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This year, BDO has set out once again to understand how CFOs from globally aspiring companies view their growth prospects overseas, as well as looked at what is changing and what, in the last year, has made a difference to their plans. The key findings were: - Mid-cap CFOs are nearly all (95%) confident that their three year plans to expand internationally will succeed - China, USA and Germany are the top three countries that are both global investors and attractors of inward investment. For China, opportunity and risk go hand in hand - Finding local people with the right skills and knowledge is more challenging than finding the money to expand abroad For more information on the BDO Ambition Survey 2011 see: http://www.bdointernational.com/ambitionsurvey2011
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BDO AMBITION SURVEY 2011Global opportunitiesSUMMARY OF GLOBAL RESULTS
BDO / Strategy OneSeptember 2011
BDO Ambition Survey 2011
METHODOLOGY
• All survey respondents and companies were required to satisfy specific criteria:- C-suite CFOs, FDs and other Heads of Finance - all reporting to the CEO- Have global revenues of between US $50m – US $1bn- Have international offices outside their headquartered country- Expect revenues representing the international side of their businesses to account for a
higher or about the same proportion in the next 3 years- Companies operating in one of the following sectors or industries: Financial services,
Manufacturing, Real estate & construction, TMT (Technology, Media, Telecommunications), Retail, Natural resources, Professional services, Tourism/ leisure/ hospitality, Transport and utilities
• 751 telephone interviews were conducted globally• Fieldwork was conducted between 23 May & 8 July 2011
Page 2
KEY FINDINGSExpanding abroad: opportunities
• Despite the economic and regulatory challenges facing businesses, 95% of mid-cap CFOs are confident that their 3 year plans to expand internationally will succeed- CFOs’ business plans back their confidence: on average they expect 44% of revenue in
3 years’ time to come from international sources (up from 37% now)
• CFOs say they have no problem getting money to expand abroad, but finding the right people - skilled, trustworthy and cross-cultural - is a real challenge
• CFOs see China as having 3 times the business opportunity of Brazil, the UK or France. However, China is a gamble as it has the most reward and the most risk factors of any country- China, USA and Germany are the top 3 global investment destinations and sources
Page 3BDO Ambition Survey 2011
KEY FINDINGS CONTINUTEDExpanding abroad: making it happen
• The best sources of advice for CFOs on how to expand come from close to home - internal sources and trusted customers, along with accountants and tax advisers who understand their clients’ businesses
• CFOs are in a hurry to expand - they expect to open an office within a year of making a decision, which means that aligning customers, staff, partners, distributors, advisers and bankers is critical
• Most businesses act fast once a decision to open a new office is made• Internal sources and existing customers are the most trusted sources
when expanding• For external advice, accountants/ tax advisers are the most trusted
professionals• Most businesses will expand in their core sector, with existing products
and services
Page 4BDO Ambition Survey 2011
KEY FINDINGS CONTINUTEDExpanding abroad: good advice
• Key insights from CFOs: be prepared and invest in the right people- Do thorough research to improve your knowledge of the market- Recruitment of good staff is key to success- Find good partners in the region- Have a strong business plan- Make sure you understand the culture and language
Page 5BDO Ambition Survey 2011
BUSINESS OPPORTUNITIES AND CHALLENGES
CONDUCTING BUSINESS ABROAD HAS BECOME MORE DIFFICULT IN THE LAST 3 YEARS
Page 7Much more
difficult
France
Australia
UK
Japan
Germany
Canada
USA
China
Saudi Arabia
Russia
Netherlands
India
Brazil
Total
26%
20%
14%
12%
12%
4%
19%
20%
20%
20%
16%
30%
34%
19%
52%
50%
62%
48%
56%
66%
57%
33%
32%
34%
50%
40%
42%
48%
22%
22%
20%
18%
32%
26%
18%
42%
38%
30%
26%
22%
14%
26%
4%
12%
2%
4%
6%
2%
2%
3%
5%
6%
6%
6%
8%
10%
3%
Much easier
Easier
About the same
More difficult
Much more difficult
BDO Ambition Survey 2011
HIGH CFO CONFIDENCE IN COMPANY’S OVERSEAS EXPANSION
Page 8Much more
difficult
Japan
Russia
France
UK
Germany
Canada
Brazil
Netherlands
Australia
USA
China
Saudi Arabia
India
Total
4%
18%
22%
32%
34%
38%
38%
40%
44%
47%
48%
66%
68%
40%
58%
74%
74%
64%
66%
60%
58%
58%
52%
48%
48%
32%
32%
55%
12%
6%
2%
4%
2%
4%
3%
1%
3%
Very confident
Fairly con-fident
Not confident
BDO Ambition Survey 2011
COMPANIES IN ALL COUNTRIES SURVEYED EXPECT MORE FUTURE REVENUE TO COME FROM ABROAD
Page 9Much more
difficult
Saudi Arabia
China
Japan
Brazil
Russia
India
USA
UK
Germany
France
Australia
Canada
Netherlands
35%
35%
35%
37%
39%
40%
42%
46%
48%
51%
52%
58%
59%
30%
29%
29%
25%
27%
31%
35%
40%
42%
47%
42%
50%
56%
Current revenue
Expected revenue in 3 years' time
BDO Ambition Survey 2011
MOST COMPANIES ARE LOOKING TO EXPAND IN CORE SECTOR
Page 10Much more
difficult
BDO Ambition Survey 2011
70%5%
25%
Core sector
New sectors
Both
46%
9%
46%
Existing products and services
New products and services
Both
Existing products
New products
Both
Core sector 85% 50% 58%
New sectors
2% 23% 4%
Both 13% 27% 38%
MARKET SIZE AND GROWTH OPPORTUNITIES DRIVE INTERNATIONAL EXPANSION
Page 11Much more
difficult
BDO Ambition Survey 2011
Market size
Higher growth rates
Acceptable geo-political risk
Opportunity to be market leader
Efficient distribution networks
Cheaper labour rates
Familiar culture and language
Under-exploited demand for my company's products
Acquisition or merger opportunities
Domestic market saturation
60%
50%
46%
37%
28%
27%
24%
22%
22%
21%
20%
20%
20%
19%
16%
16%
16%
15%
10%
COMPANIES NAVIGATE A RANGE OF CHALLENGES IN INTERNATIONAL EXPANSION
Page 12Much more
difficult
BDO Ambition Survey 2011
Intensity of local competition
Red tape & Bureaucracy
Currency fluctuations
Cultural or language barriers
Finding the right local management
Geo-political country risks
Lack of brand awareness
Corruption or ethics
Regulatory interference
Start-up costs and time
Not enough internal company resources
Getting existing staff to relocate to this country
Insufficient legal and financial infrastructures
Ability to manage environmental risks
Foreign ownership restrictions
Raising finance
35%
34%
32%
25%
25%
21%
19%
16%
15%
15%
12%
11%
11%
11%
10%
8%
THE BIGGEST CHALLENGES RELATE TO RED TAPE AND FINDING THE RIGHT PEOPLE
Page 13Much more
difficult
BDO Ambition Survey 2011
Start-up costs and time
Raising finance
Geo-political country risks
Regulatory interference
Cultural or language barriers
Intensity of local competition
Currency fluctuations
Finding the right local management
Red tape & Bureaucracy
3%
5%
8%
5%
10%
13%
8%
11%
14%
4%
4%
4%
8%
7%
6%
9%
11%
13%
3%
3%
3%
4%
4%
5%
8%
11%
7%
First mention
Second mention
Third mention
• Red tape is a particular challenge to French and Russian companies, Retailers, and businesses expanding with new products & services
• Local people- Japanese businesses, Prof services/ Transport & utilities, and those expanding In India
• Currency- Chinese/ Brazilian/ German businesses, and those expanding in US/ Canada
• Competition- Chinese, German and French businesses, Retailers, businesses expanding with new products & services , and those expanding into Europe
• Culture/ language- Chinese/ Japanese/ Australian/ French businesses, and businesses looking to expand in India/ Brazil
INVESTMENT IN PEOPLE WILL BE A MAIN FOCUS OVER THE NEXT THREE YEARS
Page 14Much more
difficult
BDO Ambition Survey 2011
Outsourcing
Time
Service delivery
Acquisitions
Brand and marketing
Capital
Product development
Channels of distribution
People
3%
5%
5%
9%
8%
18%
12%
15%
19%
3%
5%
4%
7%
10%
10%
13%
13%
21%
3%
5%
7%
7%
11%
5%
10%
10%
12%
First mention
Second mention
Third mention
• People are a particular focus in all European countries, Australia, and Professional Services businesses
• Channels of distribution - German/ Brazilian/ Russian/ Chinese companies, Manufacturers and businesses expanding into Russia
• Product development - Brazilian & Chinese businesses, Manufacturers and businesses expanding into Western Europe/ US/ Russia
• Capital - UK/ Saudi, Real Estate and Natural Resources companies
• Brand & marketing - Companies from all BRIC countries + Japan, Financial services businesses and Manufacturers
• Acquisitions’ North American, German, French, and Australian companies
INTERNAL SOURCES AND EXISTING CONTACTS ARE THE MOST TRUSTED SOURCES OF ADVISE
Page 15Much more
difficult
BDO Ambition Survey 2011
Local business advisors
Media contacts
Suppliers/ distributors
Market research
Investment banks
Government agencies
Trade organisations
Management consultants
Local specialists
Law firms
Accountants/tax advisors
Clients/ customers
Internal sources
1%
3%
4%
5%
6%
5%
9%
6%
8%
9%
12%
28%
2%
4%
4%
5%
7%
7%
5%
8%
11%
17%
12%
9%
2%
5%
6%
4%
6%
7%
5%
9%
8%
6%
13%
8%
First mention
Second mention
Third mention
• European businesses are more likely to turn to internal sources (58%)
• German (62%), Chinese (53%) and Russian businesses (50%) put more trust in clients/ existing contacts
• Accountants/ tax advisers are most widely used in the UK/ Netherlands (52%), Australia (50%) and USA (46%)
• Australians and North Americans are more likely to turn to law firms (52% and 41%)
• German and Chinese businesses are far more likely to turn to trade organisations, etc (42%/ 33%)
• Chinese businesses are by far the most likely to turn to Government agencies (42%)
• Brazilian businesses show the greatest trust in market research (44%)
GAINING FUNDING FOR INTERNATIONAL EXPANSION IS NOT GENERALLY A COMMON PROBLEM
Page 16Much more
difficult
BDO Ambition Survey 2011
Japan
India
Australia
USA
Canada
Saudi Arabia
China
France
UK
Brazil
Germany
Netherlands
Russia
Total
8%
4%
22%
13%
24%
24%
8%
30%
6%
38%
26%
18%
16%
17%
92%
90%
62%
74%
64%
64%
80%
58%
74%
48%
60%
64%
54%
69%
2%
6%
8%
8%
8%
9%
12%
12%
14%
14%
16%
20%
10%
Yes- OftenYes- SometimesNo
Difficulty gaining funding?
LOCAL KNOWLEDGE AND PEOPLE ISSUES ARE KEY WHEN EXPANDING INTERNATIONALLY
Page 17
Take advice from as many different sources as you can
Make several trips to the country concerned
Do a proper risk evaluation
Ensure have enough finance
Ensure the product itself is right
Make sure you have language skills in place
Have a strong business plan
Find good contacts/strong partners in the region
Recruitment of good staff is key
Improve your knowledge of the market in question/do thorough research
2%
4%
4%
5%
6%
9%
9%
15%
18%
36%
BDO Ambition Survey 2011
BDO GLOBAL MARKET OPPORTUNITY INDEX
GLOBAL MARKET OPPORTUNITY INDEXExplanation
Page 19
BDO GLOBAL MARKET OPPORTUNITY INDEXThe index was created from CFOs’ stated intentions to expand in specific countries. The arithmetic mean of 100 is based around intention to expand to all 18 countries listed PROCESSCFOs’ stated intentions to expand into specific countries were based on the frequency of CFO mentions of expanding into a country, and the priority order of the country being mentioned, up to a third mentionWe correlated the ‘Specific countries that will be a focus for general expansion in the next three years’ against a pre-determined list of nineteen opportunity factors and sixteen challenge factorsThe 6 most important factors driving opportunity for expansion were: market size, ease of entry, people and culture, market potential, acquisition opportunities, and better opportunities abroad than at home
BDO Ambition Survey 2011
GLOBAL MARKET OPPORTUNITY INDEXExplanation continued
Page 20
The 5 top challenge factors were: geo-political risks, finding the right local people, in-market competition, red tape and corruption, and having money and resources to expand. This enabled us to determine which countries offer the greatest opportunities in the foreseeable futureOverall Opportunity Index is based on intention to expand internationally in three years’ time and the number of CFO mentions of a given country being expanded intoOPPORTUNITIES TOP COUNTRIES
Market size China, Brazil, India
Ease of entryCanada, Australia,
Italy
People and cultureCanada, Belgium,
UK
Market potentialMexico, China,
Canada
Acquisition opportunities
Mexico, Brazil, Italy
Better opportunities abroad
China, India, Indonesia
CHALLENGES TOP COUNTRIES
Geo-political risksIndonesia, Russia,
China
Finding the right local people
Germany, Japan, Brazil
In-market competition Italy, Germany, UK
Red tape & Corruption Brazil, China, Mexico
Money & Resources USA, UK, Germany
BDO Ambition Survey 2011
CFOS SEE CHINA AS OFFERING THE GREATEST EXPANSION OPPORTUNITY: USA IS A CLOSE SECOND
CFOs see China as having THREE times the business opportunity of UK, Brazil or France
CountryOpportunity
Index
China 298
USA 279
Germany 200
India 145
Arithmetic mean
100
UK 97
Brazil 97
France 95
Russia 84
UAE 63
Page 21
CountryOpportunity
Index
Canada 60
Australia 58
Ukraine 52
Mexico 50
Indonesia 49
Belgium 47
Czech Republic 44
Japan 42
Italy 40
BDO Ambition Survey 2011
OPPORTUNITIES AND CHALLENGES DRIVING EXPANSION
Page 22BDO Ambition Survey 2011
INTERNATIONAL EXPANSION PRIORITY LIST
10/ 10 Better opportunities abroad than at home, 7/ 10Market size, Acquisition opportunities Red Tape & Corruption
9/ 10 5/ 10Market potential, Market size, Ease of entry In-market competition
8/ 10 3/ 10Ease of entry, Market size, People and culture In-market competition
5/ 10 Better opportunities abroad than at home, 2/ 10Market size, Acquisition opportunities In-market competition
3/ 10 2/ 10Market potential In-market competition
6/ 10 6/ 10Acquisition opportunities, Market size Red Tape & Corruption
2/ 10 3/ 10Ease of entry In-market competition
3/ 10 Better opportunities abroad than at home, 7/ 10Market size Red Tape & Corruption
1/ 10 2/ 10Finding the right local people
4/ 10 3/ 10Ease of entry In-market competition
5/ 10 6/ 10Ease of entry, Market potential In-market competition
2/ 10 1/ 10People and culture Red Tape & Corruption
6/ 10 9/ 10Acquisition opportunities, Market size Red Tape & Corruption
2/ 10 5/ 10Better opportunities abroad than at home Finding the right local people
1/ 10 0/ 10People and culture
1/ 10 0/ 10Better opportunities abroad than at home
1/ 10 6/ 10People and culture In-market competition
18. Italy 2/ 10 10/ 10Ease of entry Red Tape & Corruption
OPPORTUNITIES CHALLENGES
1. China
2. USA
3. Germany
4. India
5. UK
6. Brazil
7. France
8. Russia
9. UAE
10. Canada
11. Australia
12. Ukraine
13. Mexico
14. Indonesia
15. Belgium
16. Czech Republic
17. J apan
CONTACT:International Executive Office, Brussels, BelgiumTel: +32 2 778 01 30
© Brussels Worldwide Services BVBA, September 2011