01/21/09-
Strong and weak companies yet to deploy opportunistic or defensive strategies
- Though most executives are optimistic, 46% globally doubt their company’s ability to negotiate crisis successfully
- Australian companies urged to take on board lessons from past recessions
Sydney, Tuesday, 20 January 2009 – A survey of more than 800 global business leaders released today by international management consultancy Booz & Company reveals many companies have failed to adjust to the international financial crisis in ways that aid their survival, or ensure they will emerge stronger.
The survey suggests companies are yet to fully understand the impact of the crisis, and that most senior executives doubt their own company’s ability to steer a successful course through the crisis.
Meanwhile, in advise to clients, Booz & Company Australia has urged local CEOs to take on board the lessons from previous recessions in responding to the crisis, by moving quickly to preserve value or consolidate a strong market position.
Conducted in December 2008, the global survey covered respondents in 65 countries, including Australia, representing all major industry groups. Findings were broadly consistent across all regions and industries.
Booz & Company found 53% of respondents felt the structure of their global industry would change dramatically, most likely with the industry’s strongest players consuming its weakest. Respondents were optimistic about how their company would fare, with 54% saying the crisis would ultimately have a positive impact on their business, and only 20% saying it would damage their firm.
Yet this optimism appears not to be rooted in the response strategies being pursued or executives’ confidence in their company’s leadership.
Almost two thirds of companies classified as financially weak had yet to accelerate efforts to conserve cash or divest non-core assets, a key survival strategy. And a quarter of those companies reported as being financially strong – 75% of all respondent companies - were not pursuing M&A or similar growth strategies to leverage their relative strength.
Forty per cent of executives surveyed doubted their company’s plan to navigate the crisis while 46% were sceptical about their leadership’s ability to carry out the plan. A third of CEOs or C-suite respondents (CFO, CIO etc.) doubted even their own plans would work.
Managing Director of Booz & Company Australia, Tim Jackson, said the survey revealed a disconnect globally between what companies should be doing in response to the crisis and what many actually were doing.
“The sense is companies have been caught by surprise, if not paralysed, by the sudden impact of the downturn and are not sure how to move forward. Many are pursuing a haphazard response without an honest assessment of whether they should be in survival or opportunity mode,” Mr Jackson said.
“The optimism most executives express reinforces our belief that the full impact of the crisis has not yet hit home, notwithstanding that some companies have been presented with genuine opportunities for growth,” he said.
“Australian companies are relatively well positioned as our economy has been shielded from the worst of the crisis so far, and this is reflected in the corporate response.
“Most Australian companies seem to have entered a holding pattern, preferring to hold off on decisive action until international developments have played out more fully. Anecdotally, we know many corporates have put significant investment decisions on hold, or are actively exploring opportunistic moves from a position of relative strength. Notably, we are yet to see the deep, widespread restructuring that has occurred internationally.
”Booz & Company Australia is urging Australian CEOs to examine lessons from previous downturns in responding to any sustained downturn in the local economy. Vulnerable companies are advised to tighten controls and preserve cash and balance sheet flexibility, while well positioned companies could look at picking up distressed assets cheaply and investing selectively in new markets and products.
“Every economic downturn produces winners and losers and a company’s response to this crisis will determine whether they emerge stronger or weaker from it,” Mr Jackson said.
“There are some notable examples of companies that emerged from the 1990/91 recession and 2000/01 downturn having more than doubled their share price. The key to a business successfully negotiating the downturn is to adjust strategy quickly according to its market position, and to move decisively,” he said.
Booz & Company’s global survey suggests the corporate ‘green’ agenda will be an early casualty from the crisis. Some 40% of respondents said their industries will have to pull back on key corporate social responsibility (CSR) initiatives such as energy-efficiency, the environment and community service. Pessimism about the fate of these programs was most pronounced among respondents from the global transport (51%) and energy (47%) industries.
Issued by Sefiani Communciations Group on behalf of Booz & Company Australia. Media contacts:
|
Kristine Anderson |
Nick Owens/Hugo Shanahan |
Survey methodology
Booz & Company's survey about the economic crisis was fielded in December 2008 —828 managers responded. The respondents represented many major industries, from financial services to healthcare to energy to consumer goods. Thirty-seven percent of the respondents were CEOs or people who reported directly to CEOs; another 24 percent were two levels below the CEO. Geographically, the survey captured responses from managers in 65 countries. Western Europe was the most highly represented, accounting for 38% of the sample, followed by North America, with 30%, and emerging markets, with 28%. The complete survey findings can be found in the Viewpoint “Finding Upside in an Imperiled World Economy” at www.booz.com.
About Booz & CompanyBooz & Company is a leading global management consulting firm, helping the world’s top businesses, government ministries, and organisations. With more than 3,300 people in 57 offices around the world, Booz brings foresight and knowledge, deep functional expertise, and a practical approach to building capabilities and delivering real impact. Booz works closely with clients to create and deliver essential advantage.For Booz & Company’s management magazine strategy+business visit www.strategy-business.com. Visit www.booz.com to learn more about Booz & Company.