Planning for Growth
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Noiembrie 2010 |
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ERNST & YOUNG S.R.L. |
Adresa
Strada Dr. Felix Iacob, Nr. 63-69
Cladirea Premium Plaza, Etaj 15
011033 Bucuresti, Sector 1
Telefon
+40-21-402.40.00
Fax
+40-21-310.71.93
Website
www.ey.com
After the crisis, the only certainty is uncertainty
The market and economic changes witnessed by businesses over the last few years could never have been predicted. Globally, the crisis hit quickly and hit hard. Yet despite the severity of the crisis, the recovery is happening faster in some markets than many could have either hoped or expected but slower in others. As companies look forward, the one certainty of which management is sure is that post-crisis, nothing is certain.
Respondents to our survey are looking forward to a positive rebound – albeit one in which growth will be slow to return. Although this recovery is a global phenomenon, the expected growth will not be consistently distributed by country or by sector, and we believe that signifcant variations will remain.
While it is true that the "emerging markets" expect a stronger performance than developed economies, this is not a global movement – Russia, in particular, is expecting only slow growth. Interestingly, respondents from the US agree with many European countries in expecting signifcant change; equally, in the emerging markets, many of the most positive responses are from those companies which have built rapid change into their "business as usual" model.
Returning to growth is not returning to normal
Returning to growth will not be the same as returning to the "normal" conditions that existed before the economic crisis. In our research during May 2010, 4 in 10 companies responded that they do not expect business to "return to normal" for them. This is an increase of almost 25% compared with the results we gathered from the research in November 2009.
The volatile tide of economic events over the last couple of months has led to a significant impact and this higher degree of sensitiveness shows that although businesses are confident, they have become more cautious during the last eight months.
A changed world
All respondents are looking ahead to a changed business environment. The rise of new economic giants like China and India, as well as additional regulation, increased tax and the potential return of inflation, are all seen as factors which will make businesses less profitable, unless they are effectively addressed.
A consistent theme that runs across our finding, both in terms of market outlook and planned business response, is the expectation of increased volatility and complexity. Markets are expected to see major swings in growth, and both the volume and depth of change is expected to increase.
Two factors emerge as being critical to future corporate success: the speed with which a business can respond to both opportunities and threats, and the flexibility that it builds into its operation to enable it to do so.
A changed company
As a result of the situation, companies are planning many changes in the way that they operate. These changes are also extending to the way they measure their performance; while the top five performance indicators are expected to remain the same, there is a significant increase in the use of others, with a major move from quantitative to more qualitative and relative measures as key performance indicators (KPIs).
Companies have already started to revisit their business model – or plan to do so. Evidence shows that, after economic downturns, companies tend to concentrate on their core business; and we believe that this will become a trend within the next couple of years. As part of the business model review process, there was an expectation that we would see a move by companies from a centralized to more decentralized organization.
In a world where change is more prevalent and rapid, no company can afford to focus its attention on immediate events, or simply react to the latest problem; to be successful, it will have to become aware of what’s happening on the global stage and be prepared for the impact of long-term trends. Learning from key development trends in other markets and sectors will be crucial for staying ahead of competition.
Successful companies in mature markets will need to focus on global innovation management. Future market leaders will be companies which are both entrepreneurial and agile. However, the characteristic that will truly determine which companies are the dominant players in 2012 will be the ability to make and execute decisions quickly.
When times are uncertain, no one can predict what may be around the corner, so the need for flexible responsiveness has never been greater.
Implications for key functions and processes
Strategic change will involve internal transformation activities on a significant scale, including upheaval to organizational structure, the introduction of new technology, and big challenges to the way people are recruited, developed and managed.
STRATEGY AND BUSINESS EVOLUTION
Summary of the implications for strategy and business evolution
