In the midst of slowdown, a small group of optimists can see growth

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When asked to put this year into perspective, at least half of the CEOs of the fastest growing companies said business is being driven by cost containment and strategies for coping with the business slowdown. 

Yet, in spite of this majority with a defensive outlook, according to the latest PricewaterhouseCoopers Trendsetter Barometer*, some see their business and sector as being driven by offense-related factors like e-business and globalization—and the good news is this latter group is expecting growth considerably above the norm. 

When asked to identify the top three factors driving their business and industry sector this year, half or more fast growth CEOs cited cost reduction and containment (55 percent) and strategies to deal with the business slowdown (50 percent).

“In light of current economic and business conditions, all businesses need to take a hard look at their planned investments and operations.  It is essential to have good management information and a well-thought-out plan to control costs, and speed the flow of cash through the business,” said Steve Hamm, PwC managing partner of middle market advisory services.  “Although this kind of planning should be ongoing, too often it is back-burnered in better economic times, in favor of strategies for rapid business expansion.” 

Almost all of the other market drivers mentioned proved to be of considerably lesser importance: worker shortages (cited by 39 percent); actions of the US Federal Reserve Board (28 percent); electronic commerce and the Internet (22 percent); intellectual asset management (21 percent); mergers and acquisitions (18 percent); and globalization (14 percent).  At the bottom of the list was federal tax cuts for individuals (12 percent).

Looking across industry groups, more CEOs of product than service sector companies cited actions of the Federal Reserve Board, 31 percent (seven points higher); and more mentioned federal tax cuts for individuals, 17 percent (nine points higher).  In contrast, more CEOs of service companies pointed to intellectual asset management, 29 percent (15 points higher than product companies); and e-commerce and the Internet, 27 percent (11 points higher).

“It appears that more CEOs of service companies have identified – and are focusing on – drivers that they can manage, while in the product sector, more are giving credibility to areas being managed by others,” said Hamm.

Is there a connection between one’s view of what’s driving the market and success in the market?  Those mentioning e-commerce and the Internet as one of the top three drivers for their business and industry sector are projecting revenue growth 35 percent above the norm over the next 12 months; those citing globalization, 32 percent higher; and intellectual asset management, 12 percent higher.  “It appears that those retaining a sharp eye on market opportunities like e-business and globalization are poised for significant growth,” said Hamm.  “They likely are early adopters, now expecting a big payoff from their prior investments.”  

* PricewaterhouseCoopers' Trendsetter Barometer is developed and compiled with assistance from the opinion and economic research firm of BSI Global Research, Inc.

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