Globalization continues at its inexorable pace. A worldwide survey of 497 senior executives conducted by the Economist Intelligence Unit for AT&T shows that 42% of firms will be deriving half or more of their revenue from foreign markets (those outside their home base) in two years time. This compares to 30% of firms who can claim this today. China, the United States and India are the overseas destinations of greatest interest to firms. One-fifth of surveyed executives consider China to be the focus of their company’s growth strategy, while 13% cite the United States and 10% mention India.
Companies will employ a variety of strategies and entry vehicles to achieve international growth over the next two years. Nearly half (47%) will set up joint ventures, and sales or marketing alliances will be also be prominent, as cited by 43% of respondents. For many firms, research and development alliances will prove an important means of tapping new sources of innovation.
Mergers and acquisitions (M&A) will also be a favoured growth vehicle, cited by 40% of the executives polled, and can be the best option for maintaining control over operations in an overseas market and acquiring local talent. To help ensure success of M&A and joint ventures, management leadership and direction, clarity of objectives and a clear roadmap for integration are required.
There can be numerous obstacles to successful acquisitions and ventures overseas. Among them is the difficulty of integrating communications and IT networks, which is cited by 13% of executives as a common M&A pitfall. When network integration fails, the most frequent reason (mentioned by 34% of respondents) is the incompatibility of the merging parties' IT systems. In many cases, failure to engage IT staff early in merger talks also hinders integration later on, as does inadequate due diligence of IT systems.
No matter what course companies decide to follow in extending their reach across borders, the support of IT and networks is critical to making it work. Most companies agree that they could not carry out their plans for international growth without the help of advanced technologies. IP-based networks in particular lend themselves to globalization, offering a flexible, consistent and secure way of holding communications together across dispersed global operations.