How are companies reshaping their business to succeed in the challenging environment that has emerged in the wake of the recession?
Winners don’t play dead: Doing more with less in an uncertain future is an Economist Intelligence Unit report, sponsored by AlixPartners. It explores ways in which companies are reshaping their business to succeed in the challenging environment that has emerged from the great recession. It also looks at the factors holding back companies from making major capital investments. What is hindering them, and what are they doing to remove the constraints?
The principal findings of the survey and a series of interviews with senior experts are as follows:
- Despite considerable gloom in parts of the global economy, corporate leaders are guardedly optimistic. A large proportion of respondents in OECD countries say they are confident that they can strike the delicate balance between cutting back in response to short-term setbacks and investing for long-term growth. They believe in their products and services, and many took steps and learned lessons during the recession that have left them, in some ways, stronger now than they were three years ago. They cut where they had to, but focused on their top priorities and most promising initiatives, often investing in one area while enduring painful cuts in another.
- Many firms have amassed vast amounts of cash. Despite their fears for the global economy, companies with annual revenue in excess of US$500m say they expect generating revenue growth to become more important than retrenchment over the next few years. While it is expected that a certain amount of reserves will be set aside for short-term and emergency funding, many companies are setting priorities for spending.
- Organisations outside of Western Europe are making it a priority to diversify their products and services. Investing in new technology, expanding into new markets and making acquisitions are also on the “To-Do” list, although there is a meaningful minority of 20%-25% of respondents that are determined to hold onto their cash for the time being. Those willing to spend are likely to invest in Internet-based software and services, business-process-management tools, mobile communications, data analytics and cloud computing.
- When it comes to new markets, the Asia-Pacific region is the future, but other markets are still attractive. There is no question that most companies view emerging markets as the engine of future growth. Nearly 40% of our survey participants have been expanding in the Asia-Pacific region for at least the past three years, and roughly one-half expect to expand there over the next three years. Other emerging markets, in Latin America and the Middle East, will also attract a growing share of corporate investment, with around one-quarter of respondents expecting to invest in these regions within three years, although political upheaval in the Middle East may act as a deterrent in the short term.
- Technology was critical in helping companies to operate on tighter budgets during the recession, and continues to be a tool for growth. Financial companies, in particular, cited efficiency as one of the most important elements of their success, and they plan to build on that by using more Internet-based software, analytical tools, and mobile technology. At the same time, technologies from the consumer market are transforming the workplace, and companies that integrate phenomena like tablets, smartphones and social media are finding important new ways to attract customers and employees.
