16th Annual Global CEO SurveyThe disruptive decade p3/ What worries CEOs most? p5/ A three-prongedapproach p10/ It’s a que...
During the past decade, we’ve seen          economic volatility and disruption          escalate to arguably unprecedented...
ContentsThe disruptive decade	                                              3What worries CEOs most?	                     ...
I think the level of external threats has increased with every           passing decade. And as the pace of change has inc...
global economy will stay the same forThe disruptive decade                                                                ...
The prevailing mood is, as usual,                            …people always tend to think                                 ...
What worries CEOs most?The global community of regulators                     Today’s CEOs are concerned about a– as well ...
Red numbers, red tape                                             Has regulation gone too far? The US                     ...
Too much tax, too little talent                               hard.6 Meanwhile, the competition                           ...
Silver lining for some                                       From risk management                       Some European coun...
To be honest, we wouldn’t dare to predict the future. The fact isthe world has been changing a lot more quickly in recent ...
evidence to suggest that concentrating                                                                                    ...
Homing in on organic growthSo exactly which pockets ofopportunity are CEOs targeting?Nearly half are pinning their hopeson...
With growth rates among both mature                             And a growing number of CEOs are                          ...
…I think what we have to do ... is look for the growthopportunities very carefully. The easy route is to say, wellthat’s a...
Concentrating onthe customerIrrespective of the markets they’re in,CEOs have one overwhelming goal: togrow their customer ...
Getting customers onside                                      In terms of the importance of our different stakeholders, ou...
Making the most of disruption                Finland-based international                  Human capacity is key to any    ...
It all starts with the consumer – a rich and robustunderstanding of what they want, where they’re going,but, most importan...
Improving operational                               objectives. As Artem Konstandyan,                    I think the under...
Figure 11: Involving less senior managers in strategic decisions is seen as most effective in preparing them for leadershi...
Sharing as well as buying                                     We believe the dip in M&A is being                          ...
One key point of our strategic advantage is the capabilityto ‘orchestrate’ the production and engineering valuechain we cr...
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
Sondage annuel des PDG par Pwc - janvier 2013
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Sondage annuel des PDG par Pwc - janvier 2013


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Les patrons restent inquiets concernant les activités de leurs propres entreprises, d'après l'étude PwC présentée au Forum économique de Davos. Douchés l'an dernier par la crise de l'euro, ils reprennent néanmoins confiance dans l'avenir pour la croissance mondiale.

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Sondage annuel des PDG par Pwc - janvier 2013

  1. 1. 16th Annual Global CEO SurveyThe disruptive decade p3/ What worries CEOs most? p5/ A three-prongedapproach p10/ It’s a question of trust p22Dealing withdisruptionAdapting to surviveand thrive 1,330 CEOs in 68 countries 36% of CEOs are very confident about their growth prospects See page 3 82% of CEOs plan to change customer strategies in 2013 See page 15 www.pwc.com/ceosurvey
  2. 2. During the past decade, we’ve seen economic volatility and disruption escalate to arguably unprecedented levels. In a globalised world – one where countries, economies and companies are more interconnected and interdependent than ever before – risks that once seemed improbable and even remote have become the norm. For business leaders across the world, ‘expect the unexpected’ has become the mantra. To navigate through this environment, The focus on trust also goes much companies need to develop resilience.Preface This combines an ability to ride out the immediate impact of shocks with a further. In the post-crisis world, trust is at a premium. But it’s also an essential component of the ongoing relationship long-term capacity to adapt to constantly between an organisation and all its changing conditions. We’re helping stakeholders – and thereby an more and more of our clients achieve important pillar of resilience. With this blend of qualities not only to survive social media giving a voice to evermore through new and emerging challenges, diverse groups of stakeholders, CEOs but to thrive in this environment. are recognising the need to secure a In my view, the shift to resilience helps stronger social mandate by rebuilding to explain the widening gap between public trust. From promoting an ethical CEOs’ levels of confidence in their culture to increasing workforce organisations’ one-year and three-year diversity and reducing environmental outlooks. This year’s survey shows that impacts, they’re pursuing a wide array just 36% of CEOs are ‘very confident’ of initiatives to simultaneously support about their business’s growth prospects their growth strategies, establish the over the next 12 months, down from right mandate and boost resilience. 40% in 2012 and 48% in 2011 (see My sincere thanks go to the more than Figure 1). In contrast, the proportion 1,300 CEOs from 68 countries who confident about growth over the coming shared their thinking with us. Their three years has held up much better. active and candid participation is the This suggests that leaders believe their single greatest factor in the success of organisations can be resilient by the PwC Annual Global CEO Survey, rolling with the short-term blows while now in its 16th year. We greatly reshaping for longer-term growth. appreciate our respondents’ willingness What strategies are CEOs adopting to – indeed eagerness – to free up their become more resilient? Our findings valuable time to help make this survey highlight three common approaches. as comprehensive as possible. I’m First, they’re targeting specific pockets especially grateful to the 33 CEOs who of opportunity for organic growth, sat down with us in late 2012 to hold avoiding spreading their resources too deeper and more detailed conversations. thinly. Second, they’re maintaining a You can see their verbatim comments clear focus on the customer, taking throughout this report. active steps to stimulate demand, loyalty and innovation in their customer base – through mechanisms ranging from digital marketing platforms to collaborative R&D. And third, they’re fine-tuning their operational effectiveness by reducing Dennis M. Nally costs without cutting value and Chairman, PricewaterhouseCoopers collaborating with trusted partners. International
  3. 3. ContentsThe disruptive decade 3What worries CEOs most? 5A three-pronged approach 10 Targeting pockets of opportunity 10 Concentrating on the customer 14 Improving operational effectiveness 18It’s a question of trust 22CEO survey participants 28Research methodology and key contacts 30 PwC 16th Annual Global CEO Survey  1
  4. 4. I think the level of external threats has increased with every passing decade. And as the pace of change has increased, organisations like ours have to be a lot more flexible than we might have been in the past. Shikha Sharma, Managing Director and CEO, Axis Bank Limited, India2  PwC 16th Annual Global CEO Survey
  5. 5. global economy will stay the same forThe disruptive decade the next 12 months and only 28% believe it will shrink. In 2012, by contrast, 48% were convinced the global economy would contract. But economic plateaux aren’t exactly The global economic outlook is grounds for cheer. That’s why short- certainly enough to test even the term confidence about the prospects strongest enterprises. The eurozone for revenue growth has continued is still mired in recession and the US falling (see Figure 1). CEOs in Western economy is forecast to expand by just Europe are especially nervous. Only 2.2% this year.1 The situation in some 22% feel very confident they can of the growth markets is also getting increase their company’s revenues in harder, as the slowdown in the BRIC the coming 12 months, compared with economies demonstrates. 53% of CEOs in the Middle East and Latin America. While market conditions in many countries are still very difficult, CEOs are more positive about the prognosis than they were last year: 52% think the Figure 1: CEO confidence has gone up and down sharply over the past decade Q: How confident are you about your company’s prospects for revenue growth over the next 12 months? 60% Very confident about company’s prospects for revenue growth over the next 12 months 52% 50% 50 48% 41% 40 40% 31% 36% 30 26% 31% 20 21% 10 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Base: All respondents (2013=1,330; 2012=1,258; 2011=1,201; 2010=1,198; 2009=1,124; 2008=1,150; 2007=1,084; 2006 (not asked); 2005=1,324; 2004=1,386; 2003=989) Source: PwC 16th Annual Global CEO Survey1 PwC, ‘Global Economy Watch’ (December 2012). PwC 16th Annual Global CEO Survey  3
  6. 6. The prevailing mood is, as usual, …people always tend to think somewhat more optimistic when it that a tough economic situation comes to the longer-term outlook: is the sign of a ‘new normal’ 46% of CEOs are very confident about expanding over the next three years. and, conversely, that a robust That said, CEOs in most parts of the world economy will last forever. world are much less positive than But economic conditions their peers in the E7 markets (46% always alternate. versus 58%).2 Yasuchika Hasegawa, President and It’s easy to understand why they’re CEO, Takeda Pharmaceutical Company so cautious. Far-reaching changes Ltd., Japan are happening – and they’re also happening faster than before. BetweenWhen people ask me, ‘What’s going 1970 and 2011, the number of man- made disasters nearly tripled, whileto happen in the next five years?’, the number of natural disasters surgedI throw up my hands and say sevenfold.3 The past decade alone has‘I have no idea and neither do you.’ seen a number of major disruptionsHow do you cope with that degree (see Figure 2).of uncertainty? Well, I think, first, In short, improbable risks aren’t soby having the right attitude about improbable now; they’re becomingthe process of change and reinvention. the norm in a more uncertain world.Peter Tortorici, CEO, GroupM And CEOs everywhere are feelingEntertainment Global, US the heat. Figure 2: Major disruptions over the last decade Indonesia earthquake iPhone launch Global financial crash Northern Rock bank run (UK) US-led invasion of Iraq Lehman Brothers’ collapse SARS epidemic US, UK and European bank bailouts Wenchuan earthquake (China) Southeast Asian tsunami WHO declares swine flu pandemic Eurozone sovereign debt crisis and first Greek bailout Hurricane New Zealand and Japan Katrina earthquake and tsunami (US) Hurricane Sandy (US) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: PwC2 E7 markets: China, India, Brazil, Russia, Mexico, Indonesia and Turkey.3 Swiss Re, sigma No 2/2012.4  PwC 16th Annual Global CEO Survey
  7. 7. What worries CEOs most?The global community of regulators Today’s CEOs are concerned about a– as well as the political classes – are wide range of potential and ongoing threats to their business growthkeen on ensuring the stability of the prospects. These include catastrophicfinancial system. And that implies events, economic and policy threatsa completely new order, a new set of and commercial threats.rules to play by. In these cases, it’snot uncommon to wind up in a Major disruptionssituation of regulatory overreach. We asked CEOs about theirPiyush Gupta, CEO and Director, organisation’s ability to cope with theDBS Group, Singapore potential impact of various disruptive scenarios. The majority thought their organisations would be negatively affected, with major social unrest being cause for the greatest concern (see Figure 3). Indeed, CEOs are far more concerned about this than they are about a slowdown in China, possibly because they’ve already factored the latter into their calculations. Figure 3: Major social unrest tops the list of scenarios that would have the worst impact on CEOs’ organisations Q: How well would your organisation be able to cope with the following scenarios, if they happened within the next 12 months? (respondents who answered ‘negative impact’) Major social unrest in the country in which you are based 75 Recession in the US 67 Cyber attack or major disruption of the internet 63 A natural disaster disrupting a major trading/manufacturing hub 56 A breakup of the eurozone 53 Military or trade tensions affecting access to natural resources 53 Health crisis (e.g. viral pandemic, food/water safety crisis) 52 China’s GDP growth falling below 7.5% per annum 51 % Base: All respondents (1,330) Source: PwC 16th Annual Global CEO Survey PwC 16th Annual Global CEO Survey  5
  8. 8. Red numbers, red tape Has regulation gone too far? The US Dodd-Frank Act of 2010 runs to a Of course, major disruptions aren’t massive 884 pages, which makes it the only cause for concern; CEOs are 23 times longer than Glass-Steagall, nervous about a whole clutch of fiscal the reform that followed the Wall and political threats. The prospect of Street Crash of 1929.4 And the continuing economic volatility heads European Commission (EC) has their worry list, as it has for the past generated so much red tape that two years. But 71% – rising to 89% in business ministers from Germany, North America – are also concerned the Netherlands, Poland and the UK about how debt-laden governments recently wrote a letter urging Brussels will try to address growing deficits. to reduce the burden.5 This is in spite And 69% are anxious about the risk of of the EC’s efforts of the past years overregulation, now seen as a bigger to consolidate, codify and simplify threat than at any time since 2006 existing legislation and improve the (see Figure 4a). quality of new legislation. Figure 4a: Volatile conditions top the list of economic and political threats, but concerns vary by where CEOs are located Q: How concerned are you about the following potential economic and policy threats to your business growth prospects? (top four threats global CEOs named) 88% 89% 75% 66% Africa North America Middle East Africa/Asia Pacific 81% Global 71% Global 69% Global 61% Global 56% 54% 65% 50% Middle East Latin America Western Europe Latin America Uncertain or volatile Government response economic growth to fiscal deficit/debt Overregulation Capital market volatility Regions most concerned about this threat Regions least concerned about this threat Base: All respondents (North America=227; Western Europe=312; Asia Pacific=449; Latin America=165; Middle East=32; Africa=50) Source: PwC 16th Annual Global CEO Survey4 ‘Over-regulated America’, The Economist (18 February 2012), http://www.economist.com/node/215477895 James Kirkup, ‘Lift the weight of red tape, Vince Cable and allies urge Brussels’, The Daily Telegraph (20 November 2012), http://www.telegraph.co.uk/finance/yourbusiness/9689165/ Lift-the-weight-of-red-tape-Vince-Cable-and-allies-urge-Brussels.html6  PwC 16th Annual Global CEO Survey
  9. 9. Too much tax, too little talent hard.6 Meanwhile, the competition for talent has become more fierce thanOn the commercial front, CEOs are ever before, with the aging of theparticularly anxious about higher global population and the changingtaxes and the shortage of key skills nature of work.(see Figure 4b). These are perennialfears, but current events have brought Energy and raw material costs arethem to the fore. also a significant source of unease – especially in Africa and Asia Pacific,In the US, for example, one of the most where 68% and 63% of CEOs,pressing issues in President Obama’s respectively, see them as a serious threat.in-tray is reform of the corporate taxsystem. In February 2012, he proposedreducing the headline tax rate byeliminating dozens of subsidies, amove that could hit some companies Figure 4b: Volatile conditions top the list of business threats, but concerns vary by where CEOs are located Q: How concerned are you about the following potential business threats to your growth prospects? (top four threats global CEOs named) 65% 82% 68% 57% Asia Pacific Africa Africa Asia Pacific 62% 58% 52% 49% Global Global Global Global 50% 45% 31% 35% Middle East Western Europe Middle East Latin America Energy and Shifting consumer Increasing tax burden Availability of key skills raw material costs spending/behaviour Regions most concerned about this threat Regions least concerned about this threat Base: All respondents (Western Europe=312; Asia Pacific=449; Latin America=165; Middle East=32; Africa=50) Source: PwC 16th Annual Global CEO Survey6 Jackie Calmes & John H. Cushman Jr., ‘Obama Unveils Proposal to Cut Corporate Tax Rate’, The New York Times (22 February 2012), http://www.nytimes.com/2012/02/23/business/economy/ obama-introduces-plan-to-cut-corporate-tax-rate.html?pagewanted=all PwC 16th Annual Global CEO Survey  7
  10. 10. Silver lining for some From risk management Some European countries haveIt’s not all doom and gloom, though. to resilience a high level of productivity whileNearly a fifth of all CEOs in the Middle One thing is clear: the threats facing others have a lower level ofEast believe the collapse of the eurozone CEOs are coming from all directions; productivity while they are allcould provide new business opportunities. they’re coming harder and faster; and wrapped up in a ‘monetary corset’ they’re coming in more subtly varied subject to different tax regulations.Similarly, 16% of CEOs in the Middle forms. Confronted with this changing If the eurozone fails, an array ofEast and 13% of CEOs in Central and risk landscape, CEOs recognise thatEastern Europe believe China’s slowing opportunities may arise, because traditional risk managementgrowth could open new doors. And techniques aren’t enough. And, in a some of the current rigidities13% of CEOs in North America would will disappear. stagnating global economy, they knowwelcome a squeeze on natural they can’t rely on a rising tide to come Julio Patricio Supervielle, Gruporesources for the same reason. to the rescue. Supervielle’s CEO and BancoIn fact, Chinese CEOs are already Supervielle’s Chairman, Argentina The only way forward is to buildbenefiting from the lingering organisations that can surviveuncertainty in the eurozone. Our and thrive amidst disorder:research shows that, in 2011, there organisations that are agile andwere 61 deals in which mainland adaptable, able to cope withChinese companies acquired European disruption and emerge strongercompanies – up from 11 in 2006. And than before.in the three months to March 2012, thenumber of Chinese firms purchasing “If you don’t evolve and change, youEuropean firms surpassed the number go backwards. It’s pure physics,” saysof European firms purchasing Chinese Larry Fink, Chairman and CEO of assetfirms for the first time in history.7 management firm BlackRock Inc. “So we’ve adapted quite considerably. Even this year we changed our entire firm architecture to be more adapted to our clients, to be more adapted to the situation and, importantly, to finalise our evolution from a founders’ culture firm to a global, hopefully entrepreneurial firm. And that has been a big evolution.”7 PwC, ‘China deals: A fresh perspective’ (October 2012).8  PwC 16th Annual Global CEO Survey
  11. 11. To be honest, we wouldn’t dare to predict the future. The fact isthe world has been changing a lot more quickly in recent years.And looking back, we find that many forecasts of the globaleconomy turned out to be incorrect. In our company, we justtry to do well everything we need to do today. There are somany things out of our control that we feel it’s unnecessary andimpractical to make too many predictions about the economy.Instead, we focus on building robust systems that can operateunder a variety of conditions.Alex C. Lo, President, Uni-President Enterprises Corporation, Taiwan PwC 16th Annual Global CEO Survey  9
  12. 12. evidence to suggest that concentrating your firepower works much better than adopting a scattergun approach. One analysis of how 4,700 companies weathered three previous downturns shows that the star performers – those that emerged stronger than ever –A three-pronged approach weren’t the obvious ones. They weren’t the companies that cut fast and furiously or went on the offensive with ambitious restructuring programmes, acquisitions and the like. The former saw customer satisfaction drop as theGrowth is not necessarily about So what are CEOs doing to make their organisations more resilient in this quality of their offerings deteriorated,revenue growth. In this uncertain while the latter were stretched much era of ‘stable instability’? Our surveyenvironment there is more and more too thin.8 shows that they’re taking threeemphasis on bottom line growth. specific approaches: The companies that fared best in termsPeter Terium, CEO, RWE AG, Germany • Targeting pockets of opportunity: of both sales growth and profits CEOs are focusing on a few well- growth were those that mastered the chosen initiatives, primarily in their delicate balance between cutting costs existing markets, to stimulate organic to survive in the short term and growth. They’re more wary about investing to expand in the longer term. entering new markets or engaging They took advantage of depressed in mergers and acquisitions (M&As), prices to buy property, plants and and diluting their resources too much. equipment that would help them compete more effectively in the future. • Concentrating on the customer: And they invested judiciously in R&D CEOs are looking for new ways to and marketing to boost their sales and stimulate demand and foster profits when demand rose again.9 customer loyalty, such as capitalising on digital marketing platforms and The CEOs in our survey are responding involving customers in product/ in the same fashion. They’re weighing service development. But they’re also up all their options, making a few aiming to keep their R&D costs down smart investments and consolidating and make the innovation process their resources to maximise the odds of more efficient. success. And they’re doing so not because they think it’s the best way of • Improving operational surviving a downturn but because they effectiveness: CEOs are balancing think it will make their organisations efficiency with agility. They’re trying more robust. to cut costs without cutting value or leaving their organisations exposed Steve Holliday, CEO of international to external upheavals. They’re also energy distributor National Grid Group delegating power more widely and Plc., sums up this approach. “It’s very collaborating with organisations easy to just go off and think you can do to share resources and develop things that you do well in many new offerings. countries around the world which arguably need some of your skills,” he Targeting pockets warns. But if a company doesn’t have a clear idea of where it can deliver value of opportunity and isn’t disciplined in its focus, it risks Two-thirds of all CEOs are focusing on extending itself too far. “We’re very, a few carefully selected initiatives very conscious of making sure we don’t rather than nurturing numerous overreach ourselves.” different ideas and then weeding out the weakest. That’s easier said than done because every business unit naturally thinks its plans should take precedence. But there’s considerable8 Ranjay Gulati, Nitin Nohria & Franz Wohlgezogen, ‘Roaring Out of Recession’, Harvard Business Review 88, no. 3 (March 2010): 62–69.9 Ibid.10  PwC 16th Annual Global CEO Survey
  13. 13. Homing in on organic growthSo exactly which pockets ofopportunity are CEOs targeting?Nearly half are pinning their hopeson organic growth in their existingmarkets (see Figure 5). Only 17%plan to complete M&As or form new Figure 5: CEOs are pursuing the opportunities for organic growth in existing marketsstrategic alliances. And only 25% are Q: Of these potential opportunities for business growth, which one is the main opportunity inturning to new product and service the next 12 months?development.At first glance, then, it might look asif CEOs are hunkering down andwaiting for better times. But CEOs alsoknow that, if they want to grow theirbusiness, they’ll have to go where the 32% Organic growth 25% in existinggrowth is – and four distinct economicclusters are emerging (see Figure 6). domestic market New product or service development 17% New M&A/joint 17%The troubled states of Southern Europe ventures/strategic alliancesare contracting. Meanwhile, Australia, 8%Japan, North America and the more Organic growth in existingrobust members of the European Union foreign marketare showing signs of recovery, albeitrather shaky. New operation(s) in foreign marketsThe growth countries are alsodiverging. China and India are still Base: All respondents (1,330) Note: 1% of CEOs responded ‘Don’t know/Refused’expanding rapidly, but the pace is Source: PwC 16th Annual Global CEO Surveyslowing down. Conversely, some partsof Southeast Asia and Latin Americaare picking up speed. This pattern isexpected to continue for the rest ofthe decade. Figure 6: Two faster and two slower economic lanes are developing The global growth leaderboard is changing Growing but susceptible to disruption Growing and accelerating Poland 3.4% France 1.2% Indonesia 6.2% Australia 3.1% Japan 0.9% Brazil 4.0% Canada 2.3% United Kingdom 2.1% South Africa 3.6% United States 2.4% Netherlands 1.1% Germany 1.3% Ireland 2.2% Struggling to grow Growing but decelerating Italy 0.3% China 7.3% South Korea 3.6% Spain 0.9% India 6.6% Mexico 3.7% Portugal 0.5% Saudi Arabia 4.2% Russia 3.8% Greece 0.6% Turkey 5.1% Aggregates eurozone 1.0% Global (market rates) 3.0% All percentages are projected 2013-15 average growth rates Sources and methodology: PwC analysis, national statistical authorities, Thomson Datastream and IMF. The tables above form our main scenario projections and are therefore subject to considerable uncertainties. PwC 16th Annual Global CEO Survey  11
  14. 14. With growth rates among both mature And a growing number of CEOs are CEO opinion is divided on Europe,and growth economies diverging, and looking to Africa. For example, Nestlé though some CEOs see promise,with highly unique opportunities and sees Africa as one of the biggest including those countries that arethreats in each market, CEOs are opportunities for the food industry in struggling to grow. “People there [inlooking for specific opportunities in the next 10-20 years.15 Dr. João Bento, Western Europe] have decided thatall clusters. CEO of Portugal-based international they should work less and retire earlier. technology provider Efacec Capital And that may not be affordable. So IIt’s not surprising that five of CEOs’ top SGSP SA says, “…we also have a think that Western Europe has aten overseas destinations are growth presence in growth economies, such serious structural issue.” says Seymurmarkets, nor that four of these are the as Latin America, Southern Africa, Tari, CEO of Turkish private equityBRIC economies (see Figure 7). But the Magreb and also in India.” firm Turkven.fact that Indonesia is now in the top ten– for the first time – shows that CEOs The US, meanwhile, remains second Yves Serra, President and CEO of Swisshave been quick to spot more subtle shifts on CEOs’ list of top ten overseas industrial components manufacturerin the distribution of economic power. destinations, as it did last year. Georg Fischer Ltd., is more positive. All five of the mature economies on “We focus our efforts on where weIndonesia is the fastest of the the list are growing, albeit susceptible see growth. This includes Asia andaccelerating markets, with real GDP to disruption. These markets, which America, at least for our products, andgrowth forecast to increase by 6.2% comprise five of the G7 countries, are also some sectors in Europe. …So thea year for the next three years.10 quite simply too big to ignore: the US, picture is not just black and white;By 2050, Indonesia’s economy in Japan and Germany are projected to there are definitely pockets of growthpurchasing power parity (PPP) terms remain among the world’s ten biggest in Europe as well.”could be bigger than that of Germany, economies, in PPP terms, in 2050,France or the UK.11 Its stock market has while Canada and the UK are expected The traffic isn’t going in only onesoared 12.6% in the past 12 months to remain in the top 20.16 direction, though. CEOs in the maturealone.12 And the government has markets may be looking to variouslaunched a major programme to Furthermore, although the E7 countries growth markets, but CEOs in growthimprove the country’s overburdened are set to overtake the G7 countries in markets are equally prepared to goinfrastructure.13 terms of GDP size and growth by 2050, further afield: 33% of CEOs in Asia they are still expected to lag far behind Pacific and 19% of those in the MiddleOther emerging markets are also being the G7 countries in terms of GDP per East are targeting the US, for example,prioritised, like Mexico and Thailand, capita.17 So large, mature markets will while 27% of CEOs in Latin Americawhich are close on the heels of CEOs’ still remain attractive for higher valued and 18% of those in Africa aretop ten markets. Mexico is particularly products and services, given their more targeting China.notable – it could become the world’s 7th affluent consumers.largest economy by 2050 in PPP terms.14 Figure 7: Half of CEOs’ top ten countries are growth markets Q: Which three countries, excluding the country in which you are based, do you consider most important for your overall growth prospects over the next 12 months? (maximum of 3 responses) 5% UK 8% Canada 6% Russia 12% 23% Germany 31% 5% Japan US 10% China India 7% Indonesia 15% BrazilBase: All respondents (1,330)Source: PwC 16th Annual Global CEO Survey10 PwC projections.11 PwC, ‘World in 2050’ (January 2013). 12 Daniel Inman, ‘Southeast Asia’s Growing Appeal’, The Wall Street Journal (3 December 2012), http://online.wsj.com/article/SB10001424127887324020804578151761632189982. html#mod=djemITPE_t13 Eric Bellman, ‘Indonesia Boosts Infrastructure Investment’, The Wall Street Journal (7 December 2012), http://online.wsj.com/article/SB10001424127887323501404578165794187322794.html14 PwC, ‘World in 2050’ (January 2013).15 Caroline Scott-Thomas, ‘Nestlé eyes big food industry opportunities in Africa’, Food Navigator (26 November 2012), http://www.foodnavigator.com/Financial-Industry/Nestle-eyes-big-food- industry-opportunities-in-Africa16 PwC, ‘World in 2050’ (January 2013).17 Ibid.12  PwC 16th Annual Global CEO Survey
  15. 15. …I think what we have to do ... is look for the growthopportunities very carefully. The easy route is to say, wellthat’s an emerging market so that’s got to be good, that’sa mature market, that’s got to be tougher, but ... I thinkyou’ve got to drill down to see where the growth really is.... and there is growth in every market – but you’ve got togo granular.Alison Cooper, Chief Executive, Imperial Tobacco Group,United Kingdom PwC 16th Annual Global CEO Survey  13
  16. 16. Concentrating onthe customerIrrespective of the markets they’re in,CEOs have one overwhelming goal: togrow their customer base. Indeed, 51%say it’s a top three investment priorityfor the coming year. Figure 8: Not all growth markets are consumer-led economiesThat’s not surprising. What’s changed 30is the fact that CEOs are now trying to Producers Consumers and producersattract more customers while focusing Nigeria (proxied by growth in number of people of working age) 25 Projected production potential over 2011-20 periodon a smaller, more targeted rangeof growth strategies – no easy task in 20 Saudi Arabiathe current economic climate. Therecession has hit some businesses and 15 Malaysiaconsumers badly, particularly those in Indiaricher countries. Between 2000 and Mexico 102011, consumer spending in the Indonesiamature markets increased by just Brazil 52.1% a year. In the growth markets, South Africa Vietnamby contrast, it increased by a much 0healthier 5.7%.18 ChinaVery different consumption volumes -5 South Koreaand patterns in different markets addto the challenge. Though the growth -10 Russiaeconomies have some common Consumerscharacteristics, they also differ in key -15 0 20 40 60 80 100%respects – and these differences are Projected consumption potential over 2011-20 periodlikely to intensify as they continue to (proxied by GDP per capita growth)develop. Some growth countries areprimarily producers rather than Note: Dotted lines represent average valuesconsumers, for example (see Figure 8). Source: PwC analysis, UN population figures.The purchasing power and preferencesof consumers can also vary a lotwithin, as well as between, countries, In fact, nearly half the CEOs we polled We keep close track of the realand adapting to such disparate tastes see shifts in consumer buying patterns estate sector in order to remain onrequires a deep understanding of the as a serious business threat. And they the cutting edge of all advancedlocal environment. “It all starts with realise that being able to respondthe consumer – a rich and robust quickly and effectively to such changes trends in the construction ofunderstanding of what they want, is crucial. buildings, energy efficientwhere they’re going, but, most technologies and environmentallyimportantly, what they want in the Dr. Weihua Ma, President and CEO of friendly materials. We introducefuture,” Douglas D. Tough, Chairman China Merchants Bank Co. Ltd., puts the position particularly well: “We ready-to-move-in residentialand CEO of International Flavors & commercial banks are service apartments in our buildings inFragrances, Inc., observes. institutions, so changes in customer response to client suggestions.“We interview consumers all around demands are extremely important for Valentina Stanovova, Senior Vice-the world to make sure we have a us. Just as a chef in a restaurant will President, Capital Group, Russiarobust database, and we don’t lose his job if his cooking cannot satisfyextrapolate necessarily from any one his customers, a service institution willcountry to get a global view.” But there not exist if it has no customers.”are obvious risks for multinationals, headds. “…they have to adapt properlyto local needs.” The competition fromlocal and regional rivals is alsoincreasing all the time.18 PwC, ‘Introducing the PwC Global Consumer Index’ (October 2012), http://press.pwc.com/GLOBAL/global-consumer-spending-slowdown-eases.-pwc-releases-first-ever-global-consumer-index- gci/s/bc11166a-cd72-4ea7-93fa-c167d10a5cb514  PwC 16th Annual Global CEO Survey
  17. 17. Getting customers onside In terms of the importance of our different stakeholders, our customersSo it’s no wonder that new strategies to are absolutely the most important. If we don’t give them a good servicestimulate demand and foster customer – affordable tariffs, high reliability, good customer service – then we knowloyalty play a big part in CEOs’ plans we are going to be in trouble.for the next 12 months. A full 82% Andrew Bradler, CEO, CLP Holdings Ltd., Hong Kong, Chinaanticipate making changes on thisscore – and 31% have major changes inmind (see Figure 9).One obvious measure is to take Engaging with customers isn’t justadvantage of the new marketing about communicating with them,platforms now emerging. Most though. It’s also about working withorganisations have traditionally used them to co-create new offerings, andmarket research, competitive helping them use the products andbenchmarking and the like. But these services they’ve bought more enjoyablysources of information can only show or effectively. Boeing has perfected thehow customers behave en masse. first of these two approaches: it consults airlines and frequent flyersThat’s not the case in the digital arena. alike when it’s designing new planes.19Mining social media sites, blogs, Digital music service Spotify hasconsumer reviews and other such data perfected the second by invitingsources helps an organisation find out subscribers to customise their playlists,what individual customers think and which enhances the product offeringwant. Equipped with these insights, it for them and for others.can then develop products and servicesfor specific customer segments andcraft more personalised marketingmessages – as well as enhancing thebrand. This may explain why three-quarters of CEOs say they’re increasingtheir technology investments. Figure 9: Attracting – and keeping – more customers is a key priority Q: To what extent do you anticipate changes at your company over the next 12 months? Don’t know/refused Customer growth/retention/loyalty strategies 17 51 31 1% Strategies for managing talent 23 54 23 1% Increase in technology investments 25 54 21 1% Organisational structure 26 52 22 1% Increase in R&D and innovation capacity 32 50 17 1% 0 100 % No change Some change A major change Base: All respondents (1,330) Source: PwC 16th Annual Global CEO Survey19 Bryan Urbick, ‘Innovation Through Co-creation: Consumers Can be Creative’, Innovation Management (26 March 2012), http://www.innovationmanagement.se/2012/03/26/innovation- through-co-creation-consumers-can-be-creative/ PwC 16th Annual Global CEO Survey  15
  18. 18. Making the most of disruption Finland-based international Human capacity is key to any communications and information company’s growth. The secondYet innovation – generally one of the technology company Nokia is a casemost important factors in attracting important factor is R&D. in point. “…our focus is very muchand retaining customers – is surprisingly Karen Agustiawan, President Director on disruption – disrupting ourselves,low down the schedule for many CEOs. and CEO, PT Pertamina (Persero), disrupting the trends that have beenIt comes fifth on their list of investment Indonesia established in the industry and movingpriorities for this year. And though forward with new strategies, new67% plan to increase their company’s products and new ways of managingR&D capacity, only 17% intend to our organisation in order to keep pacemake major alterations. and indeed accelerate the pace beyondThe drive for efficiency explains why others.” says President and CEOsome CEOs are reluctant to invest more Stephen A Elop.in R&D, but a closer look at the data “One of the most important ways that …we want more than just satisfiedalso shows marked regional variations. we see to drive disruption is to focus on consumers. We want to delightCEOs in Africa, Asia Pacific and Latin unique and differentiating consumerAmerica are more likely to be beefing them – to go beyond their experiences. That’s a fancy way ofup their company’s R&D than those in saying, ‘how can we help you do expectations. We are seen as athe rest of the world – possibly because company that delivers excellence something you couldn’t do before?’the growth countries are still in in terms of customer service. … when you look at the patternscatch-up mode. of disruption, particularly in the area But our main innovations areNevertheless, CEOs know that of technology, it’s often something our [retail] collections and howinnovation isn’t possible without relatively focused, relatively simple quickly we get them to market.investment. That’s why a number that allows you as a person to do something you couldn’t do before, or to José Galló, CEO and Director,of leading companies are adopting Lojas Renner, Brazila more imaginative approach to the do it faster or more efficiently. And it’sinnovation process itself, whether those types of innovations that we’reit’s incremental changes or more focused on today,” he explains.fundamental changes to their businessmodels, in order to become more agileand responsive to competitive threatsor shifts in customer demand.16  PwC 16th Annual Global CEO Survey
  19. 19. It all starts with the consumer – a rich and robustunderstanding of what they want, where they’re going,but, most importantly, what they want in the future.Douglas D. Tough, Chairman and CEO, International Flavors& Fragrances, Inc., US PwC 16th Annual Global CEO Survey  17
  20. 20. Improving operational objectives. As Artem Konstandyan, I think the underlying idea ofeffectiveness CEO of Russia’s Promsvyazbank (PSB), trying to reduce cost in whatever notes, “Downsizing is not a goal inUnder pressure to meet demanding we do actually makes us become itself. We’re trying to streamline ourcustomer growth targets within tightly operations and improve staff creative and innovative.defined investment parameters, CEOs performance.” Aireen Omar, CEO,know they’ll have to change the way AirAsia Berhad, Malaysiatheir companies function. Nearly half An example? Many companiessay improving operational discovered in the aftermath of the We believe the underlying growtheffectiveness is one of their top three tsunamis in Southeast Asia and Japan that the quest to maximise the trends will be slow. So we have toinvestment priorities this year. efficiency of their supply chains had just be better than the competitionAnders Nyrén, President and CEO of severely impaired their ability to cope in these markets, and that is alsoglobal investment firm Industrivärden with disruption. Today’s CEOs have one of the reasons why we haveAB, based in Sweden, spoke for many clearly learned from that experience: to keep costs under control.CEOs when he told us: “Given that the 50% are diversifying their supplyglobal economy and the global pace Martin Blessing, Chairman of the chains and working with suppliersof life are getting faster in all aspects, Board of Managing Directors, in a wider range of territories.one needs to become more agile and Commerzbank AG, Germanyefficient about everything – including CEOs are also wary aboutrunning a company. It’s essential that inadvertently cutting value in the …we have had to look seriously atyou streamline operations and become course of cutting costs – and slashing how we manage our business. And,leaner wherever you can, so as to be the workforce is one action that canable to react more quickly to changing certainly backfire. This probably we have had to learn how to bemarket conditions.” explains why 25% have kept their prepared to disrupt ourselves. So, company’s headcount the same for rather than getting too rigid andFinding the right balance the past 12 months, while 48% have bureaucratic and too procedures- actually increased it. It may explain, driven, sometimes we’ve had to stepCost-cutting is still high on the agenda: too, why 77% of CEOs plan to revise77% of CEOs have undertaken outside of ourselves, but yet within their strategies for managing talentcost-saving initiatives in the past ourselves, by creating new units in the coming year; they realise they12 months and 70% plan to do so in to challenge the way that we do won’t be able to attract and retain newthe next 12 months (see Figure 10).But they’re not wielding the knife customers without well-trained, highly business and to extend that motivated employees. learning to the traditional partsindiscriminately; they’re trying tobalance efficiency with other strategic of our business. Alex Arena, Group Managing Director, HKT Ltd., Hong Kong, China Figure 10: Cost-cutting tops the list of restructuring activities CEOs plan to put in place in 2013 Q: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months? 70% 47% 31% Implement a Enter into a new Outsource a cost-reduction strategic alliance business process initiative or joint venture or function Base: All respondents (1,330) Source: PwC 16th Annual Global CEO Survey18  PwC 16th Annual Global CEO Survey
  21. 21. Figure 11: Involving less senior managers in strategic decisions is seen as most effective in preparing them for leadership Q: Do you deploy any of the following to develop your leadership pipeline? Q: If so, how effective are they? 100 % of CEOs who deploy the following to develop their leadership pipeline 79 80 69 71 62 61 % of CEOs who 60 58 don’t rate their initiatives as % highly effective 40 37 33 20 24 22 22 19 11 13 0 Shadowing Programmes Encouraging Rotations to Dedicated Active Involving senior to encourage global mobility different executive succession managers below executives diversity and functions/ development planning, board level among international challenges programme including in strategic business experience identifying decision-making leaders multiple successors Effectiveness of methods deployed to develop leadership pipeline Very effective Somewhat effective Not very effective Not at all effective Don’t know/refused Base: All respondents (1,330) Source: PwC 16th Annual Global CEO SurveyPutting power in more hands That said, there are pronounced I prefer a management style based regional variations in behaviour. on openness and cooperation atIn fact, some CEOs are going CEOs in North America are far moreconsiderably further: they’re devolving every level; one that does not likely to encourage their employees topower more widely to make their participate in strategic decisions than necessarily obey or respectorganisations more agile and responsive. hierarchy at all times. I believe in those based in Central and EasternAlthough only 31% encourage all their leadership that can stay flexible. Europe, Asia Pacific and Latin America.staff to get involved in strategic They’re also more likely to involve Sándor Csányi, Chairman and CEO,planning, 79% include managers middle managers. OTP Bank Plc., Hungarybelow board level in such decisions aspart of the process of developing their These variations obviously reflectleadership pipelines. And most CEOs cross-cultural differences in howthink it’s the best way of nurturing decisions are made. CEOs in culturestheir successors (see Figure 11). that are relatively egalitarian typically adopt a more participative approach“We don’t have one way of doing things than those in cultures that arenor do we have one point of authority relatively hierarchical.20 But whereasto which all questions have to be participative management can improvedirected,” says Carl Sheldon, CEO of profitability in less hierarchicalUnited Arab Emirates-based global cultures, it can worsen profitability inenergy company TAQA. “Instead, our more hierarchical cultures.21 So usingapproach is to create a culture that different decision-making styles inempowers people and – within the different cultures makes goodcontext of a set of shared values – business sense.provides them with the freedom totake action. That gives you tremendousstrength, flexibility, and agility.”20 Pankaj Ghemawat & Sebastian Reiche, ‘National Cultural Differences and Multinational Business’, Globalization Note Series, 2011.21 Karen L. Newman & Stanley D. Nollen, ‘Culture and Congruence: The Fit Between Management Practices and National Culture’, Journal of International Business Studies 27, No. 4 (4th Quarter, 1996), pp. 753-779. PwC 16th Annual Global CEO Survey  19
  22. 22. Sharing as well as buying We believe the dip in M&A is being Our innovation comes from driven by current levels of uncertainty globally collaborative efforts and aIt’s not just the way management rather than a major change inand employees interact within lot of encouragement from within. emphasis. But we’re also seeing a moveorganisations that’s changing, though; by businesses towards ‘sharing’, by It is also about empowerment,it’s also the way organisations interact decentralisation and forming partnerships or networks.with each other. Nearly half the CEOs encouragement to come up with Inspired by companies like Amazonwe polled aim to form a new strategic and Apple, CEOs recognise that they’re new ideas for R&D programmesalliance or joint venture during the no longer confined to the traditional and product development.next 12 months, which is broadly options of ‘build or buy’.in line with the pattern for the past A.M. Naik, Executive Chairman,four years. Collaborating with other organisations Larsen & Toubro Limited, India in the same or adjacent industriesAt the same time, global M&A activity provides new opportunities forhas declined sharply since the start of generating business by co-developingthe global financial crisis, although products and services, takingCEOs in some sectors, like mining, advantage of a common infrastructurepower and utilities and communications, and sharing customers. It also carriesare much more likely to be prioritising much less risk than an M&A becauseinvestment in M&A in the coming year. it doesn’t require a significant upfrontEven so, the aggregate value of the investment and doesn’t entail spendingdeals completed in the first half of several years integrating the target2012 was less than half the value of company to realise the gains.the deals completed in the first half That’s not to say there’s no place forof 2007.22 Further evidence of how M&As. On the contrary, one studycautious CEOs have become is the shows that firms using multiple modesfact that three-quarters of the deals to obtain new resources were muchconducted in 2012 were cash-only more likely to survive over a five-yeartransactions.23 period than those that relied solely onYet, some firms have plenty of money alliances, solely on M&As or solely onin their piggy banks. US companies are internal development.27sitting on about $1.7 trillion in cash But partnering with otherreserves.24 Canadian companies hold organisations, as distinct fromnearly $300 billion.25 And British purchasing them, does carrybusinesses hold another £720 billion.26 considerable organisational implications.Nearly two-thirds of the CEOs who The qualities needed to form aparticipated in our survey also intend successful network are quite differentto boost their capital spending over the from those needed to pull off annext 12 months, which suggests that acquisition. Key among these is thethey have enough cash to finance their high degree of collaboration that’splans or are confident of raising the required to make an alliance work.28funds. So, if money isn’t the issue,what is?22 mergermarket H1 round-up report (July 2012).23 mergermarket 2012 round-up report (January 2013).24 Federal Reserve, ‘Flow of Funds Accounts of the United States’ (June 2012).25 ‘Dead money’, The Economist (3 November 2012), http://www.economist.com/news/finance-and-economics/21565621-cash-has-been-piling-up-companies’-balance-sheets-crisis-dead26 Michael Izza, ‘Business Confidence research suggests recovery has not yet taken hold’, ICAEW (5 November 2012), http://www.ion.icaew.com/MoorgatePlace/2568727 Laurence Capron & Will Mitchell, Build, Borrow, or Buy: Solving the Growth Dilemma (Harvard Business Review Press, 2012).28 PwC, ‘Creating successful alliances and joint ventures’ (2012).20  PwC 16th Annual Global CEO Survey
  23. 23. One key point of our strategic advantage is the capabilityto ‘orchestrate’ the production and engineering valuechain we create in partnership with other companies.That gives us the ability to scale up or scale down quicklyand efficiently. We try to ensure our organisationalstructure is sufficiently fluid so that we can respondquickly to changes in demand.Pertti Korhonen, President and CEO, Outotec Oyj, Finland PwC 16th Annual Global CEO Survey  21