Growing beyond: Rethinking profitable growth

Foreign multinationals (MNCs) enjoyed a profitable decade in China, benefiting from the nation’s growth surge and business-friendly government policies. Now, the future looks less certain.

84 percent of executives surveyed say that productivity will be either “extremely” or “very” important to business performance in the next one to three years.

Results of the survey show that foreign MNCs in China that adopt initiatives to proactively and urgently improve productivity will secure future success.

The days of foreign MNCs in China focusing solely on growth also are disappearing fast. Instead, executives now have a mandate for “profitable growth,” placing huge pressure on local leadership teams.

To achieve this goal, five lessons emerged from our survey:

  • Leading companies are adopting strategic, cross-functional approaches to raise productivity. Whereas in the past the focus was on growing the “top line”, strategic planning is being rebalanced to give more weight to productivity goals such as targeting customers more effectively and reducing inputs per unit of revenue.
  • Leading companies are working to ensure that increased decision-making power is given to their China leadership teams, balanced by a rigorous approach to risk, controls, and governance.
  • Proactive and successfully executed cost management programs are essential. This means aggressively managing costs across the organization, but also making bold investments to upgrade operations.
  • When designing and implementing IT systems, leading companies need to balance the importance of globally consistent processes with local needs, then work to improve the level of compliance.
  • As wages continue to increase, companies are transforming process flows that impact labor productivity and doing more to incentivize and motivate their staff.

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