"http://biz.thestar.com.my/news/story.asp?file=/2001/3/26/business/26bm05ac&sec=business"
(See link above for scorecard chart)
Word of advice to potential globalisers By Liau Y-Sing
PROMPTED by market forces, deregulation and the relaxation of foreign ownership rules, many financial services companies have jumped on the globalisation bandwagon in the past two decades, but few have emerged with a positive scorecard, according to global consulting firm Accenture.
In an analysis of the financial performance and operating strategies of 31 of the largest global financial services firms over a 10-year period, Accenture (formerly Andersen Consulting) found that only 14 of them achieved superior return to shareholders and only 5 did so while also achieving superior revenue growth.
Whether they chose to move out in pursuit of their customers or expanded due to low-growth domestic environments, the successful players shared a common recipe.
"In each new country they entered, they managed to leverage on a clear edge of skill or scale which they possessed,'' Accenture said.
Their competitive advantages include brand management, scale in back-office operations achieved through the use of common systems and shared services, core competencies around distribution and customer management, and internal processing for services such as human resources, finance and purchasing.
An example is Chase Manhattan (now J.P. Morgan Chase) which has built its global customer business by leveraging a competitive advantage based on relationship banking and outstanding service quality.
Accenture said these were two areas where the company had significant expertise and for which it was well-known in its existing markets.
This principle was also reflected in Citicorp which leveraged on its skills in brand, customer management and credit card operations, it said.
Accenture said this was in contrast to many of the companies studied, which had no clear strategy, or focused plan for capturing value via global expansion.
These players simply expanded through the acquisition of operations or the opening of offices in foreign countries, but they either did not have an edge over local players, or failed to exploit the advantage they had.
The consulting firm pointed to the many British, European, Japanese and Australian banks and insurers which had moved into foreign territory on their customers' heels, but the absence of a compelling value proposition caused them to remain sub-scale and their parent companies' performance was accordingly affected.
The successful globalisers exhibited exceptional focus in their strategy. In so doing, they avoided the common pitfall of trying to "do everything at once'' by replicating their full-service domestic business in a foreign market.
Accenture said they focused on their strength which was either a particular skill or a unique product offering. This is illustrated in the famous success story of American Express, which has built its globalisation efforts on its strongest product, the charge card business.
>From there, American Express branched out to other
products such as its banking offering.
The study also found that other players such as HSBC and AIG made their foray into globalisation via their strongest product, with the former through cash management and trade finance, and the latter through commercial insurance and personal insurance in Asia.
Another word of advice to potential globalisers: Align your business models to reflect your inherent advantages. Case in point: GE Capital which has an edge in its management know-how, entrepreneurial culture and management toolkit.
According to Accenture, GE's business model enables the company to transfer these disciplines from country to country while providing the local management with a high degree of autonomy.
Successful globalisers have also been known to be sensitive to needs of new markets they enter.
A careful balance has to be struck between a proactive, hands-on approach to see that the new operations leverage the parents' advantages with a hands-off approach which give local management the authority to respond to local needs and market conditions.
Accenture said HSBC was the best illustration of this principle. The group has a unique system of hiring, grooming and developing an elite group of 400 international officers who function as "the cultural glue'' that permeates the company's leadership globally.
It said HSBC fully empowered its country and regional managers while overlaying all decision-making with uniform global management structures and processes.
Confirming a widespread belief, the study said the way to go in the future was globalisation. It said the pace of globalisation was expected to accelerate as the present oversupply in global financial services pushed companies to merge and cut costs by combining head-office functions.
The study said the drive for globalisation would also be intensified by the harmonisation of international laws, regulations and accounting practices.
Financial service providers are not the only ones in the globalisation game. Accenture said stock exchanges had begun forming alliances and were rapidly merging as seen in the alliance between the Deutsche TerminBorse and the London Stock Exchange.
It said that Nasdaq was also moving quickly working through joint ventures and by encouraging foreign companies to list
Accenture expects the mortgage, payments and general insurance businesses to begin globalisation efforts in the next five years.
"http://biz.thestar.com.my/news/story.asp?file=/2001/3/26/business/26bm05ac&sec=business"
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