Private Companies Plan to Go More Global in 2018
Often, we hear about large public companies making significant investments in overseas markets as they look to find new customers, reduce their costs, and acquire new capabilities. But when it comes to the global aspirations and operations of private companies, much less is discussed.
There are a couple of reasons behind this. First, as privately-owned enterprises they do not have to release information regarding their company to the public. Second, little research has been conducted to track the activities of these private companies—until now.
Deloitte Private launched its first global business survey recently to better understand the plans, priorities and expectations of nearly 1,900 private company leaders in 30 countries. We discovered what might be surprising to some: private companies are in many ways as reliant on overseas markets as their public counterparts.
One case in point: 57 percent of the private-company executives surveyed say global trade is important to their supply chain, compared to just 16 percent who say it is not. In other words, what happens in Shanghai matters to workers in Silicon Valley, and what happens in Silicon Valley matters to workers in Stuttgart.
Private companies also rely heavily on foreign markets for sales. According to our survey results, 79 percent depend on international markets for a portion of their revenue, and 43 percent count on them for more than 25 percent of their revenue.
Results also show that trade restrictions are not considered a major impediment to their growth. Only 17 percent cited the issue as a worry for 2018. Increased operational flexibility might help explain this. For example, a German aircraft seat manufacturer highlighted in the report maintains production facilities in several countries and flexes between them as conditions warrant.
The companies surveyed have their eyes on several potential obstacles to growth. Those in the Americas are most concerned about the uncertain economic outlook, while respondents in Asia Pacific point to the cost of raw materials, and in EMEA (Europe, Middle East and Africa) respondents note the need to close the skills gap.
If the expectations and priorities expressed in our global survey hold true, growth in global trade will remain strong in the months ahead. In September, the World Trade Organization increased its forecast for global growth in trade in 2017 to 3.6 percent and forecasted 3.2 percent growth for 2018. Both rates would be a substantial improvement over the 1.3 percent growth of 2016.
The increase in global trade has been commensurate with the most synchronized economic growth seen in a decade. All 45 countries tracked by the Organization for Economic Cooperation and Development were on track to grow last year. If the final figures hold, it will be the first time that’s happened since 2007.
Private companies continue to sustain economies across the globe. As our inaugural global survey of private business shows, these companies are confident that crossborder trade will continue to be a key contributor to their success. That’s good not just for the workers private companies employ, but also for the economies and standards of living in the markets where they do business.
Roger Nanney is vice chairman, Deloitte LLP, and Deloitte Private US leader.
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