41% are focused on growth, compared with 52% in April.
Declining growth sentiment
Prioritization of growth has declined steeply as companies are more focused on the fundamentals. Compared with six months ago, our respondents report an increased focus on reducing costs, improving efficiency and optimizing capital. As executives assess how to compete in an environment where there is lower expected growth, this shift in emphasis toward improving bottom-line performance and seeking out new ways to improve internal performance is understandable.
Nonetheless, growth remains the number-one objective, with 41% reporting that growth is their primary focus. However, this is the lowest percentage of respondents citing growth as their top priority since October 2010. Those companies focused on growth tend to prioritize lower-risk organic strategies that are within their comfort zone. Rather than pursuing ambitious, transformational deals, they are hoping to deliver growth through better execution in existing markets, changing the current mix of products and services, identifying new sales channels, and developing new products and markets through the exploitation of technology.
Which statement best describes your organization’s focus over the next 12 months?
What is the primary focus of your company’s organic growth?
| 41% || || |
are focused on growth, compared with 52% in April.
The overall declining sentiment on growth is particularly pronounced. Even the appetite for organic growth reflects this trend. Respondents’ intentions with regard to excess cash underline the declining sentiment toward growth. Only 36% plan to deploy excess cash toward organic growth, compared with 50% in April.
Returning cash to stakeholders — shareholders and creditors — is now the priority, with 31% of respondents planning to use excess cash to pay down debt, versus 18% in April. This provides further evidence that companies are focusing their attention on deleveraging and strengthening their balance sheets against a backdrop of ongoing uncertainty.
If your company has excess cash to deploy, which of the following will be your focus over the next 12 months?
Cash is returned to stakeholders...
| 51% || || |
with excess cash are focused on returning cash to shareholders and creditors.
Are companies prepared for a return to economic growth?
The focus on organic and inorganic growth has declined significantly as companies are positioning themselves for a slow recovery with low or stagnant growth rates. The Eurozone challenges, along with slowing growth in emerging markets, are driving this more conservative sentiment.
What will it take to get growth back on track?
Several ingredients must be in place — continued bold moves by the ECB, the merging of fiscal and political agendas in the Eurozone, reform in emerging markets, and the knock-on effects of increased trade flows from emerging markets to the Eurozone — in order for a return to growth.
Interestingly, the sentiment by the majority of our respondents (87%) to maintain or grow their workforce is a sign that many companies are keeping key roles and infrastructure in place and maintaining flexibility to take advantage of any improvement in the economy.
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