Helena, there are reported high levels of corporate savings in the UK. What kind of strategy would you recommend to companies in the current environment?
Well a lot are being very defensive and actually I think using some of their savings to buy back their own equity, and it’s hard for them to think of where the investment opportunities are. But I think the most obvious place is emerging markets. Not all universally, but there are clearly better demographics in places like Brazil as well as in the most obvious places like India, I suppose, where there’s a young population, and they often haven’t had the same problems of over-indebtedness as many of the developed markets have.
Clearly you’ve had a rollercoaster ride in those markets this year, so there may be as well some better opportunities than there might have been when everyone was assuming it was a sort of one way, you know, upward swing in those countries. So that seems to be what a lot of companies are at least eyeing up at the moment.
Picking up on expanding overseas, would you recommend a global strategy or one that’s adapted to the local circumstances?
Well I think you sort of have to do both really. I mean I think for many people expanding globally means looking for relevant opportunities in a local market, and usually adapting your wares to suit that market, whether it be recognising that consumers are in a different phase in the economic cycle, they might be more sort of just getting into mobile telephony than we certainly are, and recognising that those, there isn’t a one size fits all to consumption patterns globally.
But having said that, there obviously are things that don’t need to be as adapted as much, you know, people clearly there is some globalisation of and people are interested in foodstuffs from around the world, discussing with another person earlier today, Ikea, which has obviously taken a very successful product offering and really adapted it very minimally.
So I don’t think, I think it all comes down to what area a company is in and what it’s looking to do, how quickly and, you know, with how much strength it already has to be able to impose its own approach.
And finally, picking up emerging markets again, many, for many businesses this is seen as the silver bullet of market opportunities, but what kind of strategic challenges from your experience do these emerging markets create?
Well certainly I don’t think they are necessarily the silver bullet, I think you have to be very thoughtful about how you approach any overseas market, but particularly ones where there’s perhaps less infrastructure, where labour laws might be quite different, and tread carefully. And we’ve also seen a lot of those economies are not yet really domestic. So they’re not immune from the global problems that we have, you know, often they’re depending on big export markets which are the established western developed economies.
So having borne that in mind, then I think, you know, mind your eye is the best advice really because as I said labour laws for example are very different globally, and we’ve seen quite a few companies, particularly in consumer areas, get into some trouble by, for example, expanding into more developing markets, having scandals effectively where people have died on what seemed locally to be quite normal practices in terms of factories, and obviously that causing a lot of reputational damage as well as the human disaster that that is.
So I think being very careful that you understand what you’re doing and I think employing local knowledge. I mean the best partnerships that we’ve had have definitely been where we’ve engaged with people who really know the local terrain.
Helena Morrissey, thank you very much.
Helena Morrissey was talking to Leslie Budd, of the Open University's Faculty of Business and Law, after a recording of The Bottom Line.