Global Roland Berger CEO survey on restructuring
The bottom of the global economic crisis is behind us, according to the survey. The majority of companies questioned expect a significant recovery from the middle of this year, even if a short-term rise in unemployment may dampen economic growth. Asia will benefit most from global growth. Thus, the main focus last year was on reducing costs and safeguarding liquidity, but managers are now returning to growth and sales initiatives. In Belgium, however, a prolonged period of low growth is expected, as 92% of respondents foresee increasing unemployment, which may temper private demand. These are the key findings of the new "Restructuring International 2010" survey by Roland Berger Strategy Consultants. The strategy consultancy surveyed CEOs at around 5,600 international companies from fourteen different industries.
"The global crisis has bottomed out," says Eric Baart, Partner at Roland Berger Strategy Consultants. "Companies from all over the world are again pursuing a growth strategy." Globally, companies expect to see a significant recovery from the middle of 2010 – even if it is partly dampened by further hikes in unemployment.
Growth from the middle of 2010
Businesses expect economic growth to reach 1.1% as a global average for 2010, picking up to 1.6% next year. "The most optimistic growth expectations are for China, put at 8.5% for this year and 8% for next year. Europe and Japan, at just one percentage point, are seen as the regions likely to trail behind," says Baart. "Respondents identified the industries that should benefit most from the upturn as energy, utilities, pharma and health and financial services."
Belgium lags behind
A strong majority (92%) expects Belgian unemployment to further increase, which may reduce private consumption. "Most of the Belgian CEOs foresee a prolonged period of low growth in Belgium, as private demand is expected to remain weak. In addition, companies are facing stricter conditions for getting loans and fear increasing government regulation and taxes and decreasing government spending, as public deficits will need to be reduced." As Belgium is a very open economy, Belgian companies also fear increasing protectionism, which could reduce foreign demand for Belgian-made goods, despite a weaker euro.
Therefore, CEOs expect Belgium to lag behind in the economic recovery, with an expected GDP increase of only 0.5% in 2010 and 1.4% in 2011.
Belgian companies are also less optimistic about profitability than their European counterparts, with 18% of the companies expecting profit growth in 2010, compared to 43% in Western Europe.
Savings targets met – especially in HR
Most companies made big efforts to reduce their personnel costs during the crisis. These savings came to 9% as a global average for 2009. The biggest HR savings were made in the US (more than 10%). China and Japan also emerge as overachievers who slightly exceeded their savings targets. Both in Western Europe and in Belgium, 34% of the companies surveyed cut their HR costs by more than 10%.
Financial recovery, but worsening credit terms
Most companies have become more optimistic about their financial position for this year. "In the crisis, the liquidity situation became a critical issue for 40% of businesses," says Baart. "This still applies to about 20% today." As for firms still having to deal with insufficient liquidity, the survey found above-average numbers in China, Eastern Europe and the Middle East. But this is now a problem for only 14% of companies in Western Europe and 5% in the United States and Japan. In Belgium, however, 30% of the companies report liquidity still being critical.
Businesses have adopted operational cash management to safeguard their liquidity position. "The most common response is to take operational steps like improving receivables collection (76%). New fundamental changes in managing working capital is still the playing field of a limited number of leading companies. Only a third of the companies responding said they were planning to take out additional bank loans," says Baart. The terms for obtaining new bank loans have become stricter.
Asia to benefit most from the upturn
As many as 71% of respondents think that Asia will benefit most from the forthcoming recovery this year. Even more (85%) see improved opportunities for China over the next years. A third of the executives questioned believes that Europe will have to wait until next year to join the upswing. There is more optimism about North America taking off in 2011 (46% of respondents). Therefore, Europe will be less of an investment priority.
As the world economy recovers, 61% of the companies surveyed, especially in the US, plan to launch new products as a growth driver. In Japan, businesses are using the upturn to break into new markets and regions. The majority of companies worldwide plan to maximize self-financing capabilities for their future growth. Almost a third of all companies are worried that insufficient finance might impede their recovery. The same proportion identifies increased business volatility as an obstacle to taking risks.
Lessons from the survey
"We can learn four important lessons from the survey," says Eric Baart:
1. Due to increased business volatility and uncertainty, CEOs are taking less risk.
2. Companies are shifting their focus from cost reductions to revenue growth across the world.
3. Cost structures need to be adapted to absorb the increased business volatility and the focus on revenue growth. This means creating greater flexibility and scalability.
4. Asia and North America are perceived by global business leaders to offer better opportunities than Western Europe. This definitely applies to Belgium as well.
The complete survey can be ordered free of charge at:
www.rolandberger.com/pressreleases
"The global crisis has bottomed out," says Eric Baart, Partner at Roland Berger Strategy Consultants. "Companies from all over the world are again pursuing a growth strategy." Globally, companies expect to see a significant recovery from the middle of 2010 – even if it is partly dampened by further hikes in unemployment.
Growth from the middle of 2010
Businesses expect economic growth to reach 1.1% as a global average for 2010, picking up to 1.6% next year. "The most optimistic growth expectations are for China, put at 8.5% for this year and 8% for next year. Europe and Japan, at just one percentage point, are seen as the regions likely to trail behind," says Baart. "Respondents identified the industries that should benefit most from the upturn as energy, utilities, pharma and health and financial services."
Belgium lags behind
A strong majority (92%) expects Belgian unemployment to further increase, which may reduce private consumption. "Most of the Belgian CEOs foresee a prolonged period of low growth in Belgium, as private demand is expected to remain weak. In addition, companies are facing stricter conditions for getting loans and fear increasing government regulation and taxes and decreasing government spending, as public deficits will need to be reduced." As Belgium is a very open economy, Belgian companies also fear increasing protectionism, which could reduce foreign demand for Belgian-made goods, despite a weaker euro.
Therefore, CEOs expect Belgium to lag behind in the economic recovery, with an expected GDP increase of only 0.5% in 2010 and 1.4% in 2011.
Belgian companies are also less optimistic about profitability than their European counterparts, with 18% of the companies expecting profit growth in 2010, compared to 43% in Western Europe.
Savings targets met – especially in HR
Most companies made big efforts to reduce their personnel costs during the crisis. These savings came to 9% as a global average for 2009. The biggest HR savings were made in the US (more than 10%). China and Japan also emerge as overachievers who slightly exceeded their savings targets. Both in Western Europe and in Belgium, 34% of the companies surveyed cut their HR costs by more than 10%.
Financial recovery, but worsening credit terms
Most companies have become more optimistic about their financial position for this year. "In the crisis, the liquidity situation became a critical issue for 40% of businesses," says Baart. "This still applies to about 20% today." As for firms still having to deal with insufficient liquidity, the survey found above-average numbers in China, Eastern Europe and the Middle East. But this is now a problem for only 14% of companies in Western Europe and 5% in the United States and Japan. In Belgium, however, 30% of the companies report liquidity still being critical.
Businesses have adopted operational cash management to safeguard their liquidity position. "The most common response is to take operational steps like improving receivables collection (76%). New fundamental changes in managing working capital is still the playing field of a limited number of leading companies. Only a third of the companies responding said they were planning to take out additional bank loans," says Baart. The terms for obtaining new bank loans have become stricter.
Asia to benefit most from the upturn
As many as 71% of respondents think that Asia will benefit most from the forthcoming recovery this year. Even more (85%) see improved opportunities for China over the next years. A third of the executives questioned believes that Europe will have to wait until next year to join the upswing. There is more optimism about North America taking off in 2011 (46% of respondents). Therefore, Europe will be less of an investment priority.
As the world economy recovers, 61% of the companies surveyed, especially in the US, plan to launch new products as a growth driver. In Japan, businesses are using the upturn to break into new markets and regions. The majority of companies worldwide plan to maximize self-financing capabilities for their future growth. Almost a third of all companies are worried that insufficient finance might impede their recovery. The same proportion identifies increased business volatility as an obstacle to taking risks.
Lessons from the survey
"We can learn four important lessons from the survey," says Eric Baart:
1. Due to increased business volatility and uncertainty, CEOs are taking less risk.
2. Companies are shifting their focus from cost reductions to revenue growth across the world.
3. Cost structures need to be adapted to absorb the increased business volatility and the focus on revenue growth. This means creating greater flexibility and scalability.
4. Asia and North America are perceived by global business leaders to offer better opportunities than Western Europe. This definitely applies to Belgium as well.
The complete survey can be ordered free of charge at:
www.rolandberger.com/pressreleases
