Ey Competing For Growth

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Profitable growth is all about access to the right knowledge Want to know more? Competing for growth is a global survey by Ernst & Young focusing on growth. Through extensive research and conversations with 1,400 senior executives from companies around the world, Ernst & Young has developed key insights into how the worlds leading businesses are returning to profitable growth. To access our insights and learn more about Competing for Growth, contact your local Ernst & Young office or visit www.ey.com/competing-for-growth

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<ul><li> 1. Competing forgrowthWinning in the new economy </li> <li> 2. Ernst &amp; 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 One area of performance seems to be attracting more focus and management attention than all others, namely growth. More precisely, how can companies return to protable andFinding a new balance 8 sustainable revenue growth in a new competitive environment? During September and October 2010 we talked to over 1,400What we can learn from the high senior executives from companies around the world to hearperformers on: their experience, test our thinking and understand more aboutMaximizing reach and opportunity 10 the actions they are taking to help their companies thrive.Responding quickly to market changes 14Reducing cost is only part of the story 18 Recognizing that industry sectors vary and performance isTaking a proactive approach 22 relative, we examined the distribution of companies across each sector. For each sector we identied the top and bottom quartiles for both EBITDA and revenue growth. There areA changing focus: from nance high and low performers and we have explored the variationto management effectiveness 26 in their actions to seek to understand the difference in their performance.About this report 28 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 </li> <li> 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 </li> <li> 4. Competing for growth frameworkOur research shows that high performing companies are signicantly ahead of their competitors in four critical areas. The markets a company is in determine their opportunity Customer reach A companys growth Operational The Cost the competitiveness of agility competitiveness new normal Stakeholder1 Customer reach Maximizing the potential market opportunity for their 2 Operational agility Improving their ability to deliver effectively in product or service a fast-changing market Focusing on the more protable segments 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 While companies may choose to focus on particular aspects of this competitive agenda as the basis of their strategy, we believe the four to be linked. A balanced approach is required and the ultimate competitive position is found when all are optimized. Competing for growth Winning in the new economy 3 </li> <li> 5. What we foundThe new normalWhen we surveyed the market in January 2010, we found that companies were starting to get backto business, but not back to normal. It was clear that a new performance agenda was neededfor a new type of market. But as the recession turns into a slow recovery, we would expect to seecompetition gradually return to pre-crisis levels. Instead, however, an overwhelming majority of ourrespondents 85% believe their market is going to get more competitive in the next two years.Forty-six percent say it is going to get signicantly more competitive. Why would that be?It has been apparent for some time that the economic turmoil of How competitive has the market been in the past two years,recent years is unlike the cyclical recessions of previous decades. and how do you see it looking over the next two years?Partly through its sheer scale but also through its impact on 2009 2010mega trends which have been developing for a number of years,the nancial crisis and the measures taken to address it reveals a High performers 69 86new economy that seems different from the one that we have been Low performers 69 83used to. Globalization has been underway for decades similarly All respondents 70 85the impact of digital technology in production, distribution andcommunication, the massive demographic shifts and the increasedmobility of capital yet somehow the nancial crisis has marked % of respondents rating significantly more competitive and more competitivea tipping point when these factors have moved from beinglong-term trends to becoming immediate challenges. As companies secure their survival, the focus is turning again to growth. Competition is perceived to be increasing throughoutThrough our work with companies around the world, we are the value chain, from capital through to sale. But the greatestprivileged to both witness and assist management from many challenge is being faced in the market. Gone is the zero-sumorganizations as they seek to help their companies prosper. game of a shrinking market, where companies only won throughWe have used this insight as the basis for research so that through others losing, but gone too is the win/win era of the precedingaggregating responses we can move to identify not only the shared decade, where competition was mainly around comparative ratesperceptions of businesses but also the different actions that of growth. Todays market is demanding, oversupplied andseem to be having most effect. By identifying the top and bottom increasingly price sensitive. Most growth will have to be wonquartile performers from different sectors our high and low from competitors. There will be very clear winners and, equally,performers and correlating their responses, we can move beyond very clear losers.reporting the good fortune of some sectors and some companies,to identifying potentially replicable sources of advantage. This is On which elements of your business have you been facingthe basis for this report. increased competition in the past two years?The market is more competitive 60 Existing players from developed markets 43 48The market has been very difcult in the past two years 70% of 50our respondents say their market has been more competitive New players from developed markets 39 51in the past two years. This is a normal consequence of economicslowdown, as companies ght to keep market share and survive. 39 Existing players from emerging markets 31Even in the emerging markets, where economic momentum was 35only slowed, companies are reporting increased competition as 37new players enter in search of growth. Ne...</li></ul>

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