January 26, 2006 09:00 ET

Search for New Customers Displaces Cost-Cutting as Impetus for Global Expansion: PwC 9th Annual Global CEO Survey

TORONTO, ONTARIO--(CCNMatthews - Jan. 26, 2006) -

Canadian CEOs more concerned about regulation, trade barriers/protectionism barriers than global counterparts

As companies expand across the globe, especially into the BRICs economies-Brazil, Russia, India, and China-finding new customers and markets, not just cost cutting, is now their primary goal, according to PricewaterhouseCoopers' 9th Annual Global CEO Survey.

Nearly two-thirds of the 1,410 CEOs surveyed and 66% of Canadian respondents are confident that globalization will have a positive impact on their business over the next three years. Canadian CEOs cite regulation, trade barriers/protectionism as the primary impediment to globalization (83%)-more than 20% above the global average. Other challenges cited by Canadian CEOs include overregulation (71%), political instability (52%), terrorism (50%), followed by social issues (43%), currency policies (40%) and loss of intellectual capital (40%).

"Cutting costs is no longer the sole purpose for globalization. In the new phase of global expansion, companies are focused on finding and serving new customers in growing markets around the world," said Robert Scott, Leader of the PwC Canada IT Advisory Practice and co-author of a recent study on offshore outsourcing-A Fine Balance: The Buying and Selling of Canada. "The economies of Brazil, Russia, India, and, of course, China were once seen primarily as sources of low-cost production. However, they now present substantial growth opportunities for both multinational and locally-based companies, and at the same time are producing a new crop of serious global competitors."

A New Global Focus: Brazil, Russia, India, China

Overall, 71% of all respondents say their company plans to do business in at least one of the BRIC countries over the next three years. 56% of Canadian CEOs view China as the most significant market opportunity, followed by India (48%), Brazil (45%) and Russia (26%). Canadian CEOs also see China (42%) and India (28%) as the greatest competitive threats to other markets. CEOs in the BRIC countries saw competitive advantage in the quality and productivity of their workforces as well as in their political and institutional stability and proximity to large consumer markets.

CEOs around the world said that expansion into Brazil, Russia, India and China is motivated by the need to significantly expand their customer base and to serve existing customers effectively. As for other motivations for doing business in the BRICs economies, China leads in terms of cost reduction and increasing capacity. India, with its relatively low labour-cost levels, outpaces Brazil and Russia as a cost-reducing destination. India also ranks highest for accessing a highly skilled talent pool.

Respondents identified a broad range of activities to achieve their strategic objectives in the BRICs. Globally, forming alliances topped the list, followed by opening new offices, developing unique products, outsourcing, mergers and acquisitions, and offshoring. Canadian CEOs differed from this global view putting outsourcing to a third party and offshoring within their own company ahead of developing unique products and mergers and acquisitions. CEOs from more developed countries are pursuing such activities in China more than in the other BRICS. This trend, however, did not hold true for CEOs from developing countries.

Complexity: Managing the Inevitable

Complexity brought on by increased overseas commercial activity and by geopolitical forces is increasing along with globalization. Overall, 74% of Canadian CEOs surveyed said that the level of complexity in their company is higher than it was three years ago, and 24% believe it is much higher. However, survey findings suggest that CEOs around the world are not managing complexity very well. The percentage of Canadian CEOs rating their performance in managing complexity as "very good" on a number of criteria ranges from just 5 to 19%.

Canadian CEOs identified mergers and acquisitions (69%), offshoring (69%), and launching new products and services (68%) as factors adding the most complexity to their organizations. Language and cultural differences were cited to cause the least amount of complexity in Canada, the survey found.

External forces that significantly increase complexity include national and international laws and regulations, actions by competitors, and changing customer requirements.

Nearly all respondents (97%) are engaged in at least one program to reduce complexity in their organization, and 77% are engaged in five or more such programs. Canadian CEOs are focusing their complexity-reducing activities primarily in the areas of information technology (81%) and organizational structure (78%).

"Complexity is a fact of life, but not all complexity is necessary or adds value. By measuring complexity and eradicating it where it reduces value, CEOs can create strategic advantage in our increasingly global economy," said Mr. Scott.

Survey Methodology

For the PwC 9th Annual Global CEO Survey, 1,410 interviews with CEOs were conducted in 45 countries during the last quarter of 2005. The majority of interviews were conducted by telephone. A postal survey was administered in Japan. Face-to-face interviews were conducted in China and Kenya. The research was coordinated by the PwC International Survey Unit, Belfast, Northern Ireland, in cooperation with project managers and a global advisory board of PwC partners.

By region, 463 interviews were conducted in Europe, 331 in Asia-Pacific, 301 in South America, 187 in the United States (plus, in North America, 58 in Canada and 14 in Mexico), and 56 in the Middle East and Africa. By industry, financial services companies represent 17% of the interviews; technology and media companies represent 14%; and companies in the products sector (consumer and industrial products manufacturers, distributors, and retailers) represent 68%.

Twenty-three percent of the respondents' companies earn revenues in excess of $1 billion; 10 percent earn $500 million to $1 billion; 58% earn less than $500 million; and 9% offered no information. The highest concentration of companies with revenues of more than $1 billion is in Asia-Pacific (34%), followed by Europe (30%) and the U.S. (16%).

Fifty-two percent of this year's participants are publicly listed on a stock exchange, while 47% are privately owned. One percent did not specify their companies' status.

PricewaterhouseCoopers ( provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP ( and its related entities have more than 4,300 partners and staff in offices across the country.

(Unless otherwise indicated, "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, Canada, an Ontario limited liability partnership. PricewaterhouseCoopers LLP, Canada, is a member firm of PricewaterhouseCoopers International Limited.)

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