Competing for growth whitepaper

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  • 1. Competing forgrowthWinning in the new economy
  • 2. Ernst & Young has been working closely with businesses across the globe to help them respond to the unprecedented challenges of the nancial crisis and changing economy. Over the past two years, we have undertaken research andContents worked with thousands of companies around the world through programs such as Opportunities in adversity, Lessons from change and Planning for growth. Our work has identied a newExecutive summary 2 performance agenda that leading companies are following as they seek to benet from the new market environment.The new normal 4 Once short-term survival is secured, one area of performance seems to be attracting more focus and management attention than all others, namely growth. More precisely, how canFinding a new balance 8 companies return to protable and sustainable revenue growthMaximizing reach and opportunity 10 in a new competitive environment?Responding quickly to market changes 14Reducing cost is only part of the story 18 During September and October 2010 we talked to over 1,400Taking a proactive approach 22 senior executives from companies around the world to hear their experience, test our thinking and understand more about the actions they are taking to help their companies thrive.A changing focus: from nanceto management effectiveness 26 Recognizing that industry sectors vary and performance is relative, we examined the distribution of companies across each sector. For each sector we identied the top and bottomAbout this report 28 quartiles for both EBITDA and revenue growth. There are high and low performers and we have explored the variation in their actions to seek to understand the difference in their performance. In this report we explore the variation in focus and progress of these companies. We hope that their success will help you identify more effective programs of your own. Competing for growth Winning in the new economy 1
  • 3. Executive summaryCompanies across all sectors and markets are expecting the new economy to be even morecompetitive than the old over the next two years, according to our survey of 1,400 executivesfrom around the world. The increased competitive pressure extends across the value chain forlabor, input materials and capital. And those from emerging markets expect competitivenessto increase the most, as companies from developed markets enter and local players intensifytheir focus.Competition in the new economy is dynamic and being shaped There is pressure on marginsby four macroeconomic factors which, while not new, havea signicantly more pronounced importance than before. Expectations of price increases in the future are currently low almost 60% of respondents expect a price rise that either onlyMarket variation has increased matches ination or is below ination. At the same time, many executives are experiencing both price erosion in their market andEmerging markets are growing, but there is a signicant variation increased costs for input and labor in their production, raisingin performance across them. Similarly, some developed markets on-going questions about their nancial viability.are doing better than expected, whereas others are struggling orcontinuing to decline. Stakeholders are nervousThe same variation in performance and forecast is true for market Attracting and retaining talent remains a problem with vastlysegments. There is a general re-emergence of increasingly divergent approaches to stafng levels, both through the downturncost-conscious buyers, but some luxury segments continue to and in the emergence of the new economy. Capital seems limitedthrive. Old purchase patterns are under pressure. Boundaries and there is caution about the risks that are faced, the new regulationbetween buyer groups overlap and change, challenging the that is almost certain to come and the scal retrenchment thatgo-to-market assumptions of even the most established players. is being implemented. There are growing demands for greater transparency and improved governance.The market is more volatileProduct life cycles continue to shorten as innovation is increased.Economic forecasts are being changed and measurements correctedon a quarterly basis across almost all markets. This volatility isplacing increased pressure on the supply chain, which must nowaccommodate rapid change.2 Competing for growth Winning in the new economy
  • 4. Competing for growth frameworkOur research shows that high performing companies are signicantly ahead of their competitors in four critical areas. The markets you are in determine your opportunity Customer reach our pro ta ility our gro th is determined y is determined y Operational The Cost the competitiveness agility competitiveness your a ility to respond new normal o your cost ase Stakeholder con dence our value and a ility to und gro th is determined y the con dence o your stakeholders1 Customer reach Maximizing the potential market opportunity for their product or service 2 Operational agility Improving their ability to deliver effectively in a fast-changing market Focusing on the more protable segment Accelerating speed of response to get to market quicker Broadening product service offer around current clients Enhancing exibility of their supply chain to respond to Prioritizing markets to compete in smaller but protable opportunities Reinforcing their brand and marketing efforts to Refocusing on innovation, especially at an incremental increase awareness and mitigate price pressure level3 Cost competitiveness Sustaining their economic viability 4 Stakeholder condence Building stronger relationships with their stakeholders Informing the pricing decision with full cost information Identifying and explaining risk Passing on the pressure to others in their ecosystem Anticipating regulatory change Sustaining cost-reduction efforts by focusing on process Enhancing their reporting change, rather than just discretionary constraint Securing and developing their people Optimizing capital, wherever possible