Restructuring study 2010 – International
The crisis has bottomed out. 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 focus last year was on reducing costs and safeguarding liquidity, but managers are now returning to growth and sales initiatives. These are the key findings of the new "Restructuring International 2010" study by Roland Berger Strategy Consultants. The strategy consultancy surveyed board members and CEOs at around 5,600 international companies from fourteen different industries (return rate 8.5%).
"The crisis has bottomed out," says Max Falckenberg, Partner with 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," reports co-author Jakob Rüden. "Respondents identified the industries that should benefit most from the upturn as energy, utilities, pharma and health and financial services."
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. In Western Europe, 34% of the companies surveyed did cut their HR costs by more than 10%, but 40% say this figure remains the target.
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 Falckenberg. "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.
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%). Only a third of the companies responding said they were planning to take out additional bank loans," notes Rüden. The terms for obtaining new bank loans have worsened for around half of the companies. The main complaints concern higher interest rates and tougher collateralization requirements.
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 next year. A third of the executives questioned believe that Europe will have to wait till next year to join in the upswing. There is more optimism about North America taking off in 2011 (46% of respondents).
As the world economy recovers, 69% of the companies surveyed say they want to concentrate on their core business and 61%, 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 self-finance future growth with their own resources. Almost a third of companies are worried that insufficient finance might impede their recovery. More or less the same proportion identifies another potential obstacle to future growth as unwillingness to take risks.
Lessons from the crisis
"We can learn four important lessons from the crisis," says Max Falckenberg:
"The crisis has bottomed out," says Max Falckenberg, Partner with 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," reports co-author Jakob Rüden. "Respondents identified the industries that should benefit most from the upturn as energy, utilities, pharma and health and financial services."
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. In Western Europe, 34% of the companies surveyed did cut their HR costs by more than 10%, but 40% say this figure remains the target.
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 Falckenberg. "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.
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%). Only a third of the companies responding said they were planning to take out additional bank loans," notes Rüden. The terms for obtaining new bank loans have worsened for around half of the companies. The main complaints concern higher interest rates and tougher collateralization requirements.
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 next year. A third of the executives questioned believe that Europe will have to wait till next year to join in the upswing. There is more optimism about North America taking off in 2011 (46% of respondents).
As the world economy recovers, 69% of the companies surveyed say they want to concentrate on their core business and 61%, 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 self-finance future growth with their own resources. Almost a third of companies are worried that insufficient finance might impede their recovery. More or less the same proportion identifies another potential obstacle to future growth as unwillingness to take risks.
Lessons from the crisis
"We can learn four important lessons from the crisis," says Max Falckenberg:
- A downturn can weaken the liquidity position unexpectedly quickly, so businesses need to improve their liquidity buffer.
- Rapid loss of earnings in the crisis has sucked equity out of many companies. It has become more important than ever to build a comfortable equity position.
- Cost structures must be prepared for a possible collapse in business. That means creating greater flexibility.
- The foundations for future growth must be laid early on. Cost cutting must not be allowed to impede company growth.
