We recently quantified how global 12 well-known consumer-facing companies are: Apple, Coca-Cola, Diageo, Electrolux, l’Oréal, LVMH, McDonald’s, Nestlé, Nike, Procter & Gamble, Toyota and Vodafone. Diageo is the most global of these companies. There is still plenty of room for high growth, be it organic or through acquisitions.
The way we measure the degree of globalization is by calculating the revenue per target customer in the regions defined in the annual report. In their home region/country, they invariably have the highest revenue per target customer. We assume they have worked long and hard to reach this level in their home market.
We then apply this benchmark to all other regions/countries and measure the difference against their actual sales per target customer in those regions.This gives a regional actual versus possible penetration, which is then summed up globally.
By target customer, we mean all individuals within a company-specific socioeconomic level. For example, we view LVMH’s target customer as upper middle class and above; l’Oréal’s as lower middle class and above; McDonald’s as lower class and above.*
We also adjust for different price levels around the world.
Diageo is by far the most global company, having reached reached 60% of its potential. After this, the degree of globality drops off quickly.
One may wonder about, e.g., McDonald’s, but the company has far from a strong position among its target customers outside the US. However, capturing such opportunities probably means building different types of outlets with menus not traditionally associated with the brand.
For Toyota outside Japan, the opportunity is unlikely to be captured without major acquisitions.
Similarly, the other companies that lack a universally-appealing product or face stiff competition will have to find creative ways to reach their true potential.
In conclusion, the analysis shows global potential better than traditional market share analysis. In our globalization projects we use the same technique, but with much more precision in the analysis.
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* There are six socioeconomic classes: upper, upper middle, middle, lower middle, lower, and marginalized class. We often break them down further, as we have sometimes done in this analysis.
Source: Company 2014 annual reports or 10-Ks; C-GIDD; Canback analysis