Commercial Strategy Remains Top Priority for Brazil Execs

Frontier Strategy Group recently held an executive breakfast event in São Paulo, Brazil which gathered over twenty senior-level leaders of Latin America businesses, representing many US and European-based multinationals.  The event provided an opportunity for our executive clients to gain a deeper understanding of how Brazil is likely to perform over the coming quarters, along with key scenarios for Brazil’s upcoming elections.  Ryan Brier, FSG’s Head of Latin America research and moderator of the event, provided practical advice on how to position Brazil and make the case for investment relative to other emerging markets in LATAM and on a global scale.  Below are several of the key takeaways from the event:

Key Takeaway #1: Realigning Expectations around Targets for Brazil Will be Crucial Moving Forward
  • Confidence around the ability of multinationals to hit their 2014 targets is at a new low. 66% of executives in attendance have low or no confidence in their ability to hit their 2014 top-line targets for Brazil, while 72% of executives in attendance had low or no confidence in their ability to hit bottom-line targets. This is the lowest level of confidence that FSG has seen since it began polling clients around targets in 2011
  • Many executives voiced concern around rising costs in an environment of mediocre top-line growth, with several stating that they were forecasting flat or declining bottom-line growth this year despite an increase in top-line revenues. Rising energy and logistics cots were among the top reasons cited for this trend
  • Despite this poor performance, only 31% of the executives in attendance expected their 2015 targets to be lower than their 2014 targets, underscoring the need to realign corporate expectations around the potential for Brazil over the coming years
Key Takeaway #2: Executives Are Hopeful for Political Change, but Skeptical over Its Potential Impact
  • Executives are increasingly optimistic that Dima faces a serious challenger in Marina Silva, with many citing strong desire for change among the pragmatic voto útil as possibly providing a boost to Silva over Aécio Neves
  • The consensus was that a Silva victory would likely lead to a near-term boost in investment, which could serve to blunt the impact of declining government spending in 2015. However there was also a fair amount of skepticism that Silva would be able to tackle many of the structural reforms that multinationals feel Brazil requires
Key Takeaway #3: Setting the Right Commercial Strategy Remains the Top Priority for Executives
  • 42% of the executives in attendance reported that their top internal challenge over the next 18 months would be to set the right commercial strategy. This was in large part due to the fact that the top external challenge cited by executives was expected weak customer demand
  • For most executives, setting the right customer strategy went beyond rethinking customer segmentation and commercial resource allocation to also include ensuring that the targets they set for their teams were realistic in order to avoid a deterioration of morale among commercial staff

If you are an FSG client and would like more information about future events, please contact your client services director.  Not a client? Click here for more information about our services. 

Trace the Lights: 5 Key China Urbanization Stories for MNCs

nasa earth at night
Source: NASA Image

Take a look at this famous NASA image, a satellite photo of the Earth at night. This map shows the geographic pattern of night time electricity consumption, but it also clearly shows the geographic distribution of cities and population. Lights are bright in South Korea, but most places are in dark in North Korea; within the US, the east coast is brighter than the rest. Likewise, the lights are brightest around Paris and London in Europe. While there are still lots of dark places in China, we must ask ourselves, as urbanization continues in the country, what will this map look like for China in 2020, and where will the brightest lights be?

1. Strategic plan for China 2020 should incorporate future urbanization landscape—“go deep” vs. “go wide”

Every Western multinational needs to ensure they look at China’s urbanization as a major driver for the future consumption-led economy. FSG’s analysis is a starting point to assess the clusters in which multinationals already operate, and more importantly, what the best plan for the future should be—“going deep” vs. “going wide.” A clustering approach uncovers synergies, which are necessary given the scale in China and therefore an important input into the game plan for China 2020. My next blog will provide more details on which clusters I’m referring to.

2. Managing profitable growth in China

Concentrating resources on certain clusters brings the opportunity to exploit scale more quickly, because companies can leverage the synergies in sales force, distribution partners, supply chain, and marketing efforts across a wider geographical scope than by managing on a single city basis without sufficient regional scale.

3. Future organizational design is tilting toward decentralization

Multinationals will have to assess the possibility of decentralizing their Chinese sales headquarters by branching out sales centers to other hub cities to get closer to local business—for instance, using Beijing as the northern China headquarters, Guangzhou as the southern China headquarters, and Chongqing as the western China headquarters. MNCs can also consider breaking down functional responsibilities into different clusters by leveraging the clusters’ specializations—for instance, building a logistics center in Wuhan because of its favorable geographic location, establishing an e-commerce hub in Chengdu, and incubating R&D innovation in Suzhou.

4. Western multinationals need to monitor the industry clusters very closely

The government is and will continue building numerous industry clusters across the country that will help build the ecosystem around them. High-skilled and high-tech industry value chains are gradually taking shape. For example, a few biotechnology companies set up their administrative operations and R&D centers in Shanghai, while locating manufacturing in neighboring cities such as Suzhou or economic zones such as Kunshan or Zhanjiang Industrial Park. MNCs can leverage the formation of mature industry clusters to screen out horizontal suppliers and customers, as well as monitor the vertical competitive environment.

5. Multinationals need to keep an eye out for key signposts that will evolve over time; everything may not be rosy

China’s urbanization program will cost approximately US$ 6.8 trillion. From 2015 to 2020, more than US$ 100 billion of new, related professional services and biddable infrastructure contracts are estimated to be available every year. However, local governments are already deeply debt-ridden, given that China’s total local government debt in mid-2013 ballooned to 17.9 trillion RMB. The gap between the urbanization rate and urban “hukou” rate has widened over time. The high levels of local government debt will make it difficult to provide provisions for adequate public services, including healthcare and education, to new migrants.

This article is part one of a three-part blog series on China Urbanization called Trace the Lights. Check back next week for part two.

For a full report on evolving consumer base and urbanization in China, FSG clients can visit the client portal.  Not a client? Contact us for more information.

Expectations for India’s BJP Government

Infographic India's BJP Government Expectations for Next 5 Years

India has just experienced a landmark general election; the incumbent Congress is going home with its worst ever defeat since the party’s formation post India’s independence in 1947, while the Bharatiya Janata Party (BJP) government holds the strongest majority held by any single party in India since 1984. With such a strong hold on power, the country expects the BJP government to be the first in decades to pass bold reforms that can revive India from its sleepy, sub-par growth and bring it to its true double-digit potential. In this infographic, we lay out FSG’s expectations of the BJP government that MNCs can expect in the short, medium, and long run. These expectations are based on the BJP’s manifesto, market expectations, actions of the previous BJP government, and a statement released by the President of India on June 9.

Frontier Strategy Group clients can read the full analysis on the client portal

Volatility in Venezuela: Using Scenario-Based Forecasts in Strategic Plans

As economic conditions worsen and social unrest continues, multinationals are facing significant challenges in planning ahead for their Venezuelan operations. With both the short-term and long-term outlook for Venezuela unclear, and with government policies lacking coherence and credibility in the face of growing problems, multinationals are increasingly using scenario-based forecasting as they develop their strategic plans for Venezuela.

FSG has recently released for its clients a set of comprehensive scenarios for Venezuela, focusing on the economic and political dimensions that will determine how economic indicators and the business environment will evolve as Venezuela continues to deal with its enormous challenges. The scenarios that we have developed include the following:

Venezuela Economic Scenario Planning Table

Along with these scenarios, we look at the potential for deteriorating economic conditions to lead to greater political instability, which would increase the prospects for regime change, for good or ill.

For FSG clients interested in learning more, the full report is available here.

Don’t Drive at Night without Headlights: How Econometrics Can Illuminate the Economic Roadway

Headlights at night

The United States Federal Reserve (Fed) is charged with driving some of the most important monetary policies for the global marketplace, with implications spanning both developed and emerging economies.  Collectively, the Fed has some of the brightest economists, combining both academic theory and best business practices for formulating monetary policy.

I recently had the pleasure of sitting down with Dr. Jaime Marquez, a former Senior International Economist at the Fed and close advisor to Frontier Strategy Group, for a podcast on best practices deployed by the Fed for modeling the international economy, as well as how to best apply econometrics to business forecasting.  Our conversation covered ways econometrics can shed light on business planning uncertainty, and how multinationals can utilize econometrics to quantify uncertainty and assess factors important to business.  The podcast explores:

  • The definition of econometrics and how it can be used for financial modeling and forecasting
  • Best practices for selecting metadata and indicators to build robust models for business
  • The importance of monitoring and readjusting models as external events affect the economic climate

I think Jaime captured the key takeaway perfectly using an analogy of a car’s headlights: “You can drive at night without headlights, but you aren’t going to make it very far without crashing.”  Econometrics are the headlights companies can use to help them steer through the uncertainty and obstacles they face, especially in emerging markets where increased volatility and instability abound.  However, Jaime cautions that applying econometrics is certainly not a one-size-fit-all approach, but a general concept that can be adapted to each companies’ strategic goals and business models; this is where Frontier Strategy Group can help.  Jaime also shares his thoughts on trends to watch in 2014, as well as a bold prediction for the coming year at the Federal Reserve. I highly recommend you listen to our insightful 30-minute conversation.  You can download the podcast or subscribe to our Emerging Markets Insights Podcast Series.

Executive Survey Reveals Strategic Planning in Emerging Markets Often Flawed

Global Benchmarking

Multinational corporations (MNCs) in emerging markets are placing strategic decision-making power in their regional and country leaders’ hands. Despite having good access to the front lines, leaders lack the tools and data to ensure that their strategy is resilient in the face of volatility. Data deficiencies in emerging markets are a deeply felt problem for decision makers. Strategic and business plans are based on assumptions that are seldom revisited, and decision makers do not use the right toolkit to compensate for these challenges.

FSG conducted a survey of 226 senior emerging-market leaders at 120 MNCs and discovered that region and country heads tend to have responsibility for five out of six of the most important business strategy decisions in their region. These areas range from sales and marketing to pricing and product mix. Product innovation is the only category for which country and regional leaders do not control strategic decisions.

Despite the superior insight provided by their close proximity to a region or country, surveyed executives report poor data availability and reliability for six of the eight market-data categories considered important to decision making. As a result, decision-making power and overall strategy are weakened.

Plans in emerging markets are highly vulnerable to external disruptions, yet planning is performed in static fashion. Only 40% of survey respondents use scenarios to test the robustness of country plans, and few organizations revisit their plan as their operating conditions change. The survey’s results reveal the gap between what is expected of country and regional leaders and how well they are equipped to plan and execute strategy. FSG advises senior regional leaders not to recentralize strategic control but to better equip regional leaders by emphasizing scenario planning and honing targeted methods to overcome poor data.

FSG clients can review the full benchmarking report by clicking here.

Emerging Market Executive Spotlight: Disruptive Innovation with Terry Thiele

Disruptive Innovation

Frontier Strategy Group has built a vibrant and dynamic community of emerging market thought leaders ranging from our client executives to academics to former diplomats. In the case of our most recent Emerging Market Executive Spotlight Podcast all three definitions hold true. FSG’s CEO Richard Leggett recently recorded an interview with Terry Thiele, Director Sustainable Product Strategies at Lubrizol Corporation on the topics of disruptive innovation and related scenario planning. Terry’s career spans across the military, law, national security, and most recently in the private sector with Lubrizol Corporation’s strategic planning support and regulatory compliance department. You may download the podcast by clicking here, or subscribe to our Emerging Markets Podcast Series.

In this Emerging Market Executive Spotlight, Terry discusses the definitions, risks, and opportunities associated with disruptive innovation and the methods of scenario planning to prepare for its effects on global business. Innovation has and always will be disruptive, but not always in a negative manner. In fact, disruptive innovation can revolutionize a product, business, or an entire industry. Though still in the early stages of development, 3D printing is one technology that has worldwide economic implications and the potential to be extraordinarily disruptive to every aspect of the traditional value chain, especially in emerging markets. Though as Terry states, it’s not the technology that poses the problem but how companies respond to the disruptive change. 3D printing certainly has the potential to initiate the 3rd industrial revolution but is dependent on two things: cost competiveness and performance characteristics.

Listen to the podcast for further explanation of how to utilize scenario planning to properly prepare business for disruptive innovations such as 3D printing, as well as other insight on the matter from Terry Thiele.


Terry V. Thiele has been with The Lubrizol Corporation for 13 years during which time his principal responsibilities have included strategic planning support and regulatory compliance and advocacy, with an emphasis on environmental matters. In particular, Terry has led Lubrizol’s growing involvement with environmental life cycle assessments. He represents Lubrizol on the UN Clean Fuels & Vehicles Partnership, the American Chemistry Council’s Value Chain Outreach Committee, the American Petroleum Institute’s Used Oil Taskforce and the European Chemical Industry Council’s LCA Taskforce.  Before joining Lubrizol, Terry performed environmental policy and government relations functions for AB Electrolux and the General Electric Company.  Prior to that he spent the first 11 years of his career working in the Federal government with service in the Treasury Department, the Central Intelligence Agency, The Defense Intelligence Agency and the Executive Office of the President.  He received his B.A. magna cum laude from Princeton University, his J.D. from the NYU School of Law and is a graduate of the National War College.  Terry served for over 10 years in the U.S. Army Reserve, Judge Advocate General Corps, honorably discharged with the rank of captain.

Multinationals Are Reconsidering Their Operating Models in Venezuela

Venezuela has emerged as one of the most significant downside risks to 2013 performance for multinationals operating in Latin America. A devaluation in February and prolonged dollar shortages have not only hammered the value of Venezuelan business units, but in many instances have  rendered their operating models unfeasible.

While a minority of FSG clients are considering exiting Venezuela, some are asking whether a change in their operating model could position them to capture more opportunities over the medium-to-long term, especially given Venezuela’s recent history as one of the most profitable consumer markets in Latin America. Indeed, some companies, particularly in the consumer goods and healthcare space have been considering increasing their direct presence in the market, including opening up local offices with marketing and sales teams in order to capitalize on the struggles of competitors. The benefits of establishing a local office include allowing distributors to pay multinationals in local currency,  to better capture local opportunities, through stronger direct management of distributors or through a more robust direct presence.

For companies who already have a long established presence in Venezuela, the biggest challenge is how to best shield their local revenues from additional devaluation over the next twelve months. Meanwhile, the inability to repatriate currency after the shutdown of SITME and the inoperability of SICAD has only further compounded the situation. As such, companies such as Telefonica and Kimberly-Clark have decided to increase their capital expenditures over the short term and invest in their local production facilities, thus shielding cash assets from further devaluation while putting them to productive use. Other companies have considered investing in commercial real estate or other fixed assets only marginally related to their business models.

Regardless of their current operating model, multinationals should be cautious about the timing of any change in their strategy in Venezuela. The economic and business environment in the country is as likely as not to worsen over the next six months, and the Venezuelan government has thus far failed to pursue a coherent strategy to returning the economy to a period of relative stability, let alone high growth. Prospects for political and economic destabilization remain high, and companies should continue to prioritize contingency planning over growth strategies over the coming months.

PODCAST: Strategic Planning – FSG Expert Interview Part 2 of 2

Earlier in the week we covered the topic of strategic planning with insight from Cécile Bernheim, an experienced strategy and business planning expert in Europe.  Continuing the conversation of strategic planning, Cécile reiterated the importance of collaboration as it relates to portfolio management and client segmentation.

Portfolio Management, or how resources are allocated across business lines and geography in relation to potential for growth, needs to be done in collaboration in order to be accepted. It has to be a collaborative work among the different organization levels and across departments including the operations/business units. The best results are generally derived from common tools with local data provided by the region themselves.  The data should cover both macroeconomic and industry data.  All in all, the success of portfolio management resides in good cross-functional collaboration and alignment, common tools and local data and last but a good education process on benefits to the company of the approach.

Interconnected to portfolio management is the understanding of your customers, a vital process of strategic planning.  For Client segmentation, it’s important to understand the business of the customer or client of which you’re engaged with to evaluate segmentation: Within which channel are they operating? What’s the client size and degree of internationalization?  If you take the larger companies of the world, they’re very international and well poised for partnership, whereas smaller companies might have better proficiencies with local and region specific talent to consider.  Furthermore, it’s also helpful to identify the strategic role of the client: Are they adversarial, ready to partner, or interested in driving business? These are all key questions to ask when evaluating client segmentation.

Frontier Strategy Group is pleased to welcome Cécile to our Expert Advisory Network and we look forward to many more content-rich conversation with her.  To listen to or download the podcast, click on this link to access the iTunes store.

PODCAST: Strategic Planning – FSG Expert Interview Part 1 of 2

Cécile Bernheim, a well-versed and experienced strategic business planning expert, provided some key insight to developing cross-functional strategic plans that position companies for cohesive success.  Frontier Strategy Group CEO Rich Leggett recently chatted with Cécile to gain further advice on building successful plans in FSG’s Emerging Markets Insights Podcast Series.  The conversation was so fruitful and opulent with content this will be a two-part post with the  first half concentrated on the strategic planning side of the conservation and the second half more focused on portfolio management and client segmentation for business.

As with any corporate initiative, it’s important for strategic planning to be very organized and well-disciplined in order to be successful; a notion Cécile firmly stands behind.  Any company can have a well-structured hierarchy of function and responsibility, but the critical element in any structure is communication and necessary integration among company levels.  Cécile attributes a lot of the organizational success to the cross-functionality and communication of teams.  Cécile attributed her team’s success to, “the integration of planning among all three levels of the company.  The whole organization was well-aligned on the same strategic framework and was then able to adapt their strategic framework to local specificities.” In other words, they were empowered local teams but aligned with global strategy – each region had their must-win battles but all working towards the same global goal. Cécile continued, “I tried to make sure all strategic plans were cross-functional as a holistic response to a situation and strategy that was decided.”

Because the majority of FSG’s clients operate a business portfolio over both developed and developing markets, we often hear that the strategic planning proves more difficult in developing countries due to the rapid pace of change, volatility and unexpected events.   Therefore, it’s important to note two differentiating factors: processcontent.  From a process point of view, adding long-term strategic framework and annual global plans should remain somewhat similar between developing and developed regions, at least as far as the process is concerned. The content, on the other hand, will certainly vary based on the level of adaption by country.  Strategic plans, according to Cécile, need to be flexible in order to adapt so every annual plan allows enough room to balance, or re-balance, throughout the year.  Cécile mentioned that one of her key learnings was to develop and implement adaptable tools to assist efficient portfolio management.  This allows the function of the tool to remain the same, but easily reworked to use different sets of data to providing a new output for a different region.

“Strategic planning is not just one person sitting in an office making strategy on their own. Truly good strategic planning and portfolio management is the product of cross-functional initiatives that are discussed with local and regional teams so that they can recognize the data – ensure senior management is on board and of course, explain, explain, and explain the process and the benefits. At the same time, depending on organizational limits, give the regions sufficient freedoms.” – Cécile Bernheim

Perhaps that’s a lesson all global strategy planners can use: global alignment with local autonomy – using flexible tools so that they can be used at different levels of the organization.  Look for further discussion on portfolio management and client segmentation in a subsequent blog post derived from the insightful Podcast with Cécile.

For the full discussion, click on this link to access the iTunes store.


Frontier Strategy Group is pleased to introduce Cécile Bernheim as one of the newest members in FSG’s Expert Advisors Network.  Cécile brings over 20 years of experience from The Coca-Cola Company in Europe where she was the former Strategy and Business Planning Director, as well as other roles varying from general management, strategy and commercial.  Cécile is a senior business executive with solid blue-chip fast-moving consumer goods background and international experience in highly competitive and changing environments.  Prior to Coca-Cola, Cécile was a strategy consultant at Bain.  Cecile started her career in R&D in the Pharma industry and is also a qualified pharmacist and biologist and holds an MBA from IMD in Lausanne.

Cécile is available to FSG clients for consultation and her key areas of expertise are technical processes related to customer management, sales and marketing, strategic planning, as well as anything that’s related to B2B or B2C functions in an international setting.  Furthermore, Cécile has a great understanding of the dynamics between corporate and regional business units and fostering cross-functional collaborations to streamline business and communication.  Please contact your account manager for further information or contact us at