Theodore Levitt, the Harvard Business professor credited with coining the term, globalization envisioned a focus on interdependence across borders. However, he has seen its foundation shake of late. From The Wall Street Journal (April 29, 2015) comes this headline: “Is Globalization Finished?” And this fromThe Economist (June 25, 2015): “Globalization’s Retreat?”
Here’s the reason for the apparent retreat, courtesy of Gary Hufbauer, former U.S. Treasury official, writing on www.ideaslaboratory.com, General Electric’s thought-leadership platform: “Globalization… is actually not flourishing. For seven years and counting, world trade growth has failed to outpace — and thus drive — world GDP growth, while annual world foreign direct investment flows have fallen well below their 2007 peak of $2.2 trillion. ’Micro-protectionism’ has become the political flavor of the moment, exemplified by ‘Buy America’ and ’Buy Brazil’ practices.”
Throw “Buy China” in there, too. In 2014, General Motors made $2.1 billion in China, about a quarter of what it made in North American, where it sold 130,000 fewer vehicles. Why the imbalance? Around half of what GM sells in China are Wulings – inexpensive, low-margin minivans designed by one of GMs’ Chinese partners. In 2014, Chinese customers bought 1.6 million Wulings and only 79,000 high-profit Cadillacs!
So, if you’re an executive charged with cultivating profitable global markets, “micro-protectionism” is a pesky idiom that will keep you up at night.
New opportunities spawned by Trans-Atlantic and Trans-Pacific trade partnerships and efforts by the WTO will reboot globalization and bring about a host of challenges as well. In particular, executives are tasked with maintaining profitable growth while balancing strong operational efficiencies at a time when globalization’s resurgence only strengthens customer leverage. Newly emboldened customers are pressing for global supply agreements, ultra-competitive pricing and anywhere/anytime delivery.
How are global enterprises to earn leverage of their own? The answer lies in harnessing enterprise data on a global scale to maximize revenue, profit and margin: the three rudiments of shareholder value.
Indeed, today’s best-managed companies are using big data and analytics to combat the effects of globalization.These companies are able to utilize internal and external data to set prices in a single, rules-based system to ensure deals are closed at their most profitable price. With the proper use of data and analytics, companies can identify price, margin and profit opportunities for any part of their business.
Compiling data in this way can be a big task, but focusing on these three areas can help expedite the process:
1. Boost win rate: Arm your teams with data – both current and historical – and analytics that shed light on competitive offerings and market-segment trends. From this you’ll glean a variety of compelling insights: Where do the best cross-sell opportunities lie; what will customers want next? Which customers appear poised to defect and what can you do to prevent their defection? And which of your reps are contributing the most to profitable growth?
2. Increase average deal size: Equip reps with win-loss, compliance and pricing data to win a negotiation advantage. If your sales team has the right, data-driven support, they will avoid pricing arbitrarily and maintain focus on your ultimate goals. For this to work, make sure that you’re able to determine and deliver the optimal price and guidance for any given deal. Impose a single rules-based system driven by the most salient data — internal and external. (Said differently, make sure that no rep leaves a negotiation without an affirmative answer to this question: Have I charged the right price?The fact is, too many companies don’t even bother to ask the question!)
3. Shorten the sales cycle: Much of this comes down to exercising control; that is, the ability to evaluate pricing strategy for each deal. For example, when does it make sense to cede on price, or offer strategic concessions, in exchange for closing quickly? But don’t forget that shortening the sales cycle also comes down to your ability to sell not just “product” but perceived value. After all, the more highly valued the deliverable, the faster a customer will sign. So if you aim to close faster (and who doesn’t?), train your field reps to sell not what’s in the box, but that which your product enables.
Improving each of these benchmarks by just 10% will trigger a 34% acceleration in sales velocity – the critical measure of how much cash a company is generating, and how fast.
You needn’t be a Harvard professor to conclude that on a global stage tilting in favor of customers, the enterprise’s best strategy is not to chase every new-business opportunity. Rather, leverage enterprise data and proven analytics to sharpen the three-pronged force multiplier above to retain the upper hand. When you start to look at it from this standpoint, globalization can work in your company’s favor.
Mike Hoffman is chief commercial officer for Vendavo.
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