2011 CEO Outlook Report Final

8/3/2019 2011 CEO Outlook Report Final

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Panel Report

www.icd-research.com

Global CEO Business Outlook Survey20112012

Reference code: ICDR1250

Published: August 2011

ICD Research

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London EC4Y 0BS

United Kingdom

Tel: +44 (0)20 7936 6400

Fax: +44 (0)20 7336 6813

Website: www.icd-research.com


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TABLE OF CONTENTS

Global CEO Business Outlook Survey 20112012 Page 2

ICD Research. This product is licensed and is not to be photocopied Published: August 2011

TABLE OF CONTENTS

1 Introduction ................................................................................................................................. 61.1 What is this report about? ............................................................................................................. 61.2 Methodology ................................................................................................................................ 61.3 Profile of survey respondents........................................................................................................ 8

2 Executive Summary ................................................................................................................... 93 Industry Dynamics ................................................................................................................... 11

3.1 Revenue growth expectations ..................................................................................................... 113.1.1 Revenue growth expectations by region ............................................................................................... 133.1.2 Revenue growth expectations by turnover............................................................................................ 14

3.2 Future developments in business structure.................................................................................. 163.3 Merger and acquisition activity predictions................................................................................... 17

3.3.1 Merger and acquisition activity predictions by region ............................................................................ 183.3.2 Merger and acquisition activity predictions by company turnover .......................................................... 19

4 Market Growth Outlook............................................................................................................ 204.1 Demand in emerging markets ..................................................................................................... 21

4.1.1 Demand in emerging markets by region ............................................................................................... 234.1.2 Demand in emerging markets by company turnover ............................................................................. 24

4.2 Growth expectations in developed countries ................................................................................ 254.2.1 Growth expectations in developed countries by region ......................................................................... 264.2.2 Growth expectations in developed countries by company turnover ....................................................... 27

5 Threats and Opportunities ...................................................................................................... 285.1 Leading business concerns for 20112012.................................................................................. 28

5.1.1 Leading business concerns for 20112012 by region ........................................................................... 305.1.2 Leading business concerns for 20112012 by company turnover ......................................................... 30

5.2 Key supplier actions to maintain and secure buyer business ........................................................ 315.2.1 Actions to maintain and secure buyer business by region ..................................................................... 325.2.2 Actions to maintain and secure buyer business by turnover.................................................................. 33

6 Procurement Dynamics ........................................................................................................... 346.1

Annual procurement budgets ...................................................................................................... 35

6.1.1 Annual procurement budgets by region ................................................................................................ 366.1.2 Annual procurement budgets by company turnover .............................................................................. 37

6.2 Planned change in procurement expenditure ............................................................................... 386.2.1 Planned change in procurement expenditure by region ........................................................................ 396.2.2 Planned change in procurement expenditure by company turnover ...................................................... 40

6.3 Variations in regional supplier prices ........................................................................................... 41


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6.3.1 Variations in regional supplier prices by region ..................................................................................... 426.3.2 Variations in regional supplier prices by company turnover................................................................... 43

7 Procurement Behaviors and Strategies ................................................................................ 447.1 Critical success factors for supplier selection ............................................................................... 457.2 E-procurement ........................................................................................................................... 46

7.2.1 E-procurement by region ..................................................................................................................... 487.2.2 E-procurement by company turnover ................................................................................................... 49

8 Marketing Spend Activity ........................................................................................................ 508.1 Annual marketing budgets .......................................................................................................... 51

8.1.1 Annual marketing budgets by region .................................................................................................... 528.1.2 Annual marketing budgets by company turnover .................................................................................. 53

8.2 Planned change in marketing expenditure levels ......................................................................... 548.2.1 Planned change in marketing expenditure levels by region................................................................... 558.2.2 Planned change in marketing expenditure levels by company turnover ................................................ 578.2.3 Planned change in marketing expenditure levels vs. revenue growth expectations ............................... 58

8.3 Future investment in marketing and sales technology .................................................................. 598.3.1 Planned investment in marketing and sales technologies by region ...................................................... 608.3.2 Planned investment in marketing and sales technologies by company turnover .................................... 61

9 Marketing and Sales Strategies .............................................................................................. 629.1 Future investment by media channel ........................................................................................... 62

9.1.1 Future investment by media channel by region .................................................................................... 649.1.2 Planned change in marketing spend by company turnover ................................................................... 65

9.2 Marketing agency selection criteria ............................................................................................. 669.2.1 Marketing agency selection criteria by region ....................................................................................... 679.2.2 Marketing agency selection criteria by company turnover ..................................................................... 68

10 Appendix.................................................................................................................................... 69 10.1Methodology .............................................................................................................................. 6910.2Contact us ................................................................................................................................. 6910.3About ICD Research .................................................................................................................. 6910.4Disclaimer .................................................................................................................................. 69


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LIST OF FIGURES

Figure 1: Revenue Growth Optimism (%), 2011 .......................................................................................................................................................... 12Figure 2: Revenue Growth Optimism by Region (%), 2011 ......................................................................................................................................... 13Figure 3: Revenue Growth Optimism by Turnover (%), 2011 ...................................................................................................................................... 14Figure 4: Company Revenue Growth Optimism: Cross-Industry Comparisons (%), 2011......................................................................................... 15Figure 5: Key Expected Changes in Business Structure (%), 2011 ............................................................................................................................ 16Figure 6: Merger and Acquisition Activi ty Expectations by Region (%), 2011 ............................................................................................................ 18Figure 7: Merger and Acquisition Activity Expectations by Company Turnover (%), 2011 ........................................................................................ 19Figure 8: Top Ten Growth Regions (%), 2011 ............................................................................................................................................................. 20Figure 9: Demand in Emerging Markets (%), 2011 ...................................................................................................................................................... 22Figure 10: Demand in Emerging Markets by Region (%), 2011 .................................................................................................................................. 23Figure 11: Demand in Emerging Markets by Company Turnover (%), 2011 .............................................................................................................. 24Figure 12: Growth Expectations in Developed Countries by Region (% Increase Responses), 2011 ..................................................................... 26Figure 13: Growth Expectations in Developed Countries by Company Turnover (% Increase), 2011 ..................................................................... 27Figure 14: Leading Business Concerns (%), 20112012 ............................................................................................................................................ 29Figure 15: Actions to Maintain and Secure Buyer Business (%), 2011 ....................................................................................................................... 31Figure 16: Actions to Maintain and Secure Buyer Business by Company Turnover (%), 2011 ................................................................................. 33Figure 17: Annual Procurement Budgets in US$ (%), 2011 ........................................................................................................................................ 35Figure 18: Annual Procurement Budgets in US$ by Region (%), 2011 ....................................................................................................................... 36Figure 19: Annual Procurement Budgets in US $ by Company Turnover (%), 2011..................................................................................................... 37Figure 20: Expected Change in Tota l Procurement Expenditure by Region (%), 2011 ............................................................................................. 39Figure 21: Expected Change in Tota l Procurement Expenditure by Company Turnover (%), 2011 .......................................................................... 40Figure 22: Variatio ns in Regional Supplier Prices (%), 2011 ....................................................................................................................................... 42Figure 23: Variations in Regional Supplier Prices by Company Turnover (%), 2011 ................................................................................................. 43Figure 24: Critica l Success Facto rs for Supplier Selection, 2011 ................................................................................................................................ 45Figure 25: EProcurement: Level of Implementation (%), 2011 .................................................................................................................................. 47Figure 26: EProcurement: Level of Implementation by Regio n (%), 2011 ................................................................................................................ 48Figure 27: EProcurement: Level of Implementation by Company Turnover (%), 2011 ............................................................................................ 49Figure 28: Annual Marketing Budgets: Airports Industry Suppliers (%), 20092011.................................................................................................. 51Figure 29: Annual Marketing Budgets by Region (%), 2011........................................................................................................................................ 52Figure 30: Annual Marketing Budgets by Company Turnover (%), 2011 .................................................................................................................... 53Figure 31: Planned Change in Marketing Expenditure (%), 2011 ............................................................................................................................... 55Figure 32: Planned Change in Marketing Expenditure Levels by Region (%), 2011 .................................................................................................. 56Figure 33: Planned Change in Marketing Expenditure Levels by Company Turnover (%), 2011 .............................................................................. 57Figure 34: Change in Marketing Expenditure Levels by Revenue Growth Expectations (%), 2011 ............................................................................ 58Figure 35: Planned Investment in Marketing and Sales Technologies by Region (%), 2011.................................................................................... 60Figure 36: Planned Investment in Marketing and Sales Technologies by Company Turnover (%), 2011................................................................. 61Figure 37: Future Investment by Media Channels (%), 2011 ...................................................................................................................................... 63Figure 38: Future Investment by Media Channels by Region (% Increase Responses), 2011 .................................................................................. 64Figure 39: Future Investment by Media Channel by Company Turnover (% Increase Responses), 2011................................................................ 65Figure 40: Marketing Agency Selection Criteria (%), 2011 .......................................................................................................................................... 66Figure 41: Marketing Agency Selection Criteria by Region (%), 2011 ........................................................................................................................ 67Figure 42: Marketing Agency Selectio n Criteria by Company Turnover (% ), 2011 ................................................................................................... 68


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LIST OF TABLES

Table 1: Total Industry Survey Respondents by Industry, 2011 .................................................................................................................................... 8Table 2: Respondents by Global Company Turnover (%), 2011 ................................................................................................................................... 8Table 3: Respondents by Region (%), 2011................................................................................................................................................................... 8Table 4: Revenue Growth Optimism (%), 2011............................................................................................................................................................ 12Table 5: Revenue Growth Optimism (%), 2011............................................................................................................................................................ 13Table 6: Revenue Growth Optimism by T urnover (%), 2011 ....................................................................................................................................... 14Table 7: Merger and Acquisition Activity Expectations (%), 2011 ............................................................................................................................... 17Table 8: Merger and Acquisition Activity Expectations by Region (%), 2011.............................................................................................................. 18Table 9: Merger and Acquisition Activity Expectations by Company Turnover (%), 2011.......................................................................................... 19 Table 10: Demand in Emerging Markets (%), 2011 ..................................................................................................................................................... 22Table 11: Growth E xpectations in Developed Co untries (%), 2011 ............................................................................................................................ 25Table 12: Leading Business Concerns (%), 20112012.............................................................................................................................................. 29Table 13: Leading Business Concerns by Region (%), 20112012 ............................................................................................................................ 30Table 14: Leading Business Concerns by Company Turnover (%), 20112012 ........................................................................................................ 30Table 15: Actions to Maintain and Secure Buyer Business by Region (%), 2011 ...................................................................................................... 32Table 16: Annual Procurement Budgets in US$ (%), 2011.......................................................................................................................................... 35Table 17: Annual Procurement Budgets in US$ by Company Turnover (%), 2011 .................................................................................................... 37Table 18: Expected Change in Total Procurement Expenditure (%), 2011 ................................................................................................................ 38Table 19: Variations in Regional Supplier Prices (%), 2011 ........................................................................................................................................ 41Table 20: Variations in Regional Supplier Prices by Region (%), 2011 ...................................................................................................................... 42Table 21: Variations in Regional Supplier Prices by Company Turnover (%), 2011 .................................................................................................. 43Table 22: EProcurement: Level of Implementation (%), 2011 ................................................................................................................................... 46Table 23: Procurement Budget Increase vs E-Procurement (%), 2011 ...................................................................................................................... 47Table 24: EProcurement: Level of Implementation by Company Turnover (%), 2011 ............................................................................................. 49Table 25: Annual Marketing Budgets (%), 2011........................................................................................................................................................... 51Table 26: Annual Marketing Budgets by Region (%), 2011 ......................................................................................................................................... 52Table 27: Annual Marketing Budgets by Company Turnover (%), 2011 ..................................................................................................................... 53Table 28: Planned Change in Marketing Expenditure (%), 2011 ................................................................................................................................ 54Table 29: Planned Change in Marketing Expenditure Levels by Region (%), 2011 ................................................................................................... 56Table 30: Planned Change in Marketing Expenditure Levels by Company Turnover (%), 2011 ............................................................................... 57Table 31: Planned Investment in Marketing and Sales Technologies (%), 2011....................................................................................................... 59


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INTRODUCTION



1 Introduction

1.1 What is this report about?

This report is the result of an extensive survey drawn from ICD Researchs exclusive panel of C-levelrespondents consisting of CEOs and other senior level respondents such as managing directors and board

members from leading companies. As countries emerge from the effects of recession, this report provides the

reader with a definitive analysis of the industry outlook and explores how opportunities and demand are set to

change in 20112012. This report not only grants access to the opinions and strategies of business decision

makers and competitors, but also examines their actions surrounding business priorities. The report also

provides access to information categorized by region and turnover.

The report also examines:

Revenue growth expectations: projects the revenue growth expectations of major industry stakeholders

Market-specific growth opportunities: identifies top growth regions to enable companies to allocate theirmarketing activities and budgets effectively

Mergers and acquisitions: analyzes expectations surrounding merger and acquisition (M&A) activity and

core influencing factors

Leading business concerns: identifies leading business concerns and subsequent efforts to manage them

Procurement expenditure trends: tracks companies procurement budgets and forecasts possible changes

in spend

Factors for supplier selection: outlines critical factors influencing supplier selection

Marketing expenditure trends: tracks the marketing budgets of supplier companies and forecasts possible

changes in expenditure

Key factors for marketing agency selection: provides insights into the marketing needs of suppliercompany competitors

1.2 Methodology

All ICD reports are rigorously sourced and created according to a comprehensive three-stage methodology:

1) Online Survey

The research source in this report is based on the surveyed opinions and forward-looking expectations of

CEOs, board members and other C-level respondents. ICD Research conducted an extensive online survey

during March 2011 taken by 1,285 CEOs, board members and other C-level respondents.

These respondents are drawn from the ICD Research Industry Insight Panel, an exclusive industry panel

covering over 2 million business professionals worldwide. Respondents represent a dedicated professional

community where participants are surveyed in context, drawn from ICD Researchs industry magazine and

media communities, and delegate relationships across our global industry conference and forum events.

These business communities are made up of highly engaged, qualified professionals, who rely on ICD


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INTRODUCTION



Researchs flagship media brands in their respective markets, enabling ICD Research to access

knowledgeable and informed industry opinion.

2) Secondary Research

Collection of the latest market-specific data from a wide variety of respected third-party industry sources:

Government statistics

Industry associations

Company filings

Broker reports

International organizations

Industry news websites

Industry reports

3) Data Analysis and Report Writing

The results of this research have been analyzed and evaluated by ICD Researchs in -house industry-specific

analysts. The analysts research and analysis expertise, marketing pedigrees, market research and consulting

backgrounds, and ongoing continuous education on leading macro-economic and industry news and events

have shaped their analytical judgments and conclusions of the industry opinions gathered.

4) Quality Control

A) Templates

Detailed process manuals

Standardized report templates and accompanying style guides

Advanced data analysis and survey programming tools

QC checklists

B) QC Process

Randomized spot checks on data integrity

Peer review

Senior-level QC


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INTRODUCTION



1.3 Profile of survey respondents

Our in-depth industry survey was completed by 1,285 C-level respondents containing CEOs and other senior

level respondents such as managing directors and board level respondents from industries shown in the table

below:

Table 1: Total Industry Survey Respondents by Industry, 2011

Industry type % respondents

Transport 14%

Pharmaceutical 13%

Power 10%

Interior Design 10%

Mining 9%

Medical Device 7%

Airports 6%

Hotel and Cruise 6%

Food and Beverage 6%

Packaging 5%

Aerospace 5%

Construction 5%

IT 4%

Overall 100%

N.B. Results may not equal 100% due to rounding

Source: ICD Research Industry Survey 2011 ICD Research

Table 2: Respondents by Global Company Turnover (%), 2011

Company turnover Percentage of respondents

Less than US$100 million 91%

US$100 millionUS$1 billion 7%

More than US$1 billion 2%

Overall 100%


Table 3: Respondents by Region (%), 2011

Region Percentage of respondents

North America 23%

Europe 41%

Asia-Pacific 21%

Rest of the World 15%

Overall 100%



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EXECUTIVE SUMMARY



2 Executive Summary

The global industry is confident about revenue growth in 2011

Overall, 63% of C-level respondents are more optimistic about revenue growth for their company over the

next 12 months than the previous 12 months. Strong growth in emerging markets such as Eastern Europe has

contributed to an increase in revenue optimism. The need to expand customer base and invest in innovative

technologies are cited as the major factors behind the rise in revenue growth optimism. The top three key

expected changes for 2011 are to expand in current market, introduction of new products and services and

expand abroad.

Mergers and acquisitions are expected to increase in 2011

Global industry executives expect to see increased levels of consolidation, with 61% of respondents predicting

that there will be either a significant increase or an increase in M&A activity over the next 12 months.

Improving operational efficiency to attain economies of scale, increases in geographical presence and

business competence, and increases to customer bases for better return on investment (ROI) are the key

drivers for M&A activity.

A high proportion of respondents expect that, due to market uncertainty, small companies may have found it

difficult to sustain credit lines and will look to larger companies for support. For instance, a C-level respondent

an airport operator company based in North America states: Repeated losses due to the economy have

made consolidation and mergers the only sensible business solution for many industries. At this point, it is not

so much a matter of business success that is key, but having a revenue source that is stable.

China, India and Brazil are the most important emerging markets

Respondents identify China to be the most important region for growth among emerging markets, along with

India and Brazil. Chinas growth is expected to increase in 2011 due to strong market potential, strong

economic growth and sufficient labor resources. For example, CSR Zhuzhou Electric Locomotive Research

Institute Co., Ltd., a subsidiary of CSR Corporation Ltd. (CSR), signed an agreement with Wabtec

Corporation, which is based in the US, in May 2011. Under the agreement, the company will manufacture

braking systems for rail cars.

The US, Singapore, Taiwan and Hong Kong, Australia, Germany and the UK are identified as the most

important regions for growth among developed regions. Singapore acts as a significant trading base for the

South-East Asian region, with low corporate taxes and strong intellectual property rights attracting companies

to set up their operations in the region. For example, in April 2011, Pan Pacific Hotels & Resorts announced

that it will launch its flagship Parkroyal Hotel in Singapore in 2012.


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Companies face key challenges in market uncertainty, responding to pricing pressure and cost

containment

Market uncertainty, responding to pricing pressure and cost containment are the most immediate business

concerns for the global industry. Market uncertainty is considered a leading concern by most companies due

to falling or limited demand that has increased price competition between companies. With the aim of

increasing revenues, business models have to be reworked to avoid the prospect of markets being lost. For

example, major European home decoration companies such as Saint-Gobain, DIY and B&Q have closed retail

stores in prominent cities in China due to low individual demand. Many companies are forced to innovate and

differentiate products.

Average annual procurement budget is expected to increase in the next 12 months

The average size of the global annual procurement budget for respondents in 2011 is expected to be US$26

million, with Asia-Pacific leading with US$47 million. Procurement budgets are expected to rise over the next

12 months by an average of 11%, and companies are also expected to invest in developing advancedtechnologies to reduce costs and enhance brand value. Procurement expenditure is high in Asia-Pacific due to

strong economic growth, rising affluence and a surge in demand for raw materials, which have compelled

companies to invest in new technologies and sustainable measures. For example, Harmony Gold Mining

Company Ltd., based in South Africa, is considering diversifying its mining operations into Indonesia and the

Philippines.

Average marketing budgets are expected to rise by 10% in 2011 as compared to 2010

The average size of the global, annual marketing budget is estimated to be US$1.2 million in 2011, with the

Rest of the World leading with US$1.2 million. ICD Researchs industry survey revealed that, on average,

global industry suppliers marketing budgets are expected to rise by 10% over the next 12 months. The

generation of new customers, introduction of new products, increased new contract orders, brand awareness

and support and expansion of current markets are considered to be the most important objectives to achieve

through the increased budgets.As we are planning to expand our business, publicity and industry awareness

is crucial for our company. Therefore, our marketing department is under pressure to reveal its presence

across the industry,quotes a board-level executive of a packaging industry supplier company in the Asia-

Pacific region.

Market intelligence research, client acquisition solutions and business performance management

solutions will dominate future investment

Market intelligence research, client acquisition solutions,business performance management solutions and

CRM solutions emerged as the most important areas of investment among marketing and sales solutions

activities in 2011. New media such as email and newsletters, corporate and brand websites and online

content sites have increased in importance among C-level respondents. The rapid development of online

social networking channels such as Twitter, LinkedIn and Facebook provides new opportunities for

respondents to effectively communicate messages between industry partners to build networks.


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3 Industry Dynamics

In this chapter, executives provide their future expectations for the growth prospects of their companies, as

well as insights into the type and likelihood of structural changes in the competitive landscape in terms of

mergers and acquisitions and business structure. This provides a snapshot of the business outlook for theindustry.

Key Findings:

Across the industry, 63% of respondents are more optimistic about revenue growth for their companies

over the next 12 months.

Of all respondents, 74% from the Rest of the World, 65% from Asia-Pacific are optimistic about revenue

growth over the next 12 months, compared to 63% in the North America and 59% in Europe.

Respondents from medium and large sized companies are more optimistic about revenue growth than

smaller companies in the next 12 months.

The top three key expected changes for 2011 are expand in current market, introduction of new

products and services and expand abroad.

Overall, respondents from all industries expect to see increased levels of consolidation, as 61% predict

an increase in the level of M&A activity over the next 12 months.

The majority of respondents from North America and Europe expect an increase in M&A activity duringthe next twelve months.

From large companies, 82% of respondents expect an increase in M&A activity during the next twelve

months, while 74% from medium-sized companies and 60% from small companies anticipate similar

trends.

3.1 Revenue growth expectations

Overall, 63% of respondents are more optimistic about revenue growth for their company over the next 12months than the previous 12 months. A further 24% are neutral, while 9% of respondents are less optimistic

about their companys revenue growth prospects.

Strong growth in emerging markets such as Eastern Europe has contributed to an increase in revenue

optimism. For example, Imtech, a technical services provider in Europe, has received high order inflow for

high-tech traffic solutions in Russia, Lithuania and Romania. The need to expand customer base and invest in


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innovative technologies are cited as the major factors behind the rise in revenue growth optimism for industry.

The expansion of product offerings to increase sales is also considered to be a prime factor.

In addition to this, the revision of business policies, management changes, steps taken by companies to

rationalize costs, favorable government policies and commodity price stability have all led to increased

optimism levels among industry respondents. For example, the Australian governments plan to reduce the

headline rate of tax from 40% to 30% has proved to be immensely beneficial for companies that either operate

in Australia or plan to expand their businesses into the country.

In an interesting development, many major companies are shifting their research and manufacturing activities

to the Asia-Pacific region, and as a result, markets in China, South Korea, India, Vietnam and Indonesia are

set to grow at a healthy rate despite regulatory constraints. A comparatively large and increasing population,

coupled with increasing disposable income, makes the Middle East and Asian countries attractive for

investment.

Table 4: Revenue Growth Optimism (%), 2011

Growth optimism % Respondents

More optimistic 63%

Neutral 24%

Less optimistic 9%

Don't know 2%

Overall 100%



Figure 1: Revenue Growth Optimism (%), 2011


63%

24%

9%

4%

Question: Are you more or less optimistic about revenue growth foryour company over the next 12 months compared to the previous 12

months?

More optimistic

Neutral

Less optimistic

Don't know


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3.1.1 Revenue growth expectations by region

Of all respondents, 74% from the Rest of the World and 65% from Asia-Pacific are optimistic about revenue

growth over the next 12 months, compared to 63% in North America and 59% in Europe. Optimism in Europe

is slightly lower than other regions due to the recent debt crisis, although Europe is expected to move towards

recovery in 2011 with various strategic moves which are either in the process of implementation or have

already been implemented earlier this year. For example, in March 2011, the UK government announced a

freeze on air passenger duty (APD) until 2012 to increase demand for long-haul flights. On a similar note,

companies from other sectors are also optimistic about increases in their revenue growth outlooks. For

example, Kinnarps, a leading supplier of interior products in Sweden, has obtained the largest single-order

contract from Princess Noura Bint Abdulrahman University in Riyadh, Saudi Arabia, to deliver thousands of

desk tables, chairs, easy chairs, coffee tables and more.

Strong growth in emerging markets such as India and China has also contributed to an increase in revenue

optimism. For example, Advanced Technologies, which is based in the US, has doubled the production

capacity of its water technologies manufacturing plant in Wuxi New Zone in Eastern China.

Table 5: Revenue Growth Optimism (%), 2011

Growth optimism North America Europe Asia-Pacific Rest of the World

More optimistic 63% 59% 65% 74%

Neutral 22% 28% 21% 17%

Less optimistic 9% 11% 8% 6%

Don't know 6% 3% 6% 4%

Overall 100% 100% 100% 100%



Figure 2: Revenue Growth Optimism by Region (%), 2011


63

59

65

74

22

28

21

17

9

11

8

6

6

3

6

4

North America

Europe

Asia-Pacific

Rest of the World

Question: Are you more or less optimistic about revenue growth for your companyover the next 12 months compared to the previous 12 months?

(% respondents by region)

More optim istic Neutral Less optim istic Don't know


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3.1.2 Revenue growth expectations by turnover

For analyzing revenue growth expectations by company turnover, companies are classified as small, medium-

sized and large, based on the turnover mentioned below:

Turnover less than US$100 million: small company

Turnover between US$100 millionUS$1 billion: medium-sized company

Turnover more than US$1 billion: large company

Medium-sized and large companies are more optimistic about revenue growth than smaller companies, with

71% and 70% of C-level respondents expecting growth in revenue in the next 12 months.

Table 6: Revenue Growth Optimism by Turnover (%), 2011

Revenue optimism Less than US$100 million US$100 millionUS$1 billion More than US$1 billion

More optimistic 63% 71% 70%

Neutral 24% 23% 19%

Less optimistic 9% 6% 11%

Dont know 5% 1% -

Overall 100% 100% 100%



Figure 3: Revenue Growth Optimism by Turnover (%), 2011


63

24

9

5

71

23

6

1

70

19

11

0

More optimistic

Neutral

Less optimistic

Dont know

Question: Are you more or less optimistic about revenue growth for your companyover the next 12 months compared to the previous 12 months?

(% respondents by turnover)

Less than US$100 million US$100 mill ionUS$1 billion More than US$1 bil lion


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The net differences in the optimism levels of various industries are mapped in the following figure; the global

nature of the ICD Research Survey 2011 allows for analysis of the relative positions of each industry. The

mining industry leads the chart, followed by aerospace and power, whereas the defense and construction

industries exhibit the lowest growth optimism.

Figure 4: Company Revenue Growth Optimism: Cross-Industry Comparisons (%), 2011

Source: ICD Research Analysis / ICD Research

34%

38% 39% 40%41%

43%46%

48% 48% 49%50%

54%58%

60%

0%

10%

20%

30%

40%

50%

60%

70%

Net difference in revenue growth optimism


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3.2 Future developments in business structure

The changing economic environment has forced companies to reconsider their business structures and

incorporate necessary changes. Respondents were asked how they see their companies business structures

changing in the next 12 months, and if they will be expanding or diversifying into specific markets or product

sectors. The answers have been segmented into different stakeholder categories, which identify the apparent

changes anticipated across the industry and provide insights into general airport industry dynamics.

The top three key expected changes for 2011 are expand in current market, introduction of new products

and services and expand abroad. Companies have assigned high importance to the launch of new

innovative products and services, and managing prices. For example, Orville Redenbacher, a popcorn

specialist based in the US, introduced a new microwavable popcorn bag that is considered to be extremely

consumer friendly. On a similar note, Borealis, involved in chemical and innovative plastics solutions,

introduced a new packaging film, BorShape.

Expansion in current markets remained the highest priority in 2011, and respondents plan to increase theirproduct lines and expand facilities in present locations. For example, Moses H Cone Memorial Hospital has

begun construction of its US$200 million North Tower in Greensboro, North Carolina. This will add an

additional 79,248 square meter to the hospitals existing area and allow it to replace semi-private rooms with

96 private patient rooms designed to enhance patient recovery and safety.

Figure 5: Key Expected Changes in Business Structure (%), 2011


70

51

37

30

27

16

3

1

Expand in current market

New products and services

Expand abroad

Stabilizing company finances

Hiring new talent

Pricing management

Other

Don't know

Question: Globally, what are your company's top priorities in the next 12 months?(% respondents)


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3.3 Merger and acquisition activity predictions

Overall, executives from all industries expect to see increased levels of consolidation, with 61% of

respondents predicting that there will be either a significant increase or an increase in M&A activity over the

next 12 months. ICD Researchs 2011 survey highlights improving operational efficiency to attain economies

of scale, increases in geographical presence and business competence, and increases to customer bases for

better return on investment (ROI) as the key drivers for M&A activity.

A high proportion of respondents expected that, due to market uncertainty, small companies may have found it

difficult to sustain credit lines and will look to larger companies for support. For instance, a C-level executive of

an airport operator company based in North America states: Repeated losses due to the economy have

made consolidation and mergers the only sensible business solution for many industries. At this point, it is not

so much a matter of business success that is key, but having a revenue source that is stable.

In a competitive and technology-driven market, unstructured business entities are most favorable for

consolidation in the process of growth. The current security and surveillance market is fragmented andunstructured, but is likely to witness a number of acquisitions to improve growth through collaborative efforts in

technology, research and innovation,explains a board-level executive of a defense security and surveillance

company based in Europe.

Attempts to reduce operational costs and increase organizational efficiencies are also major factors in the rise

in consolidation expectations. For example, a C-level executive from a packaging converter company in

Europe comments: A significant number of smaller converters or packaging companies will be struggling to

survive as operational costs increase to unprecedented levels. Such spiraling costs will drive smaller

companies to either sell or close their businesses. For their customers sakes, however, these companies

should opt to sell. Other factors that help to create a favorable environment for M&A are a steady

improvement of the global economy and equity market, intention to increase current facilities to meet

overwhelming demand, intention to achieve synergies and reduce costs, low interest rates and financial

support from governments in accelerating growth.

Table 7: Merger and Acquisition Activity Expectations (%), 2011

Expectations Percentage

Significant increase 15%

Increase 46%

No change 23%

Decrease 2%

Significant decrease 1%

Dont know 12%

N.B. Responses are not mutually exclusive, and therefore do not equal 100%



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INDUSTRY DYNAMICS



3.3.1 Merger and acquisition activity predictions by region

The majority of respondents from North America and Europe expect an increase in M&A activity during the

next twelve months. Of companies that operate in North America, 67% expect increased level of M&A activity,

while 60% of respondents from Europe have similar expectations.

Table 8: Merger and Acquisition Activity Expectations by Region (%), 2011

Expectations North America Europe Asia-Pacific Rest of the World

Significant increase 16% 13% 15% 20%

Increase 51% 47% 44% 39%

No change 22% 24% 25% 19%

Decrease 2% 2% 3% 2%

Significant decrease - 1% 1% 2%

Dont know 8% 13% 12% 18%

Overall 100% 100% 100% 100%



Figure 6: Merger and Acquisition Activity Expectations by Region (%), 2011


16

51

22

2

0

8

13

47

24

2

1

13

15

44

25

3

1

12

20

39

19

2

2

18

Significant increase

Increase

No change

Decrease

Significant decrease

Dont know

Question: What change do you expect to see in the number of mergers and acquisitionsin your industry over the coming 12 months and why? (% respondents by region)

North America Europe Asia-Pacific Rest of the World


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INDUSTRY DYNAMICS



3.3.2 Merger and acquisition activity predictions by company turnover

An analysis of survey results reveals that 82% of respondents from large companies expect an increase in

merger and acquisition activity during the next twelve months, while 74% of respondents from medium-sized

companies and 60% from smaller companies and anticipate similar trends. Using synergies between multiple

partners or organizations, such as purchasing and integrated flight networks, helps us to reduce costs and

improve our strategic position in the market, says a board level respondent from an airports systems

integrator company that operates in Europe.

Table 9: Merger and Acquisition Activity Expectations by Company Turnover (%), 2011

Expectations Less than US$100 million US$100 millionUS$1 billion More than US$1 billion

Significant increase 15% 19% 19%

Increase 45% 55% 63%

No change 23% 19% 11%

Decrease 2% 2% -

Dont know 13% 5% 7%

Overall 100% 100% 100%



Figure 7: Merger and Acquisition Activity Expectations by Company Turnover (%), 2011


15

45

23

2

13

19

55

19

2

5

19

63

11

0

7

Significant increase

Increase

No change

Decrease

Dont know

Question: What change do you expect to see in the number of mergers and acquisitionsin your industry over the coming 12 months and why?

(% respondents by company turnover)

Less than US$100 mil lion US$100 mil lionUS$1 bil lion More than US$1 bil lion


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MARKET GROWTH OUTLOOK



4 Market Growth Outlook

This chapter provides a definitive assessment of the emerging regions on which marketing executives should

concentrate, and their interpretation of the economic situation in developed regions. Responses were

categorized by company type, region and turnover.

Key Findings:

China, India, Brazil and Middle East are considered to be the most promising emerging markets in 2011.

Large companies prefer Russia and South Africa as the other two promising regions, while medium-sized

companies consider Eastern Europe and the Middle East as having high potential for growth.

India, China and the Middle East have been identified as the most promising markets by C-level

respondents throughout all regions.

The top five developed countries expected to generate the most demand in 2011 are the US; Singapore,

Taiwan and Hong Kong; Australia; Germany and the UK.

Companies operating in North America expect to invest in the US, while respondents from Asia-Pacific

gave more importance to Singapore, Taiwan and Hong Kong, and Australia.

Irrespective of turnover, Singapore, Taiwan and Hong Kong, Australia and the US are identified as the

developed regions with the most growth potential.

Figure 8: Top Ten Growth Regions (%), 2011



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4.1 Demand in emerging markets

Developments following the global economic crisis of 20082009 suggest that demand and consumption will be

increasingly sourced from emerging economies. As a result, multinational corporations are viewing emerging

economies not only as production locations, but also as major customer bases for future growth. Respondentswere asked: Which emerging markets do you expect to offer your industry the most growth over the next 12

months? Responses have been categorized by different stakeholder categories to iden tify specific growth

regions.

The top five emerging markets expected to offer most opportunities for industry growth in 2011 include China

with 33% of respondents, India with 30%, Brazil with 24%, the Middle East with 22% and Eastern Europe with

22%.

Chinas growth is expected to increase in 2011 due to strong market potential, strong economic growth and

sufficient labor resources. Both China and India have become very attractive to foreign investors due to their

strong economic growth. For example, CSR Zhuzhou Electric Locomotive Research Institute Co., Ltd., asubsidiary of CSR Corporation Ltd. (CSR), signed an agreement with Wabtec Corporation, based in the US, in

May 2011. Under the agreement, the company will manufacture braking systems for rail cars.

Domestic companies are competing with multinational companies in the Chinese market. For example, Zhuhai

United Laboratories, a Hong Kong-headquartered pharmaceutical manufacturing company, expects to invest

US$151.42 million for the development of the domestic insulin market, which is usually dominated by foreign

players.

India plans to place more emphasis on PPP projects, particularly regarding plans that have been proposed in

the India Vision 2020 document. For example, software service provider Infosys Technologies has already

secured government projects to design intelligent power grids for several state governments in India; the

company plans to secure more government contracts in the near future. Similarly, a new coal power plant is

currently under construction in Gujarat, India; the new plant is expected to be one of the biggest coal-fired

plants in the world and will be commissioned in 2012.

Other emerging markets with strong growth potential are:

Rwanda

Peru

Chile

Nigeria

VenezuelaUAE (Dubai)

Central and Eastern European countries

The Caribbean Islands

The Philippines

Indonesia


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Table 10: Demand in Emerging Markets (%), 2011

Market Percentage

China 33%

India 30%

Brazil 24%

Middle East 22%

Eastern Europe 22%

Russia 19%

South Africa 12%

Saudi Arabia 10%

Turkey 10%

Indonesia 9%

Mexico 9%

Argentina 7%

Vietnam 7%



Figure 9: Demand in Emerging Markets (%), 2011


7

7

9

9

10

10

12

19

22

22

24

30

33

Vietnam

Argentina

Mexico

Indonesia

Turkey

Saudi Arabia

South Africa

Russia

Eastern Europe

Middle East

Brazil

India

China

Question: Which emerging markets do you expect to offer your industry the mostgrowth over the next 12 months? (% all respondents)


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4.1.1 Demand in emerging markets by region

According to respondents from different regions, China, India and the Middle East are expected to register most

growth. Although some similarities exist throughout regions regarding emerging markets identified for growth,

the order of importance assigned to different markets varies by region.

In North America:

China

India

Brazil

In Europe:

Eastern Europe

China

Russia

In Asia-Pacific:

India

China

Middle East

In the Rest of the World:

Brazil

Saudi Arabia

Middle East

Figure 10: Demand in Emerging Markets by Region (%), 2011


0

10

20

30

40

50

Russia

China

India

Brazil

Argentina

Indonesia

MexicoSaudi Arabia

South Africa

Turkey

Vietnam

Middle East

Eastern Europe

Question: Which emerging markets do you expect to offer your industry themost growth over the next 12 months? (% respondents by region)

North America Europe Asia-Pacific Rest of the World


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4.1.2 Demand in emerging markets by company turnover

Irrespective of turnover, emerging markets such as China, India and Brazil are identified as the regions with

the largest growth potential in the industry in the next 12 months. The survey results show that, apart from

these regions, large companies identify Russia and South Africa as the other promising regions, whilemedium-sized companies consider Eastern Europe and the Middle East as having high potential for growth.

Figure 11: Demand in Emerging Markets by Company Turnover (%), 2011


0

10

20

30

40

50

60

Russia

China

India

Brazil

Argentina

Indonesia

MexicoSaudi Arabia

South Africa

Turkey

Vietnam

Middle East

Eastern Europe

Question: Which emerging markets do you expect to offer your industry themost growth over the next 12 months? (% respondents by company turnover)

Less than US$100 m illion US$100 m illionUS$1 billion More than US$1 billion


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4.2 Growth expectations in developed countries

Many critics cite developed regions as the most negatively affected by the global economic crisis in 2008

2009. As a result, emerging markets have attracted increasing amounts of investment over the last two years,

due to improved chances of ROI. However, as the world economy enters a recovery phase, there areindications that developed regions will offer increased opportunities for the airports industry in 2011. This

section identifies the developed countries expected to offer the most growth potential. Respondents were

asked: How do you expect economic conditions to change in the following regions in 2011?

Survey results indicate that the top five developed countries expected to generate demand in 2011 are the

US; Singapore, Taiwan and Hong Kong; Australia; Germany; and the UK. The US is one of the most important

developed markets in the world: for example, NV Energy has added a 484MW combined-cycle plant at its

existing 144MW Harry Allen Generating Station in Nevada, US. The new facility will be able to meet 80% of

Southern Nevadas energy needs. Similarly, in April 2011, American Airlines and Japan Airlines (JAL) entered

into a close co-operation agreement to provide cargo customers with more routing choices, new destinations,

and increased cargo capacity by utilizing their mutually combined worldwide network.

Singapore acts as a significant trading base for the South-East Asian region, with low corporate taxes and

strong intellectual property rights attracting companies to set up their operations in the region. On a similar

note, in April 2011, Pan Pacific Hotels & Resorts announced that it will launch its flagship Parkroyal hotel in

Singapore in 2012, located at the key gateway into the central business district and the Raffles Place financial

hub. On a similar note, Hon Hai Precision, the parent of Taiwanese IT giant Foxconn, plans to buy a stake in

E-Ton Solar Tech, a Taiwanese solar cell company, for a consideration of US$130 million. The investment is

in line with Hon Hai's new development policies targeting clean energy.

Table 11: Growth Expectations in Developed Countries (%), 2011

Growth expectations Increase Remain the same Decrease Don't know Overall

USA 43% 30% 12% 15% 100%

Singapore, Taiwan and Hong Kong 41% 27% 3% 29% 100%

Australia 35% 33% 6% 25% 100%

Germany 34% 39% 6% 21% 100%

UK 31% 37% 16% 16% 100%

Canada 30% 40% 4% 25% 100%

South Korea 28% 32% 7% 33% 100%

Japan 27% 21% 27% 26% 100%

France 20% 44% 13% 24% 100%

Italy 13% 41% 20% 26% 100%

Spain 13% 34% 28% 25% 100%




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4.2.1 Growth expectations in developed countries by region

An analysis of responses by region reveals significant variations with respondents from companies with

leading operation in North America expected to invest in the US, while respondents from Asia-Pacific gave

more importance to Singapore, Taiwan and Hong Kong, and Australia. Respondents from Europe expect to

invest in Germany and UK, while Japan seems promising to respondents from companies operating in theRest of the World. Overall, developed markets identified for growth by respondents in various regions are:

In North America:

USA

Canada

In Europe:

Germany

UK

In the Asia-Pacific:

Singapore, Taiwan and Hong Kong

Australia

In the Rest of the World:

Japan

Singapore, Taiwan and Hong Kong

Figure 12: Growth Expectations in Developed Countries by Region (% Increase Responses), 2011


0%

10%

20%

30%

40%

50%

60%

70%USA

Canada

UK

Germany

France

ItalySpain

Japan

South Korea

Australia

Singapore, Taiwanand Hong Kong

Question: For the following developed markets how do you expect demand tochange in 20112012? (% respondents by region)

North America Europe AsiaPacific Rest of the World


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4.2.2 Growth expectations in developed countries by company turnover

An analysis of growth expectations for developed countries by company turnover reveals no significant

variation. Irrespective of turnover, Singapore, Taiwan and Hong Kong, Australia and the US are identified as

the developed regions with the most growth potential. Nevertheless, large companies also gave high

preference to South Korea and Japan, while small companies consider Germany and the UK to be promising.

Figure 13: Growth Expectations in Developed Countries by Company Turnover (% Increase), 2011


0%

10%

20%

30%

40%

50%

60%

USA

Canada

UK

Germany

France

ItalySpain

Japan

South Korea

Australia

Singapore, Taiwanand Hong Kong

Question: For the following developed markets how do you expect demand tochange in 20112012? (% respondents by turnover)

Less than US$100 million US$100 millionUS$1 billion More than US$1 billion


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THREATS AND OPPORTUNITIES



5 Threats and Opportunities

Constantly changing business dynamics present both threats and opportunities to companies operating across

all industries. The most important challenges facing companies and how these can be overcome have been

captured in our industry survey. In addition, respondents were surveyed on how suppliers can better maintainor win business from buyers, and where the key areas of opportunity lie during the next 1218 months.

Key Findings:

Market uncertainty, responding to pricing pressure and cost containment are the most immediate

business concerns for the industries.

Regulatory change seems to be a leading concern for companies operating in North America, while

responding to pricing pressure is of higher importance to companies with leading operations in Europe.

Rising competition and the retention or recruitment of skilled staff remains a more immediate business

concerns for larger companies than small and medium-sized companies.

Industry respondents consider innovate products, improved customer service, provide support for

generating new business, engage in partnerships to optimize working capital and reduce costs, improve

payment terms and reduce prices to be the foremost actions for suppliers to secure business.

Reduce prices and work harder to reduce costs are considered of higher importance to large

companies than to medium-sized and small companies.

5.1 Leading business concerns for 20112012

Of all the challenges industry executives are expected to face in 2011, market uncertainty, responding to

pricing pressure and cost containment are the most immediate business concerns. While 51% of companies

rate market uncertainty as the most important business concern during 20112012, a further 39% rate

responding to pricing pressure as the second-most-important concern. Similarly, cost containment and

rising competition are considered to be the other significant business challenges in 20112012 by 37% and

32% of the industry respondents respectively.

Market uncertainty is considered a leading concern by most companies , as falling or limited demand has

increased price competition between companies. With the aim of increasing revenues, business models have

to be reworked to avoid the prospect of markets being lost. For example, major European home decoration

companies such as Saint-Gobain, DIY and B&Q have closed retail stores in prominent cities in China due to

low individual demand.


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According to 37% of respondents, cost containment is a major concern. Rises in raw material prices have

become a leading business challenge and many companies are on the lookout for innovative solutions.

Increased competition has led to increased pricing pressure for many companies, which in turn has negatively

affected their profitability. Many companies are forced to innovate and differentiate products, and at the same

time save considerable amounts in operational costs. A C-level respondent from a supplier company based in

North America states: Mycompany is focused on the development and application of new technologies for

increasingly sophisticated missions and mission support.

Retention or recruitment of skilled workforce is a leading concern, as identified by 28% of respondents. In

order to retain staff, many companies plan to raise salaries substantially in 2011. Other incentives including

education programs and fringe benefits are on the cards.

Table 12: Leading Business Concerns (%), 20112012

Leading business concerns 20112012

Market uncertainty 51%

Responding to pricing pressure 39%Cost containment 37%

Rising competition 32%

Retention or recruitment of skilled staff 28%

Political interference 25%

Regulatory change 24%

Reducing debt or bad debt 17%

Dealing with staff shortages 15%

Others 4%



Figure 14: Leading Business Concerns (%), 20112012


4

15

17

22

25

28

32

37

39

51

Others

Dealing with staff shortages

Reducing debt or bad debt

Regulatory change

Political interference

Retention or recruitment of skilled staff

Rising competition

Cost containment

Responding to pricing pressure

Market uncertainty

Question: What are the biggest concerns for your organization in 20112012?(% all respondents)


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5.1.1 Leading business concerns for 20112012 by region

Market uncertainty, cost containment and retention or recruitment of skilled staff remains the leading

business challenges for respondents throughout regions.Highlighting this concern, a board member of a coal

mining company in North America states: Our company is expecting a severe shortage of skilled technical

labor which could be asignificant constraint on our business growth.

Table 13: Leading Business Concerns by Region (%), 20112012

Leading business concerns North America Europe Asia-Pacific Rest of the World

Market uncertainty 52% 56% 45% 44%

Regulatory change 37% 20% 18% 24%

Retention or recruitment of skilled staff 36% 19% 34% 34%

Cost containment 33% 36% 43% 36%

Responding to pricing pressure 32% 46% 36% 36%

Political interference 30% 20% 24% 34%

Rising competition 29% 30% 38% 36%

Dealing with staff shortages 17% 9% 21% 19%

Reducing debt or bad debt 17% 16% 14% 21%

Others 5% 3% 5% 2%



5.1.2 Leading business concerns for 20112012 by company turnover

Irrespective of size, companies consider market uncertainty, cost containment and responding to pricing

pressure to be the three leading business concerns. However, rising competition and the retention or

recruitment of skilled staff remains a more immediate business concerns for larger companies than small andmedium-sized companies.

Table 14: Leading Business Concerns by Company Turnover (%), 20112012

Leading business concerns Less than US$100 million US$100 millionUS$1billion More than US$1 billion

Market uncertainty 52% 36% 41%

Responding to pricing pressure 38% 48% 44%

Cost containment 36% 48% 48%

Rising competition 32% 35% 48%

Retention or recruitment of skilled staff 28% 31% 44%

Political interference 25% 27% 22%

Regulatory change 23% 36% 30%

Reducing debt or bad debt 17% 17% 7%

Dealing with staff shortages 14% 18% 22%

Others 4% 3% 4%



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5.2 Key supplier actions to maintain and secure buyer business

Global economic uncertainty has made cost concerns a higher priority for most companies. Simultaneously,

demand is changing as regular patterns of purchasing have become disrupted due to the recession and a

subsequent tentative move into recovery in some parts of the world. These changes require proactive and

improved methods of securing new business, as well as maintaining current business, as industry buyers

review their current supplier bases more closely.

Respondents were asked to identify the three most important ways that suppliers can secure business from

buyers in the current economic climate. Survey results show that, in 2011, suppliers identified innovate

products, improve customerservice, provide support for generating new business, engage in partnerships

to optimize working capital and reduce costs, improve payment terms and reduce prices as key factors to

secure business, as expressed by 46%, 43%, 39%, 39% and 29% respectively of C-level respondents.

To improve customer service and reduce costs, some companies are showing willingness to form partnerships

with suppliers. A C-level executive from a power industry supplier company operating in North America says:Mycompany is looking to collaborate with other companies in the power sector to significantly reduce lead

times and meet commitments.Another board-level respondent of a mining equipment supplier company with

leading operations in Asia-Pacific states: Our company is focused on providing technical support that is, in a

way, related to customer service for our clients.

Figure 15: Actions to Maintain and Secure Buyer Business (%), 2011


1

2

9

13

18

22

24

28

28

29

39

39

43

46

None of these

Other

Provide support f or offsetting existing business attrition

Provide other concessions and incentives

Demonstrate better ROI

Sign long term agreements

Off er more flexibility in delivery

Work harder to reduce costs

Reduce prices

Improve payment terms

Provide support for generating new business

Engage in partnerships to optimize working capital and

Improve customer service

Innovate products

Question: What are the three most important ways that suppliers can help buyers'business in the current business climate? (% respondents)


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5.2.1 Actions to maintain and secure buyer business by region

Respondents across all regions rank efforts to innovate products, provide support for generating new

businesses, improve customer service and engage in partnerships to optimize working capital and reduce

costs as the leading actions suppliers should take to secure business. For example, a C-level executive from

a hydropower generation company operating in Asia-Pacific states: We expect our suppliers to provide good-

quality products and services at a reasonable price.

Respondents from North America and Europe region give importance to innovate products as t echnological

innovation can help reduce costs, enable the development of more efficient processes and bring products to

market more quickly than in the past. For example, InterCall Europe, a UK-based arm of Intercall Inc.,

introduced a new line of easy-to-install and competitively priced conferencing packages designed for small

and medium-sized businesses under the InterCall SMB portal in April 2011.

Table 15: Actions to Maintain and Secure Buyer Business by Region (%), 2011

Actions

North

America Europe Asia-Pacific

Rest of the

World

Innovate products 52% 48% 45% 35%

Provide support for generating new business 43% 40% 35% 40%

Engage in partnerships to optimize working capital and reduce costs 40% 38% 39% 44%

Improve customer service 39% 41% 50% 43%

Work harder to reduce costs 26% 29% 26% 29%

Demonstrate better ROI 23% 19% 16% 14%

Improve payment terms 22% 26% 32% 40%

Reduce prices 22% 28% 31% 32%

Sign long-term agreements 18% 19% 26% 32%

Offer more flexibility in delivery 18% 24% 24% 28%

Provide other concessions and incentives 12% 12% 12% 17%

Provide support for offsetting existing business attrition 9% 10% 8% 7%

Others 4% 1% 3% 1%

None of these 2% 1% 1% 1%




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5.2.2 Actions to maintain and secure buyer business by turnover

An analysis of responses by company turnover identified minor variations in responses and attitudes.

Irrespective of size of company turnover, innovate products, improve customer service, engage in

partnerships to optimize working capital and reduce costs and provide support for generating new business

are identified as the major actions for suppliers to maintain and secure business with buyers. However, reduce

prices and work harder to reduce costs are considered of higher importance to large companies than to

medium-sized and small companies.

Figure 16: Actions to Maintain and Secure Buyer Business by Company Turnover (%), 2011


0

0

11

11

11

30

22

33

33

11

44

22

59

59

1

0

9

12

26

23

24

35

26

30

39

30

43

46

1

2

9

13

18

22

24

27

28

29

39

40

42

46

None of these

Others

Provide support for off setting existing business attrition

Provide other concessions and incentives

Demonstrate better ROI

Sign long term agreements

Offer more flexibility in delivery

Work harder to reduce costs

Reduce prices

Improve payment terms

Engage in partnerships to optimize working capital andreduce costs

Provide support for generating new business

Improve customer service

Innovate products

Question: What are the three most important ways that suppliers can help buyers'business in the current business climate? (% respondents by company turnover)

Less than US$100 million US$100 millionUS$1 billion More than US$1 billion


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PROCUREMENT DYNAMICS



6 Procurement Dynamics

This chapter reveals the current size of companies procurement budgets and how spending in supplier

organizations will change, providing insight into the buying behaviors and market competition for supplier

companies. Forward-looking expectations for category-level spending on specific products and services revealthe future needs in the industry and identify vital business opportunities for suppliers.

Key Findings:

For 2011, the average size of the global, annual procurement budget is estimated at US$26 million.

Respondents in Asia-Pacific have the highest procurement budgets, at US$47 million in 2011, followed by

the Rest of the World at US$35 million and North America at US$22 million.

Procurement budgets of survey respondents are expected to rise by an average of 11% over the next 12

months.

The greatest increase in procurement budgets is expected for respondents that primarily operate in North

America, as they expect a 13% budget increase. This is in contrast to respondents in Europe, who are

expected to see the lowest increase in spending.

Respondents from large companies expect their procurement expenditures to increase by an average of

8% over the next 12 months, while respondents from small companies expect their procurement

expenditure to rise by 10%.

Of all respondents, 63% expect an increase in supplier prices, while 13% expect a decrease and 21%

expect no change.

Of respondents from companies that operate in North America and the Rest of the World, 68% each

expect supplier prices to increase, followed by respondents from Europe with 61% expecting an increase.


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PROCUREMENT DYNAMICS



6.1 Annual procurement budgets

The total size of the annual procurement budgets reveals the potential available share of expenditure to

suppliers. This section identifies budgets by company type, turnover and region. For 2011, the average size of

the global annual procurement budgets is estimated at US$26 million. While 41% of respondents indicate that

they will restrict their procurement budgets to less than US$250,000 in 2011, 21% of respondents expect their

annual procurement budgets to range between US$1 million and US$10 million.

Companies are also expected to invest in developing advanced technologies to reduce costs and enhance

brand value. Some companies plan to enhance their product mix and market presence through acquisitions.

For example, Terra Firma, a high-voltage-grid operator based in Italy, acquired Rete Rinnovabile Srl, a solar

energy comp

2011 CEO Outlook Report Final

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