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January 25, 2006 8:33 am

CEOs upbeat on impact of globalisation

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Chief executives are optimistic about the impact of globalisation on their companies, believing that it brings opportunities to reach new customers and to lower costs, a detailed survey launched at the start of the World Economic Forum shows.

Leaders of the world’s companies also think China is the best place to locate their overseas operations, with 55 per cent of CEOs reporting that they plan to do business there in the next three years.

The results are included in a survey of 1,400 chief executives around the world and reveal them to be in positive mood after two very strong years of global economic growth and sharp rises in world trade.

The most popular reason given for doing business in India, Brazil, Russia as well as China was to access new customers from the increasingly rich countries. Cutting costs and making use of cheap labour also featured prominently.

But chief executives complained that operating in an increasing number of countries substantially increased the complexity of their companies. Almost all the companies surveyed reported they had initiated internal strategies to reduce the complexity of their technology and their operations.

The PwC survey showed that company executives were not reaching out across the world when they chose to do business in other countries, but were more likely to confine their expansion to regional markets. European companies tended to favour expansion in Russia, while South East Asian companies  saw more opportunities in China and India.

Among Brazil, Russia, India and China, chief executives marked Russia very poorly for failing to have a fair and transparent judicial system, while India scored highly. Company leaders believed China’s gross domestic product  per head to be a significant advantage even though it is the lowest of the four countries.

Communist China also, ironically, scored highest for having a market economy with 90 per cent of chief executives saying this feature was a significant advantage of operating in the country.

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