In China, managing costs was the response adopted by approximately 50% of respondents — far more than any other geography.

Summary: Organization are facing mature markets and slow organic growth — thus the pressure on prices. National austerity programs also seem to be a factor.

Pricing pressures have emerged from our fifteenth risk (five below the risk radar) last year to fourth position this year.

Together with the three risks discussed previously, pricing pressures are ranked consistently as being a high-impact challenge across almost all sectors. Pricing pressure ranks in the top four in six out of seven sectors. In the public administration sector, the risk generally does not apply.

Key factors

Political and regulatory pressures feature prominently among the drivers for health care respondents. The second and third most commonly reported drivers of this risk are political or regulatory pressure and trade union or public pressure.

However, for most sectors, pricing pressures appear to be predominantly market-driven. The global recession, and the weak recovery that is now under way in many developed nations, has brought home the reality of a structural shift in market conditions.

In many European and North American market segments, market maturity, declining populations, population aging and slow economic growth are producing slow or even negative organic growth for companies.

Pricing pressures are not strictly a mature markets phenomenon, however. Respondents in some emerging markets – notably India, South Africa, and Russia – rank the risk among the top three. This may perhaps be attributable to rising exposure to international competition in these rapidly globalizing economies.

Drivers of pricing pressure risks, as reported by organizations surveyed

2013 forecast

• In many emerging markets, including China, Poland, India, Russia and South Africa, this risk is expected to fall in importance.
• Overall, there is no clear pattern in the outlook to2013, with sectors and geographies divided over their views on whether the impact of the risk will rise or fall. This may reflect uncertainty over whether or not recovery will return markets to growth in the near term.

Pricing pressure

Managing the risk

Overall, a majority of respondents to our survey indicated that they were actively managing price pressure risk, primarily by adjusting their pricing strategies to remain competitive.

Sector strategies

• Oil and gas, life sciences and power and utilities firms appeared to be more likely to attempt to tackle competition head-on through measures such as leveraging market dominance to retain pricing power. 
• Nearly 40% of health care companies indicated that their efforts to mitigate this risk were unsuccessful due to political pressures on pricing – presumably another reference to efforts in many countries to control health care costs.

Geographic approaches

• Executives from Australia, Brazil, China and the US appear far less likely to have already implemented measures to manage pricing risk than their counterparts in Europe and Russia.
• Political pressures on pricing appeared particularly acute in Australia, France and Germany.
• In China, managing costs was the response adopted by approximately 50% of respondents — far more than any other geography. (Germany, also an export-oriented nation, was second with approximately one-quarter reporting strategies based around managing costs.)
• In Sweden, more than 50% of respondents indicated that no measures to respond had been either taken or planned. This figure is particularly striking when one considers that (as with all risks and opportunities) only respondents placing pricing pressures among their top four concerns were asked about the measures they had taken to manage the risk.

Factors mitigating pricing pressure risks, as reported by organizations surveyed

Organizations' responses to pricing pressure

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