Nearly 75% of CEOs are either in the process of localising or have already localised part of their production in the country of sale for their product, a new survey has found.
As economic and geopolitical uncertainty persists, localisation has increasingly become one of the different strategies CEOs are deploying to adapt.
EY-Parthenon's CEO Outlook finds that most leaders (57%) expect the current geopolitical and economic uncertainty to last more than a year. Despite this outlook, CEO confidence has risen, as business resilience and earnings in the face of global uncertainty have assuaged some concerns.
The biggest challenges business leaders face in achieving their company's financial targets include technological disruption and AI risks, access to talent and labour costs, infrastructure constraints, geopolitical tensions and supply chain vulnerability.
The survey highlights that, while unexpected changes have always been something businesses have had to contend with, the current pace of change has become increasingly difficult to navigate. It describes this new environment as a NAVI world: an environment defined by non-linear, accelerated, volatile and interconnected forces.
Most CEOs (59%) expect to finance the transformation of their company portfolios through improved financial performance and bigger margins; 24% expect to tap shareholders; and 16% are considering debt financing.
While localising production in the country of sale is not a one-size-fits-all solution, more than half (56%) of CEOs have restructured their supply chains to better focus on regional markets.
On the one hand, localisation can provide a more resilient supply chain and strengthen government relations through creating jobs and supporting domestic economies. An increased interest in digital sovereignty and an increased use of AI and automation to recreate efficiencies at a more regional scale are also drivers of localisation.
Such shifts imply higher costs and operational obstacles in the long term. However, given that 72% of CEOs believe this is not a temporary shift – barring a shock that pushes in the opposite direction – it is likely that localisation efforts will continue.
