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The pressure of survival is drawing the focus of CEOs towards maximising returns from existing markets.
"Now, we have put much more focus on managing the expense base as well as working capital … I don't see it as being a short-term decision. I think it will just position us to be that much stronger, more viable … as we move through this cycle."
Stephen Green
Group Chairman HSBC Holdings plc, UK
Between 2008 and 2009 the number of CEOs whose 12-month growth plans centre on existing markets has grown from 30 percent to 37 percent, while the number who see new markets, new products, new acquisitions and new strategic alliances as their main growth opportunities has declined 2-3 percent.
Even in cash-rich industries, such as pharmaceuticals, CEOs are more cautious. Fred Hassan, Chairman and CEO of ScheringPlough Corporation, says: "Unlike industries which borrow a lot of money, like financial services and utilities, [pharmaceutical companies] tend to be less hungry for capital investments. However, R&D is in some ways a capital investment, although it's not accounted for in that manner. We are seeing more caution in launching R&D projects: more selectivity, much tougher hurdles…."
"Right now we are focused on survival," says Robert Willett, CEO of Best Buy International & Enterprise CIO, the US-based multi-national retailer. He continues: "Companies don't go bust because they don't make money; they go bust because they don't have any cash…We could see this downturn was going to be here for a while, so we started conserving cash…We've taken our new store programme down from 100 to probably 30-50…We've also asked, what are the three things we're going to really push hard on? We always have a hundred opportunities, but what are the three or four really big things that can accelerate our strategy, differentiate us from our competitors, and use the downturn to our benefit?"
As businesses try to survive immediate market conditions, they are also trying to make certain that they endure and succeed over the long term. CEOs have long believed that critical sources of competitive advantage take years, not quarters, to build. Agility, customer service, talent and reputation remain at the top of the list.
More than 90 percent of CEOs believe that these four features are important or critical to long-term growth. Furthermore, meeting strategic objectives, such as building or maintaining these sources of competitive advantage, continues to be one of the top criteria in evaluating investments, along with maximising financial returns.
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