International Business Report 2013: Looking out not in
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International Business Report 2013: Looking out not in International Business Report 2013: Looking out not in Document Transcript

  • International Business Report 2013:Looking out not inInternational business report 2013
  • Executive summaryThe latest data from the International Business Report Figure 1: Balance percentage of optimism/pessimism 2013(IBR), which surveys business leaders across the globe Balance percentage of those indicating optimism against those indicating pessimism over the next 12 monthsfrom 12,000 listed and privately held businesses in 44economies, shows that 36 per cent of Irish seniorexecutives are slightly or very optimistic about thecountry’s economic prospects in 2013, an increase of 6 percent year-on-year and 15 per cent on 2011.1 Irishbusinesses are ranked the 5th most optimistic of the 10Eurozone countries surveyed with a net percentage balanceof -2 per cent2 (2012: -12 per cent) i.e. those businessleaders optimistic (36 per cent) about the economy’soutlook in 2012 less those who are pessimistic (38 percent). Globally Ireland remains 29th out of the 44economies in 2013 (see figure 1).3 Successful organisations sustainably and responsiblyidentify and exceed customer needs. In doing so, successfulcompanies create many opportunities in their communitysuch as employment, taxes, talent development andinnovation. Successful organisations unfortunately alone Source: IBR 2013cannot solve all economic woes. IBR 2013 shows the clear While the Irish outlook improves, IBR 2013 suggests thatand widening gap between the outlook for the macro the on-going Eurozone crisis at -22 per cent (2012: -16 pereconomy and the outlook for those trading in Ireland. cent) and United States fiscal cliff at -4 per cent (2012: +1 Ireland and therefore the customers of many Irish per cent) continue to undermine global growth prospects,businesses have endured severe financial and emotional with the balance percentage of business leaders optimisticstress following several years of austerity budgets. The less those pessimistic in both economies decreasing instress on the country and as a result for Irish businesses 2013. Globally business optimism stands at a netwho focus solely on Ireland for its market will continue due percentage balance of +4 per cent (2012: 0 per cent).to the following three key challenges: Relative to our Eurozone counterparts, only Germanyi balancing the government budget; (+21 per cent), Denmark (+14 per cent), Belgium (+12 perii dealing with the oversized debt burden – public, cent) and Estonia (+18 per cent) are more optimistic about personal and corporate; and their economic outlook in 2013. The continued decline iniii funding the public sector pensions deficit. business sentiment across European economies suggests that businesses leaders are now adjusting their outlook due to the difficult process of fiscal and structural reform across the zone.1 2011’s IBR surveyed Privately Held Businesses exclusively2 Balance percentage between those businesses that are optimistic and those that arepessimistic3 44 countries surveyed in 2013 compared to 40 in 2012. Holding for the 40 economies th th th thsurveyed in 2012, Ireland would have climbed from 29 to 25 and from 7 to 4 out of the EUcountries in 2013
  • Economic uncertainty typically elicts a ‘wait and see’ policy • Irish senior executives are increasing investment infrom many businesses. In Ireland those that continue to R&D, plant and machinery and buildings, expectingwait, have seen their competitiveness erode or face ever increased productivity and export led growth in 2013decreasing returns. (see figure 3): After five years of toil, Irish businesses are more costefficient and lean, with senior executive sentiment in these Figure 3: Irish business investing in growth as uncertainty prevails Percentage change of businesses expecting investment to increase ororganisations reflecting this trend. Those organisations that remain the same from 2012 to 2013have survived this challenging trading period are now 2013 84% 70% 70% 92%investing in long-term growth and competitiveness, as thekey financial indicators of revenue, profitability, sellingprices and exports continue to stabilise (see figure 2).Figure 2: Economic Indicators 2012 62% 42% 65% 68%Balance percentage 2007-2013 Investment Investment Investment Investment in in plant & in new in R&D employment machinery buildings /talent Source: IBR 2013 Profit is the difference between income and costs. Profit protection was achieved mainly in the last five years through a strong focus on costs. It appears profit improvement will be driven by a continued cost efficiency model coupled with greater returns from customers asSource: Grant Thornton IBR 2013 growth strategies start to deliver.* Note 2007-2011 includes PHBs exclusively At Grant Thornton we believe Irish businesses areAs a small open economy, dependent on the external driving growth as they:market Irish businesses have felt every change in the globaleconomy over the last few years. It appears they have • think customer - relentlessly focusing on customeradapted to downside risk stemming from the uncertain needsEurozone outlook, especially trading partner demand, • think talent - rewarding people to deliverthrough a forward thinking strategy - analysing the • think smart - embedding smart technology andcompetitive landscape in the market, understanding the processes across the businessopportunities not only in their sector but their sub-sector,and by investing in the future of their company – moving Successful Irish businesses are looking out not in, withfrom survival model to revival and indeed growth through customers, talent and the opportunities that smartexports. technology and processes provide being the sharp end of the pencil when it comes to driving growth.This is reflected in IBR 2013 key findings:• Irish businesses are investing in talent with 92 per cent of businesses expecting employment to increase or remain the same in 2013 (2012: 68 per cent), while Ireland ranks 1st in the world for the availability of a skilled workforce for the second consecutive year;• Financial indicators continue to stabilise reflected by 54 per cent of business leaders expecting profit to increase (2012: 30 per cent) and 48 per cent expecting turnover to increase (2012: 39 per cent) in 2013;• Ireland ranks 4th out of the 44 countries surveyed regarding export growth expectations (+36 per cent), behind 3 of the fastest growing emerging markets of Turkey (+50 per cent), mainland China (+44 per cent) Patrick Burke Partner and India (+41 per cent); International Business Report 2013 – Ireland 3
  • International Business Report resultsContents05 Irish businesses, getting on with it09 EU and US, our traditional trading partners12 Global results and emerging economies focus4 International Business Report 2013 - Ireland
  • Section 1Irish businesses, getting on with itFigure 4: Levels of business optimism versus predicted 2013 GDP growthBalance percentage*Source: IBR 2013, International Monetary Fund 2012* Countries circled in blue denote EU membersThe challenging domestic economy and continuing GDP growth forecast, according to the Internationaluncertainty in the Eurozone shows Irish business Monetary Fund (IMF), to be 1.1 per cent in 2013.expectations to be delicately balanced for 2013. 38 per Irish businesses are ranked the 5th most optimisticcent (2012: 42 per cent) of businesses remain slightly of the 10 Eurozone countries surveyed and are 9or very pessimistic about the economic outlook in percentage points above the EU average (27 per cent)2013 (globally 35 per cent and EU 10 per cent). 36 per for those that are slightly or very optimistic, at 36 percent (2012: 30 per cent) of Irish businesses were cent in 2013.slightly or very optimistic for the economy for the This suggests that Irish business leaders have beennext 12 months (globally 38 per cent, EU 27 per cent). successful in adapting to the continued wave of crisis’s Figure 4 highlights how business optimism and faced by the Eurozone. Challenging market conditionsGross Domestic Product (GDP) growth expectations over the last number of years have forced Irishrank on a global scale for 2013. Improved business companies to become more competitive andsentiment, as well as modest growth expectations in ambitious, looking out not in.2013, places Ireland in the lower left quadrant with The nature of the recovery in Ireland, however, continues to be two speed with exports in the main International Business Report 2013 - Ireland 5
  • driving corporate growth. The weakening of the euro Figure 6: Irish consumer income & expenditure 2007-2015 €billion - Current Pricesin 2012 - decreasing 9 per cent against the dollar and 7per cent against the British pound – has given Irishexporters a strong competitive boost.4 The currency’smovement has helped to boost exports, which areexpected to have grown by 4.5 per cent in 2012, whilethe domestic economy remains flat. 5 IBR 2013 ranks Ireland 4th in the world for exportexpectations in 2013 at +36 per cent – a markedstrengthening on 2012 +25 per cent.Figure 5: Export expectations – 2005-2013Percentage balance of businesses Source: CSO, ERSI, Amarach 2012 The challenges faced by the government relative to the fiscal deficit and debt – public, personal and corporate, have been well discussed and documented.* Note 2005-2011 includes PHBs exclusively The issue of the public sector pension reserve whichSource: IBR 2013 started in 2001, through the establishment of theWhile there are signs that most sectors of the Irish National Pension Reserve Fund is likely to dominateeconomy are stabilising (see figure 2), with Irish discussions on government finances. The office ofoutward looking businesses ‘getting on with it’; a Comptroller and Auditor General in 2009 identifiednumber of challenges in the macro economy remain the liability to be €116bn.8 €116bn references theahead. present value of the cash payments that fall to be met over the next 60 years in respect of pensions earned at Irish debt levels (public, personal and corporate) 31 December 2009. The assets presently to fund thiscontinue to diminish the prospects of a macro liability stand at €14bn.recovery. Spending cuts and tax hikes have seenconsumer spending remain depressed with the Assets outlined below (see figure 7) have reduceddomestic economy expected to have contracted by 1.5 over the last three years due mainly to theper cent in 2012.6 recapitalisation of our banks totalling €8.0bn. Although recent economic data (e.g. retail sales, Public sector pensions now account for 14 per centExchequer returns, manufacturing/services, of the government’s total pay and pension bills. ThePurchasing Managers Indexes) on the Irish economy pension bill has increased 44 per cent since 2008. Thehave been positive, domestic demand is expected to cost of funding this position will continue to depresscontinue to remain flat on the back of sustained consumer spending in the long-term and likelyhousehold and public sector deleveraging and weak determine the success or otherwise of governmentlabour markets, with demand expected to fall by 2.2 efforts to stabilise the fiscal position. 9per cent in 2012 and by 0.6 per cent next year.7 Thistrend is expected to continue with no sustained upliftin personal consumption from 2007-2015 (see figure6).4 Bloomberg Businessweek, November 20125 National Irish Bank, December 20126 8 Central Statistics Office (CSO), Davy Stockbrokers, December 2012 Comptroller and Auditor General, Reports on the Accounts of the Public Services7 Davy Stockbrokers, December 2012 2011, September 2012 9 Department of Finance: Analysis of the Exchequer Pay and Pensions Bill, 2007-20116 International Business Report 2013 - Ireland
  • Figure 7: National Pensions Reserve Fund asset allocation, ensure the best opportunity of securing funding.2009 compared to 2012 Attracting equity is similarly important. Assets Sept Assets Sept 2012 (€m) 2009 (€m) Securing access to credit and equity in the ‘newTotal discretionary 5,977 13,857 normal’ will be about having:portfolio (e.g. equity,financial assets, • an ability to grow turnover regardless of the generalalternative assets) economic environment, either through adapting toTotal directed portfolio 8,057 7,000 technology and processes changing consumer(investment in banks) buying behaviour, the relative market strength ofTotal fund 14,034 20,857 the business or through exposure to high growthSource: National Pension Reserve Fund, 31 September 2012 & 2009 markets;According to the latest statistics from the Central • strong balance sheets and sustainable cashBank, loans to Irish households decreased at a rate of management. Balance sheet performance is3.7 per cent in the year ending October 2012, becoming as important as operating performance;unchanged from the rate of decrease recorded at the • the ability to generate returns on capital above itsend of August and September. Lending for house costs and create long term economic valuepurchase was 1.9 per cent lower on an annual basis inOctober, while lending for consumption and other continuously improving product and servicepurposes and to businesses decreased by 8.6 per cent offerings - moving up the value chain.and 4.2 per cent respectively. 10 However the challenge of accessing credit is not Ireland as a place to run and locate a business isuniquely an Irish one as the western world comes to unquestionable. Ireland’s tax rates, innovation andterm with those three words – too much debt. talent mean it ranks 2nd in the world out of 50Interestingly, most of our European counterparts see countries for its business operating environment inaccess to credit as a far bigger hurdle than here in Grant Thornton’s 2012 Global Dynamism IndexIreland (see figure 8). (GDI). The IDA’s recent announcement of the creation of 12,722 smart jobs in 2012 supportsFigure 8: EU access to finance Ireland’s ranking on the index.Balance percentage of respondents indicating access to financeto be more or less accessible, 2012 compared to 2013 Ireland has the highest availability of a skilled workforce, with Irish business leaders expecting employment to increase by 38 per cent in 2013 (2012: 15 per cent), with 54 per cent expecting it to stay the same (2012: 53 per cent). The findings of Grant Thornton’s research is positive, but one of the key measures of how a country is doing is its level of unemployment which currently stands at 14.6 per cent in Ireland. The labour market remains very weak despite the recent fall in the live register. Enterprise Ireland supported companiesSource: IBR 2013 recorded a net jobs gain of 3,804 last year - the highest increase since 2006 – encouraging as these indigenousThe days of light touch regulation and inexpensive and export led companies create employment in Ireland,easy access to credit are gone. As the banking sector while growing overseas.rebuilds itself, credit is less ‘freely’ available and more Talent management and skills development will beexpensively priced. Sourcing finance is essentially a key to the delivery of successful business goals. Irelandcreditor-debtor relationship that needs to be worked has an innovative, well educated workforce thatout with an understanding of mutual dependency. By compares favourably internationally. However, moreunderstanding a bank’s business model and the must be done to ensure that the right kind ofcompetitive landscape in which it operates, Irish workforce is available for key roles, particularly inbusinesses can develop a value proposition that will growth sectors such as food, technology and life science.10 Central Bank Statistics, October 2012 International Business Report 2013 - Ireland 7
  • For Irish businesses with an instinct for growth, transacting in the local economy, alone, is unsustainable. Irish businesses that adapt their business model for the enduring impact of the European sovereign debt crisis, high growth markets, credit, technology and talent management will successfully grow domestically and overseas in the next decade. The message is clear; follow the customer and lead your people.Figure 9: Key indicators for business growth 2011* 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 ROI ROI ROI UK UK UK EU EU EU US US US Global Global global Outlook for the economy -45% -12% -2% -8% -35% -3% 22% -17% -17% 23% 1% -4% 23% 0% 4% over the next 12 months Businesses expecting an 42% 31% 38% 26% 21% 22% 32% 27% 24% 20% 20% 19% 25% 22% 23% increase in exports Balance percentage** 41% 25% 36% 24% 18% 20% 29% 20% 18% 19% 18% 14% 22% 18% 19% Businesses expecting an 19% 25% 18% 36% 29% 33% 33% 29% 30% 44% 38% 35% 40% 35% 35% increase in selling price Balance percentage -7% 7% 4% 21% 13% 20% 20% 11% 12% 38% 24% 23% 28% 18% 20% Businesses expecting an 45% 30% 54% 58% 41% 58% 50% 35% 38% 53% 51% 46% 54% 48% 51% increase in profitability Balance percentage 19% 15% 42% 41% 22% 50% 37% 13% 19% 44% 40% 28% 40% 31% 35% Businesses expecting an 42% 39% 48% 65% 48% 58% 60% 43% 42% 68% 59% 52% 65% 56% 57% increase in revenue Balance percentage 16% 15% 38% 55% 34% 49% 51% 25% 25% 60% 48% 38% 56% 43% 45%* PHB exclusively 2011** Balance percentage of those indicating optimism against those indicating pessimismSource: IBR 2013 8 International Business Report 2013 - Ireland
  • Section 2EU & US, our traditional tradingpartnersFigure 10: Outlook for the economy over the next 12 months – EU, US and Eurozone membersBalance percentage of businesses indicating optimism against those indicating pessimism Ranking Very Slightly Neither optimistic Slightly Very Don’t Balance Y-o-Y optimistic optimistic nor pessimistic pessimistic pessimistic know change 1 Germany 8 39 27 26 - - 21 - 25 2 Estonia 2 42 30 22 4 - 18 -* 3 Denmark - 26 60 10 2 2 14 + 14 4 Belgium 6 38 20 24 8 4 12 + 34 5 Latvia - 34 40 22 4 - 8 -* 6 Lithuania 2 28 38 22 6 4 2 -* 7 Ireland 2 34 26 28 10 - -2 + 10 8 United Kingdom 2 32 29 30 7 - -3 +32 9 Poland 2 18 46 30 4 - -14 - 26 10 Sweden - 15 54 29 2 - -16 -8 11 Italy 2 20 32 38 8 - -24 -4 12 Greece - 12 34 32 22 - -42 0 13 Netherlands 2 14 26 46 12 - -42 -2 14 France - 13 24 47 15 1 -49 -3 15 Finland - 12 24 60 2 2 -50 -2 16 Spain 1 11 8 48 31 1 -67 -5 Eurozone 3 23 25 38 10 1 -22 -6 EU Average 3 24 28 35 9 1 -17 0 United States 7 29 24 29 11 - -4 -5 Global Average 8 31 26 25 10 - 4 +4* First year in surveySources: Grant Thornton IBR 2013The European Union and the United States are 2012 survey of unemployment in the Eurozone foundIreland’s two largest trading partners representing that the recession had pushed unemployment up to aapproximately 59 per cent and 20 per cent of total record 11.7 per cent. The figures also revealed that noIrish goods exports.11 The protracted negotiations fewer than 20 EU states have recorded increases inover how to resolve both the sovereign debt crisis in unemployment compared to a year earlier.13the Eurozone and the fiscal cliff in the United States While the short-term outlook for the EU remainshave significantly eroded business confidence in both fragile, growth and business expectations divergeeconomies. Weakening trading partner demand is markedly between countries (see figure 10).expected to weigh more heavily on Ireland’s external Businesses in Germany, Estonia and Denmark are thesector during 2013, which together with the lack of most optimistic in the EU at +21 per cent (2012: 46support from the domestic economy is forecast by the per cent), +18 per cent14 and +14 per cent (2012: 0IMF to result in moderate GDP expansion of 1.1 per per cent) respectively. While optimism in Spaincent. remains the lowest in Europe at -67 per cent (2012: - According to the European Commission, GDP is 62 per cent) exacerbated by the highest unemploymentset to contract by 0.3 per cent in the EU and 0.4 per in Europe at 25 per cent and youth unemploymentcent in the Eurozone in 2012, with a gradual return to levels heading towards 60 per cent.15GDP growth in 2013 at 0.4 per cent in the EU and 0.1 However, those businesses that were slightly orper cent in the Eurozone.12 Unemployment in the EU very optimistic about business expectations inis expected to remain high in 2013. Eurostat’s October 13 Eurostat, October 201211 14 Central Statistics Office – January to October 2012 First year in the IBR12 15 European Commission Autumn Forecast 2012 Eurostat, November 2012 International Business Report 2013 - Ireland 9
  • Germany have fallen significantly year-on-year, down Figure 11: Estimated effect of housing on year-on-year US real GDP growth15 per cent to 47 per cent, indicative that the trendtowards recession is hitting core European countriesand industries – debtors need creditors too. The on-going travails of the Eurozone, and the slowdown inhigh growth markets such as Brazil and India and onlytentative signs of re-emergence of China’s economicgrowth engine, are having a major impact on businessconfidence in the 2nd biggest export economy globally(export expectations in Germany have fallen 19 percent to +15 per cent in 2013). Business outlook in the EU countries constitutes 7out of the bottom 10 of Grant Thornton’s Global Sources: S&P Dow Jones indices (prices), Goldman Sachs (GDP), The Wall Street JournalOptimism Index (see figure 1), with only four(including Ireland) of the EU countries surveyed in New orders rose at the fastest rate since March 2011,IBR 2013 registering an increase in the balance driven by domestic demand. Business confidence,percentage of those that are optimistic over those that however, remains fragile in the UK and could easily beare pessimistic year-on-year. derailed by any further setbacks in key export markets, In contrast, there are signs that the US economy is notably any resurgence of the Eurozone debt crisis.improving. In December 2012, employers added Britain’s economy also faces headwinds from a155,000 new workers; encouraging considering the long-term government austerity programme andlooming government budget crisis that many feared inflation that has proven slower to fall than the Bankwould bring recession in 2013 if not resolved. This of England had forecast, eroding consumer spendingconcern was reflected in IBR 2013 findings, with power. The latest Bank of England forecast for 2013business outlook decreasing 5 per cent to -1 per cent GDP growth stands at 1 per cent, with any recoveryfor 2013. likely to be slow and protracted.18 This echoes the In addition, an improving housing market is comments of the Governor of the Bank of Englandbuoying consumers’ spirits and giving the economy its Sir Mervyn King in June 2012, when he said: “Whenbiggest lift since the real estate boom with economists the crisis began in 2007 and 2008, most peoplerevising up its expectations that the US economy may including ourselves did not believe that we would begrow by 2.0 per cent in 2013 (see figure 11).16 still right in the thick of it, in the middle of it, quite this late. All the way through, I’ve said ………that IThe United Kingdom has seen the largest percentage don’t think we are yet half-way through.”rise in business expectation year-on-year in the UK Europe at best is expected to face a sustainedfrom -35 per cent to -3 per cent in 2013. Improving period of low growth, austerity and lack of unity.business sentiment was reflected in December 2012, Many economists believe that Europe may face a lostwhen British factory activity jumped unexpectedly to decade or two similar to that which occurred in Japangrow at its fastest rate since September 2011, in the 1980s and 1990s. If this is the case, Irishaccording to the Markit/CIPS manufacturing business leaders need to maximise their resourcesPurchasing Managers’ Index (PMI).17 effectively and target consumer segments with the most disposable income and the highest possible margin growth. Dynamic Irish businesses will always find value, by understanding the market, sector or subsector they are trading to – in terms of regional demand, shifting demographics, urban consumption centres and technology adaptation (m-technology and e- commerce).16 Wall Street Journal, January 201217 18 The Markit/CIPS Manufacturing Purchasing Managers Index (PMI), December 2012 Bank of England, November 201210 International Business Report 2013 - Ireland
  • Changes in consumer and business trends are percentage of over 65s, and the highest child andoccurring rapidly. Segmenting your target market by working age population in the European Union.income, demographics, new customer needs and Figure 13 provides an outlook on the dependencycompetition can enable growth, where unemployment ratios in selected EU economies in 2010.is high and domestic demand subdued. Across western society, an ageing population (see Irish businesses need to have a sustainable businessfigure 12) combined with low fertility rates is creating model to ensure that they meet changing customersignificant challenges and opportunities in the needs. Considering the changes in demographics (e.g.marketplace. age, distribution of income, household size and intergenerational households), Irish senior executivesFigure 12: Age demographics across (selected) EU27countries 2011* need to consider whether to invest a large proportion of research and development and marketing expenditure on younger age groups (0-18 & 18-30), older age cohorts or both. The underlying economic, social and demographic changes occurring in Europe mean businesses will need to relentlessly think customer. The working age population in Europe and North America is declining. The average working ages continue to rise, with the war for talent becoming global. Talent is no longer a commodity: increasingly competitive global markets, skill shortages and demographic trends, mean businesses need to think*EU27 figures 2010Source: Eurostat talent to execute strategy. Innovation increasingly will be focused on the This demographic shift will require entirely new needs of different generations. Those in the middleapproaches on the part of both policy makers and (30-49 demographic) are saddled with household debtbusiness leaders. Western governments will have to and negative equity. Business leaders will continue totackle societal issues (e.g. rising healthcare expenses, face lower revenues and weaker order books (seepublic sector pension deficits, and older age figure 14), if they are unable to adapt to thedependency ratios), while business leaders will need to opportunities that smart technology and processbe opportunistic when devising new product strategies provide in segmenting their customer in traditionalthat cater to this demographic. By 2060, 30 per cent of overseas markets.all EU citizens are forecast to aged 65 years or over.In contrast, Ireland is presently experiencing a babyboom, and by 2060 is predicted to have the lowestFigure 13: EU (selected) median age and age dependency ratios, January 2010 Median Dependency ratio Population aged 80 or over age Young age Old age Total EU - 27 40.9 34.8 28.4 63.2 4.7 Denmark 40.5 41.2 27.5 68.8 4.1 Germany 44.2 31.0 34.1 65.1 5.1 Spain 39.9 31.3 26.6 57.9 4.9 Ireland 34.3 44.9 18.5 63.4 2.8 France 39.9 41.5 28.6 70.2 5.3 Italy 43.1 31.2 33.3 64.5 5.8 Netherlands 40.6 38.9 25.1 64.0 3.9 Sweden 40.7 40.1 31.0 71.0 5.3Source: Eurostat, Amarach Research International Business Report 2013 - Ireland 11
  • Section 3Global results and emergingeconomies focusFigure 14: Expectations of order books versus revenuesBalance percentage*Source: IBR 2013* Countries circled in blue denote EU membersAt a global level, using purchasing power parity,19 business confidence for 2013 – the top right handthe share of emerging markets in world GDP is to quadrant.surpass 50 per cent in 2013.20 As a result, businesses Weaker order books and higher revenues inin many emerging economies look well placed for China indicate that falling property prices, bankingincreased demand and higher revenues. Figure 14 impairments, decreasing exports and an economyillustrates the relationship between revenue and driven by investment rather than consumptiondemand in the 44 economies surveyed. In spite of continue to weigh heavily on business leadersrevised downward GDP growth in many emerging minds.economies in 2012, both economic indicators A hard landing for China’s domestic economy isremain strongest in these markets, reflecting strong now seen as increasingly unlikely. After GDP growth had slowed for seven consecutive quarters,19 The differences in cost of living growth picked up in the final quarter of 2012.20 IMF’s World Economic Outlook 201112 International Business Report 2013 - Ireland
  • However, the country is on track for its weakest in the 2000-2011 period for Asia, Middle East,economic expansion in more than a decade, with Africa, and Latin America.economists predicting growth of less than 8 percent in 2012. Figure 16: Percentage of GDP exports to emerging markets (selected EU countries)The gradual recovery in global business optimism islargely been driven by emerging and developingeconomies. The shift of economic power flowingtoward high-growth emerging markets hasintensified with the world’s largest matureeconomies increasingly dependent on the strengthof the economies in Asia, Latin America, the MiddleEast and Africa for the health of the globaleconomy. Regional optimism levels in LatinAmerica +69 per cent (2012: +61 per cent),BRIC+39 per cent (2012: +34 per cent) and APACex. Japan +28 per cent (2012: +23 per cent) has Source: Citi Research, IMFimproved year-on-year, remaining robust in spite of These regions represent future global growth, andthe challenging economic conditions in Europe and are also the regions that are more suited to aNorth America. number of our indigenous exports, which successFigure 15: Business outlook 2013 compared to 2012 has a significant economic multiplier effect inBalance percentage of optimism/pessimism by region creating jobs, demand and consumption in the domestic economy (e.g. agri-food sector, clean technology). Therefore, it remains an on-going concern that approximately 4 per cent of Irish exports are going to the BRIC economies (see figure 17).21 High growth markets, as well as other developing economies, constitute 8 out of the top 10 economies in Grant Thornton’s Global Business Optimism Index 2013 (see figure 1).Source: IBR 2013 Figure 17: Irish exports of good to BRIC countries Percentage of grand total by valueIBR 2013 shows that international expansion is nolonger a one-way street. Increasingly cash-richbusinesses in emerging economies are looking forexpansion opportunities in mature markets, whetherthrough opening up premises or buying distressedassets. Businesses in Turkey (59 per cent), Russia(37 per cent), India (33 per cent) and China (27 percent) are looking at opportunities in WesternEurope; while 33 per cent of Latin Americanbusinesses are looking at North America. Figure 16 illustrates exports to emerging markets(2000-2011) as a percentage of GDP demonstrating Source: Irish Exporters Association 2011the low exposure of weaker European economies toexternal growth and their reliance on internal and Both growth and interest rates remain low inEurozone demand. It is clear that Irish trade mature economies, and many businesses indiversification needs to increase from the traditional emerging markets are looking for foreign directmarkets of the UK, US and Western Europe, as investment that provides technology, process, skillsIreland’s exports as a share of GDP have declined 21 IEA end of year trade statistics 2011 International Business Report 2013 - Ireland 13
  • and knowledge transfers - all growth opportunities Figure 18: Top 10 markets for Irish exporters 2013for high value Irish exports. Country /Region Percentage However, it is encouraging to see that Irish Western Europe 39%businesses as well as the Irish government have North America 21%turned their direction to fast growing emerging Eastern Europe/Middle East 21%markets. Trade missions to China, Brazil and South China 15%Africa in 2012 has helped to gain traction for Irish India 15%businesses in these markets. Australia/New Zealand 10% South Africa 6% Ireland has the capacity for high value exports to Russia 6%these markets (e.g. food and agriculture, clean Brazil 6%technology and financial services). Overcoming Other Africa 6%legislative/regulatory hurdles in these markets, as Source: IBR 2013well as securing access to finance will remain thecore challenges for Irish businesses if they are to Emerging markets continue to adopt westerncapture a slice of these high growth markets. products and lifestyles as their middle class explodes According to the Irish Exporters Association in size and potential.Survey and International Trade Finance Review The issue for businesses to capitalise on this2012, 71 per cent of Irish exporters are targeting opportunity is that they generally need three assets:new markets. 2013 IBR finds that 21 per cent of • time;Irish businesses expecting to grow their business • money and;internationally are considering expanding into • an established brand/productEastern Europe/Middle East, 15 per cent intoChina and India and 6 per cent into Russia andBrazil (see figure 18). Facing weak growth rates at While the opportunity is large new marketshome, it is positive to see business leaders in Ireland require significant investment in time, talent,looking for international expansion opportunities in resources and effort to reap the rewards.higher growth economies.14 International Business Report 2013 - Ireland
  • The Grant Thornton International Business Report (IBR) is a quarterly survey of around 3,000 senior executivesin privately-held and listed businesses all over the world. Launched in 1992 in nine European countries the reportnow surveys more than 12,000 businesses leaders in 44 economies on an annual basis providing insights on theeconomic and commercial issues affecting companies globally.To find out more about IBR and to obtain copies of reports and summaries please visit:www.internationalbusinessreport.com. The site also allows users to complete the survey and benchmark theirresults against all other respondents by territory, industry type and size of business.Participating economiesArgentina LithuaniaArmenia MalaysiaAustralia MexicoBelgium NetherlandsBelarus NorwayBotswana New ZealandBrazil PhilippinesCanada PolandChile PeruMainland China RussiaDenmark SingaporeFinland South AfricaFrance SpainGermany SwedenGeorgia SwitzerlandGreece TaiwanHong Kong ThailandIndia TurkeyIreland United Arab EmiratesItaly United KingdomJapan United StatesLatvia Vietnam © 2013 Grant Thornton. All rights reserved. Member of Grant Thornton International Limited Authorised by the Institute of Chartered Accountants in Ireland to carry on investment business.