Corporate Expectations Barometer: Baseline report of expectations
 

Corporate Expectations Barometer: Baseline report of expectations

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Corporate Expectations Barometer: Baseline report of expectations is an Economist Intelligence Unit report sponsored by SAP. The findings and views expressed do not necessarily reflect those of the ...

Corporate Expectations Barometer: Baseline report of expectations is an Economist Intelligence Unit report sponsored by SAP. The findings and views expressed do not necessarily reflect those of the sponsor. The Economist Intelligence Unit’s editorial team executed the survey and wrote the report. Kim Andreasson was the editor and project manager. Nigel Holloway was the project director. Jazmine Atienza created the barometer cover image and Mike Kenny designed the report.

The quantitative findings presented in this report come from an online survey of 1,032 respondents based in 88 countries, conducted by the Economist Intelligence Unit in May 2009. The survey asked respondents about their expectations of business prospects over the next 12 months. The results have been used to create the Corporate Expectations Barometer, part of an ongoing programme of research tailored to executives coping with rapidly changing business conditions.

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    Corporate Expectations Barometer: Baseline report of expectations Corporate Expectations Barometer: Baseline report of expectations Document Transcript

    • Corporate Expectations Barometer:Baseline report of expectationsA report from the Economist Intelligence Unit Sponsored by
    • Corporate Expectations Barometer: Baseline report of expectations Preface Corporate Expectations Barometer: Baseline report of expectations is an Economist Intelligence Unit report sponsored by SAP. The findings and views expressed do not necessarily reflect those of the sponsor. The Economist Intelligence Unit’s editorial team executed the survey and wrote the report. Kim Andreasson was the editor and project manager. Nigel Holloway was the project director. Jazmine Atienza created the barometer cover image and Mike Kenny designed the report. The quantitative findings presented in this report come from an online survey of 1,032 respondents based in 88 countries, conducted by the Economist Intelligence Unit in May 2009. The survey asked respondents about their expectations of business prospects over the next 12 months. The results have been used to create the Corporate Expectations Barometer, part of an ongoing programme of research tailored to executives coping with rapidly changing business conditions. The programme’s online home is www.eiu.com/sponsor/barometer. Our thanks are due to all survey respondents for their time and insight. June 20092 © Economist Intelligence Unit Limited 2009
    • Corporate Expectations Barometer: Baseline report of expectations Introduction For the first time since the second world war, global GDP is expected to shrink this year—by 1.8%, according to the Economist Intelligence Unit’s global forecast released in June 2009. Worldwide consumption is down, stockmarkets are down, trade is down and employment is down. But according to a survey conducted by the Economist Intelligence Unit, and sponsored by SAP, global business conditions are set to improve. The survey, conducted in May 2009, asked 1,032 executives and managers around the world, representing a range of industries and company sizes, for their perceptions of business conditions over the coming 12 months. The results have been used to calculate the Corporate Expectations Barometer, an ongoing index of business perceptions. This report summarises the findings of the initial survey, which forms the baseline index. About the research multinationals; the majority (57%) have over US$300m in global annual revenue. Most conduct business internationally: 54% of respondents say The online survey was conducted by the Economist their company has regional or global operations, Intelligence Unit in May 2009. In total, 1,032 while the rest only do business within their national businesspeople took part, representing 88 countries. borders. A range of job functions and seniority The top ten countries by number of respondents are levels are represented in the respondent pool. Over the US, India, Canada, Singapore, Australia, the UK, one-quarter (28%) identify themselves as C-level Hong Kong, Germany, Spain and China. Regionally, executives, and over one-third (42%) as a senior 37% of respondents are based in Europe, the Middle vice-president, director or other senior executive. The East or Africa, 37% in Asia-Pacific and 26% in the remainder are managers and below. Americas. The survey asked for respondents’ views on business Respondents represent all major industries and conditions over the next 12 months in five areas: their the public sector, with particular strength in financial company, their industry, their country, their region services (25%), professional services (18%), and and the world. The Corporate Expectations Barometer manufacturing and automotive (17%). Participating is a weighted average based on how respondents companies range in size from small outfits to major assessed business prospects in these five areas.3 © Economist Intelligence Unit Limited 2009
    • Corporate Expectations Barometer: Baseline report of expectations Executives who expect conditions to improve over the next 12 months outnumber those who think they will worsen by two to one. However, the level of optimism differs greatly by industry and geography. Among the findings: l Sectoral differences. Executives in the technology and energy industries are most optimistic about prospects for their industries: those expecting conditions to improve in their sector outnumber those expecting conditions to deteriorate by a margin of four to one. Respondents in healthcare and the public sector are least hopeful, with almost as many expecting conditions to deteriorate as to improve. l Regional differences. Executives in Asia-Pacific who expect business conditions to improve in their region outnumber those who expect conditions to deteriorate by a margin of nearly four to one. But in Latin America and Eastern Europe, more executives expect conditions to deteriorate than to improve over the coming 12 months. l Best prospects closest to home. Executives are more bullish about prospects for their own companies than they are about prospects for other areas of the economy. Those expecting their company’s prospects to improve over the next 12 months outnumber those expecting conditions to worsen by a margin of more than four to one. But those expecting global business conditions to improve outnumber the pessimists by less than two to one. The barometer will be updated continually at www.eiu.com/sponsor/barometer until December 2009, as new respondents take the online survey (or previous respondents take it again—registered participants are invited to take part on a monthly basis). Participation is encouraged and executives who take the survey may use the interactive site to: l Benchmark their confidence level against that of peers in their industry and region, and track changes over time. l Compare their economic growth expectations against those of Economist Intelligence Unit analysts. l Download customised briefings prepared by the Economist Intelligence Unit—including forecasts for industry, region and the world—to help executives make better-informed business decisions.4 © Economist Intelligence Unit Limited 2009
    • Corporate Expectations Barometer: Baseline report of expectations Introducing the Corporate Expectations Barometer baseline expectations On a scale of 0 to 10, with 10 being the most positive expectation, the average expectation for the next 12 months is 6.3. This index is a weighted average of five scores: respondents were asked to assess business prospects for their company, their industry, their country, their region and globally. The following scores will form the baseline for the ongoing index: Overall index—an average of the five scores below 6.3 Company score—prospects for “your company” over the next 12 months 7.1 Industry score—prospects for “your industry” over the next 12 months 6.3 Country score—prospects for “your country” over the next 12 months 6.2 Regional score—prospects for “your region” over the next 12 months 6.1 Global score—global business prospects over the next 12 months 5.9 It is notable that executives view prospects for their own company—the business they are best informed about—with the greatest degree of optimism. They may be privy to new growth strategies or finance figures that reveal the first glimmer of recovery. Or perhaps they have seen first hand their companies go through lay-offs and painful restructurings, and simply do not believe things could get worse. Whether executives are being too positive—or too negative—will become clear in due course. Among survey respondents, C-level executives tend to be more optimistic about prospects for their own companies than manager-level and frontline employees. Whether this indicates greater insight on the part of senior management—or hardened realism among the rank-and-file—will be up for debate over the coming months. Also intriguing is the fact that respondents from smaller companies tend to be more optimistic than those at large companies. Is this because large companies are harder hit by declining trade volumes? Or because limited access to capital affects them sooner? The Twitter feed on the Corporate Expectations Barometer website, www.eiu.com/sponsor/barometer, will analyse the obstacles faced by companies in the global downturn.5 © Economist Intelligence Unit Limited 2009
    • Corporate Expectations Barometer: Baseline report of expectations Index by industry When asked to predict business conditions in their own industry, executives by and large are positive: those expecting improved conditions over the next 12 months outnumber those expecting worse conditions by a margin of more than two to one. But hopefulness varies by industry. Executives in technology & telecoms and energy express the greatest optimism about prospects for their industry, while those in healthcare & pharmaceuticals and public sector & non-profits have the bleakest view. Importantly, the barometer measures improvement or decline over current conditions rather than the absolute quality of the economic environment. Those in the worst-hit industries, such as financial services and automotive, may have high scores because they believe conditions cannot get any more dismal. As a result, the barometer may foretell a turning point in a suffering industry’s prospects. Technology & telecoms 7.1 Energy 6.9 Professional services 6.6 Consumer goods & retailing 6.5 Manufacturing (non-automotive) 6.4 Financial services 6.3 Automotive 6.3 Healthcare & pharmaceuticals 5.2 Public sector & non-profits 5.0 Index by region Business prospects also depend on the regional location. Respondents in Asia-Pacific have the highest expectations for business conditions in their region over the next 12 months. Executives who expect business conditions to improve in Asia-Pacific outnumber those who expect conditions to deteriorate by a margin of nearly four to one. A turning point may also be detected in North America, where executives are more positive than their counterparts in Western Europe, while those in Eastern Europe are most pessimistic about their region’s prospects. Asia-Pacific 7.1 North America 6.3 Africa & Middle East 5.2 Western Europe 5.0 Latin America 4.8 Eastern Europe 4.36 © Economist Intelligence Unit Limited 2009
    • Corporate Expectations Barometer: Baseline report of expectations GDP forecasts The five barometer questions use simple qualitative measures: respondents were asked whether conditions will be “better”, “the same” or “worse” in 12 months. It is easy to foresee that conditions will improve. It is much harder to predict by how much they will improve. Yet this is what we demanded of survey takers. Respondents were asked to predict GDP growth over the next 12 months in three areas: their country, their region and globally. On average, respondents expect slow but positive growth, echoing the cautious optimism of the barometer. Country growth—GDP growth over the next 12 months in “your country” 0.5% Regional growth—GDP growth over the next 12 months in “your region” 0.3% Global growth—global GDP growth over the next 12 months 0.2% For easy comparison, the survey takers’ predictions have been juxtaposed with those of Economist Intelligence Unit analysts. On average, survey takers are more cautious: while they predict 0.2% global GDP growth, our analysts predict 2.1% growth. (It should be noted, respondents are predicting growth “over the next 12 months”, mid-2009 to mid-2010, while Economist Intelligence Unit analysts are predicting growth for 2010 as a whole. The nearer timeframe does appear less rosy than the further one.) Here is a sampling of other predictions. GDP growth forecast Survey takers Economist Intelligence Unit World 0.2% 2.1% Australia 0.0% 0.7% Canada 0.8% 0.7% China 6.3% 7.3% Germany -2.7% -0.9% Hong Kong 0.7% 0.9% India 5.6% 6.4% Singapore -1.6% 1.0% Spain -3.1% -1.1% UK -1.5% -0.5% US -0.1% 1.0%7 © Economist Intelligence Unit Limited 2009
    • Corporate Expectations Barometer: Baseline report of expectations Conclusion It may well turn out that executives in the baseline report of expectations for the Corporate Expectations Barometer are too positive in predicting a turnaround. They may be cheered by indicators that beat analysts’ most dismal forecasts, without questioning whether those forecasts were too pessimistic to begin with. Or are survey takers perhaps too negative? But so far, respondents’ views seem to be cautiously optimistic: businesspeople expect growth in some industries and some regions, while remaining cautious in others. And they predict a slow turnaround in global GDP growth, with a wide variation of economic growth by country. With the overall barometer score at 6.3 out of 10, there remains plenty of room for movement in both directions over the coming months. To register your disposition—be it positive or negative—please join us online at www.eiu.com/sponsor/ barometer.8 © Economist Intelligence Unit Limited 2009
    • Appendix Corporate Expectations Barometer:Survey results Baseline report of expectations Appendix: Survey results Please note that totals may not equal 100% due to rounding. In which country are you based? In which region are you based? (% respondents) (% respondents) United States of America Asia-Pacific 19 37 India Western Europe 13 26 Canada North America 5 23 Singapore Middle East and Africa 4 7 Australia Eastern Europe 4 4 United Kingdom Latin America 3 3 Hong Kong 3 Germany 3 Spain 3 China 3 Switzerland, France, Italy, Netherlands, Indonesia Nigeria, South Africa 2 Belgium, Finland, Japan, Russia, Sweden, Brazil, Malaysia, Mexico, Thailand, Poland, Turkey, New Zealand, South Korea, Pakistan, Vietnam, Denmark, Hungary, Norway, Philippines, Austria, Czech Republic 1 The following countries account for fewer than 1% of respondents each: Greece, Tanzania, Bulgaria, Slovenia, Iran, Kenya, Luxembourg, Portugal, Taiwan, Bangladesh, Ghana, Ireland, Israel, Kazakhstan, Malta, Mauritius, Mongolia, Romania, Ukraine, United Arab Emirates, Venezuela, Zambia, Zimbabwe, Albania, Bosnia and Herzegovina, Colombia, Costa Rica, Cuba, Ecuador, Ethiopia, Gibraltar, Grenada, Kuwait, Liechtenstein, Lithuania, Macao, Macedonia, Madagascar, Nepal, Peru, Puerto Rico, Saudi Arabia, Serbia, Slovakia, Solomon Islands, Sri Lanka, Svalbard and Jan Mayen Islands, Swaziland, Syria, Uzbekistan9 © Economist Intelligence Unit Limited 2009
    • Appendix Corporate Expectations Barometer:Survey results Baseline report of expectations What best describes your main functional role? Which of the following best describes your industry? (% respondents) (% respondents) General management, strategy, operations, Financial services procurement or supply-chain management 25 43 Professional services Finance, risk or legal 18 23 Manufacturing (non-automotive) Business development, marketing and sales 12 20 Technology and telecoms Information, research or development 11 7 Healthcare and pharmaceuticals IT 9 5 Consumer goods and retailing Human resources 8 2 Energy 6 Public sector, non-profit and education 6 What are your organisation’s global annual revenues Automotive in US dollars? 5 (% respondents) Less than $50m 30 Which of the following best describes your role within your company? $50m to $300m 13 (% respondents) $300m to $1bn 13 More than $1bn 44 C-level executive (eg, board member, CxO, president) 28 Other senior executive (eg, managing director, SVP, VP, director, head of department) 42 Manager or below 2910 © Economist Intelligence Unit Limited 2009
    • Appendix Corporate Expectations Barometer:Survey results Baseline report of expectations What are your expectations of business conditions in your What are your expectations of business conditions in your country over the next 12 months? industry over the next 12 months? (% respondents) (% respondents) Better than current Better than current conditions 47 conditions 46 Same as current Same as current conditions 33 conditions 32 Worse than current Worse than current conditions 20 conditions 22 What are your expectations of business conditions in your What are your expectations of global business conditions over region over the next 12 months? the next 12 months? (% respondents) (% respondents) Better than current Better than current conditions 43 conditions 42 Same as current Same as current conditions 35 conditions 35 Worse than current Worse than current conditions 22 conditions 23 Which best describes your company’s market? What are your expectations of business conditions for your (% respondents) company or organisation over the next 12 months? (% respondents) National—we only operate in our home Better than current country 23 conditions 56 Regional—we operate Same as current in several countries 22 conditions 31 Global—we operate in Worse than current many countries conditions 13 around the world 5411 © Economist Intelligence Unit Limited 2009
    • Appendix Corporate Expectations Barometer: Survey results Baseline report of expectations For the following areas, what are your expectations for growth over the next 12 months? (% respondents) -10% -9% -8% -7% -6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% GDP growth in your country 1 0 1 2 2 3 5 8 10 8 9 14 11 6 3 4 4 6 2 0 0 GDP growth in your region 0 0 0 1 2 4 5 10 9 7 10 12 13 10 7 6 2 1 0 0 0 Global GDP growth 1 0 0 1 1 2 2 6 11 11 14 19 16 8 3 1 1 1 0 0 0 Growth in your industry 3 1 2 1 1 4 2 5 7 6 13 12 13 10 6 8 2 3 1 1 1Design: MikeKenny@mac.com Whilst every effort has been taken to verify the accuracy of this information, neither The Economist Intelligence Unit Ltd. nor the sponsors of this report can accept any responsibility or liability for reliance by any person on this white paper or any of the information, opinions or conclusions set out in the white paper. 12 © Economist Intelligence Unit Limited 2009
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