Most U.S. business leaders believe the economy is in a recession now, or that one is inevitable within six months. That's according to a survey conducted by The Boston Consulting Group (BCG) of 101 senior decision makers at U.S. companies with at least $500 million in annual revenues.
CHICAGO (Business Wire EON) March 6, 2008 --
Most U.S. business leaders believe the economy is in a recession now, or
that one is inevitable within six months. That’s
according to a survey conducted by The Boston Consulting Group (BCG)
of 101 senior decision makers at U.S. companies with at least $500
million in annual revenues.
Almost every executive (94.9%) who said that a recession is likely
believes his or her company will not be able to avoid the effects of the
recession.
Companies Already Feeling Recession Squeeze
A total of 53.4% of executives believe that we’re
in a recession now (37.6%), or that we will be within six months
(15.8%). While the majority (71.2%) of those who believe we’re
in or near recession say they base their view in part on macro-economic
indicators, they’re also feeling the effects
in their businesses: 55.9% say their view is based in part on a slowdown
in sales, and 30.5% say it’s based in part on
a slowdown in payments to their companies.
Going into the Recession With the Right Perspective
“We believe companies should approach signs
of a recession as an opportunity – to
prepare. Downturns magnify relative strengths and weaknesses, so
companies that gird themselves intelligently can leverage a change in
the dynamics of an industry – something that
always happens in a recession – so that it
works in their favor,” said Hal Sirkin,
global leader of BCG’s Operations practice,
which spearheaded the research.
“In the last recession, 30% of the companies
that had been among the top 10 players in their sectors dropped off that
list. So, viewed the right way, a downturn presents a strategic
opportunity to leapfrog the competition, rather than simply posing a
threat,” he added.
Recession Trap vs. Recession Opportunity
Indeed, most executives – 57.6% –
said the recession will present opportunities (though 42.4% said it won’t).
Of those who said it will, 64.7% said the recession will lead to chances
for market share gains; 47.1% said it will be an opportunity to
implement changes with less internal resistance; and 29.4% said it will
provide M&A opportunities.
But Companies that Believe They’re
Prepared May Still Fall Into the Recession Trap
Nearly three-quarters (74.5%) of executives say their companies have
taken measures to prepare for the downturn, and 81.3% say they’re
at least somewhat confident – 23.7% are very
confident – that their company is better
prepared than competitors.
“Unfortunately, many of these companies are
probably less prepared than they believe –
and headed for the recession trap. Based on our research, most of the
measures these companies say they’re taking –
80% of the steps, in fact – are conventional
and related to cost cutting,” said Sirkin, a
Chicago-based BCG senior partner. “By mainly
focusing on cost reduction, they’re not
taking advantage of the opportunities a recession can provide. What they
need to do is pull out all the stops now so they can move ahead of their
competitors soon and be well positioned when business softens further.”
The Right Steps to Being Prepared
Mr. Sirkin suggests that companies should begin immediately to determine
and measure their risk levels in a downturn; sharpen their “downturn
radars” by setting up early warning systems
that look for danger and opportunity; “get in
shape” by doing things like building
collaborative partnerships, licensing agreements and outsourcing
relationships that reduce risk, keep costs variable and lead to new
opportunities; think and act counter-cyclically by taking such steps as
giving more service to profitable customers or target accounts and
increasing marketing and R&D investments; streamline supply chains; free
working capital to reduce debt and interest expense; and get everyone
involved in making the most of the downturn by creating a “we’re
all in this together” environment.
“In a recession, everyone feels short-term
pain. But companies that successfully approach a recession as an
opportunity have the potential to realize long-term gain,”
said Sirkin.
Note to journalists: Hal Sirkin at The Boston Consulting Group
(BCG) is available to discuss the findings in more depth and elaborate
on BCG’s recommendations for organizations
willing to take steps to prepare to leverage a downturn.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting firm
and the world’s leading advisor on business
strategy. We partner with clients in all sectors and regions to identify
their highest-value opportunities, address their most critical
challenges, and transform their businesses. Our customized approach
combines deep insight into the dynamics of companies and markets with
close collaboration at all levels of the client organization. This
ensures that our clients achieve sustainable competitive advantage,
build more capable organizations, and secure lasting results. Founded in
1963, BCG is a private company with 66 offices in 38 countries. For more
information, please visit www.bcg.com.
About the Survey
The Boston Consulting Group commissioned an online survey, conducted by
Chicago-based Research Pros Inc., of 101 corporate decision makers at
U.S. companies with over $500 million in revenues. About 80% of the
companies had revenues over $1 billion. All respondents described
themselves as having a position at their company in which they make
decisions affecting the overall direction of the company. The survey was
conducted February 19-21, 2008.
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