How to grow beyond

Optimizing your business model to thrive in the current climate.

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Has there ever been a more testing time to do business? Yet despite faltering economies and banking systems, some businesses are still achieving success, and fast; and they are doing it by pushing boundaries and breaking new ground.

These beacons of ingenuity are excelling not simply by tackling the current economic woes, but by exploring the opportunities that the current state of flux presents. By developing new products and services, exploring emerging markets and nurturing new talent, these companies are optimizing their business models to succeed whatever the conditions.

Growing your business beyond boundaries requires knowledge, ingenuity and a healthy dose of courage.

The risks and opportunities that face today's businesses will ultimately shape what happens next. They form the basis of a new global report that surveyed 641 companies operating in 21 countries in a variety of industry sectors.

EY's Business Pulse provides guidance around the top risks and opportunities in 2013 and beyond, and it does so by scrutinizing four key areas.

Cost competitiveness

The first area addresses the top risk identified in the survey; pricing. Today, businesses are increasingly directing their efforts toward cutting costs and prices in order to survive in shrunken mature markets, while also competing in rapidly growing ones.

"Everyone has felt the rising pressure from cost cutting and related profit pressure. This risk has to be a constant concern — even when there is not a crisis — because you cannot truly solve the problem of cost cutting in one day," says Christophe Babule, Head of Internal Audit at the L'Oréal Group.

"A crisis can be an opportunity. It is a way to push the whole organization to act on these risks faster." The increasing significance on cost is understandable.

Cutting costs by just 1% can yield the same bottom-line results as a 10% boost in sales, which can be a massive pick-me-up in today's ultra-competitive markets.

Stakeholder confidence

The second area for consideration has fundamentally shifted since the global financial crisis first erupted in 2007, and now includes the influence of government interventions. The increasing role of governments as a key stakeholder is due largely to escalating regulation, most notably felt in the financial services sector.

More regulatory reporting is needed to satisfy stakeholders and government alike. It is also a factor in rapidly growing markets, where governments are playing a bigger role in more sectors, which can affect the competitive environment.

Keeping on top of government policy and maintaining good relations with the state is one way to find opportunities, prepare for changes or mitigate risks. Regulation and compliance is a growing risk factor facing companies today, and the forecast is that it will remain a concern for some time yet.

Volker Barth, Head of Compliance at Daimler, warns that the level of regulation will only increase as regulators become more aggressive. "This will also be the case in rapid-growth markets," he explains.

"A big downside risk here is that authorities in rapid-growth markets are not as well prepared as those in developed markets." Thorough risk analysis and research and stringent planning in your growth strategy are now more critical than ever for successful management of this factor.

Customer reach

More positively, expanding your customer reach is seen as a mechanism for accessing opportunities through innovative products, services and operations that open up niche areas in existing markets and
achieve success in growth markets. As a consequence, innovation has been identified as the greatest opportunity in 2013 and the foreseeable future.

The possibilities associated with innovation go hand in hand with the potential offered by emerging markets, which is also seen as a key growth area in the coming years. Not surprisingly, the International Monetary Fund expects major rapid-growth markets to expand by 5%-6% in 2013-14.

In accordance, it is likely that this expansion will be conveyed to the world via new marketing channels. Social media outlets (as well as cloud computing and data insights) particularly, are seen by many organizations as an area that will be increasingly important to expanding the customer base.

Operational agility

The ability to adapt and streamline operations is viewed as a valuable way of making tangible improvements that will steady the ship through volatile macro changes, or even make headway into new markets. Companies are encouraged to consider investing in processes, tools, talent management and training to deliver greater productivity.

In a similar vein, finding more effective ways of executing strategy throughout the business is regarded as an area where gains can also be made. Here, an investment in IT has become the practical embodiment of this move to enhance analytical and administrative processes.

Each of these areas illustrates that change is afoot, with the shifting economic landscape providing both risks and rewards. With so much at stake, equal reserves of creativity and determination are needed for companies to survive and thrive.

And, as the research shows, the stark difference between those companies that can successfully harness these key factors in their growth strategy is clear for all to see.

A crisis can be an opportunity.


EY-The top 10 risks and opportunities