Respondents highlight a range of risks associated with increased localisation, ranging from inconsistent systems and product quality standards to higher costs and poorer standards of corporate governance.
Governance and compliance concerns are seen as the biggest barriers to greater decentralisation.
* A balanced approach is best - In practice, most activities are neither wholly centralised nor wholly decentralised.
Many firms define central parameters within which local markets can retain some flexibility-a majority of respondents give local country managers authority to set pricing levels within pre-determined price ceilings and floors, for example.
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