By Conrad de Aenlle
Many businesses want to become global operators. It sounds great in theory, especially in sectors like technology or financial services that have natural customer bases all over the world and can benefit from economies of scale. But being global in the real world isn’t so easy.
There are numerous challenges to contend with for companies whose activities stretch across borders, including diverse economic and social conditions and a range of idiosyncratic corporate cultures and consumer customs and preferences. Then, of course, there are the normal ups and downs of the economic and business cycles and competitive pressures that affect any enterprise.
Ajay Banga, the president and chief executive officer of MasterCard, finds that the lingering impact of the global recession and financial crisis of the late 2000s is making life all the more difficult for multinationals like his.
“One of my biggest challenges is that I [haven’t] had the economy as a tailwind,” Banga, who became CEO of the electronic-payment firm in mid-2010, said in an interview with Yale Insights. While some areas have experienced periods of economic growth during his tenure, they have been countered by stagnation elsewhere. At any given time, Banga said, “it’s actually been a headwind…in some region or the other.”
One example he provides is the dramatic rise in the dollar. In the 12 months through May the currency rose more than 20 percent against the euro and the Japanese yen. For American companies and their domestic shareholders, a strong dollar puts a drag on financial results by reducing the value of overseas revenues and by raising the costs of products and services to foreign customers.
MasterCard has become increasingly global since going public in 2006 and consolidating several regional associations into one company. It presently generates 60% of its revenues outside the U.S., which compares with an average of 46.3% for companies in the benchmark Standard & Poor’s 500 Index. And despite being hindered by the strong dollar, growth is faster outside the U.S., as well: foreign transactions accounted for $3.15 trillion, 10% more than in 2013, according to the company’s annual report. American transactions totaled $1.24 trillion, up 8%.
Capturing the growth that’s available around the world depends on striving for uniformity in certain respects and diversity in others, Banga said. Being the same everywhere allows a company to benefit from economies of scale, for example. Otherwise, he said, “you just have a large, complicated global company.” MasterCard operates a single payment platform used by 30,000 banks across 200-plus countries. The way the platform functions changes constantly, he explained, and the banks that do business on it don’t implement the changes all at once, but they all catch up at least once each year.
Where being different helps is in building a global workforce, Banga said. While he wants everyone who works for him to have the same work ethic and spirit of commitment, he stresses that the company benefits from receiving ideas from employees with varying life experiences and educational backgrounds.
“You’re going to get the power of the collective uniqueness of your people” if they come from different places but are headed in the same direction, he said. “That diversity is the diversity I’m looking for.”