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Centrally governed global companies struggle to compete in emerging markets, reports Hay Group


Centrally governed multinational companies are struggling to compete with domestic competitors in emerging markets, yet are unwilling to adapt their approach to flexibility, according to new research by management consultancy, Hay Group.

Despite nearly two thirds (63%) of respondents claiming that central rule is holding back their companies' ability to succeed in emerging markets, a third (28%) categorically state that their organisation would not consider adopting another approach.

A further two thirds (65%) believe that central governance poses a serious threat to the business, with the majority (72%) of those questioned pointing to a lack of autonomy to respond flexibly to local market conditions as a key reason for ineffectiveness in emerging markets.

Hay Group's study is based on interviews with 200 senior decision makers in multinational organisations.

Jon Dymond, director at Hay Group said: "Few companies have been willing to address the real challenge of creating an operating model that is truly in tune with emerging markets. Yet, effective organisations must be able to adapt and connect to local markets in order to fulfil their potential - success should not be hampered by restrictions put in place by the corporate centre."

Respondents pointed to multinational companies' ability to compete effectively with local players as a key area for improvement, giving it an average effectiveness rating of 5.2 out of 10.

It is not only local competition that suffers as a result of rigid business practices - the operating model was rated just 6.0 out of 10 for effectiveness, while leadership, values and culture were all highlighted as areas for improvement, with effectiveness ratings of just 6.3.

Dymond added: "There is no 'one size fits all' approach to succeeding in emerging markets - the most effective balance of centralised and decentralised control will vary from company to company.

"But, for multinationals to really succeed in these high-growth economies, they will need to be brave enough to adopt a more flexible approach that engages staff at all levels and ensures that they have the right people, with the right insight in the right role.

"From the values, culture and operating model of a company, to its corporate policies, reporting systems and management approach, the most competitive businesses will be those that are most agile and able to respond to change quickly and efficiently."