Capital Confidence Barometer

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Corporate strategy In an ever-changing business landscape fueled by disruptive competition, executives are increasingly utilizing alliances to accelerate growth. 40% plan to enter alliances with other companies or competitors to help create a value from underutilized assets 4 | Capital Confidence Barometer
Corporate strategy Disruption creates both threats and opportunities Q: From where do you see the most disruption to your core business in the next 12 months? Digital technology is changing the way companies across all sectors interact with their customers. The influence of digital is facilitating changes in customer behaviors and expectations, causing measurable core business disruption. Additionally, increased sector convergence and cross-industry innovation are increasing the number of competitors companies face. Changing customer behavior and expectations Advances in technology and digitalization Sector convergence and increased competition from companies in other sectors Product innovation 13% 17% 21% 24% While these developments pose a major challenge, they also provide opportunities as companies seek to carve out new markets to boost their own revenues and earnings. Those companies taking a proactive attitude to perpetual change and challenges to their core business will be best positioned to take advantage of new market opportunities. Increased globalization Industry regulation 12% 13% Digital at the heart of boardroom thinking Executives have already firmly established control of costs and margins as a top corporate priority. Their acceptance of prolonged low economic growth has elevated this discipline even further on the boardroom agenda. Another factor feeding into this cost-control mentality is the price sensitivity caused by the shift to operating in a digital environment. Customers and consumers now have the ability to access many suppliers and, more importantly, compare pricing and reviews instantaneously. Q: Which of the following has been elevated on your boardroom agenda during the past six months? Select your top three answers. Reducing costs/improving margins Increased volatility in commodities and currencies Impact of digital technology on your business model Regulatory and competition/ antitrust oversight Cybersecurity 33% 32% 31% 35% 44% This ever-greater focus on digital is leading companies to review their business models more generally, including sales markets and channels. At the same time, the shift to digital has raised concern that cyberattacks may affect both brand and revenue, bringing cybersecurity to the heart of companies’ operations. Executives are also concerned about the impact of regulatory and antitrust oversight. One area in which regulators are becoming increasingly interventionist is large industry consolidations, a key driver of the current M&A market. This may have an effect on the number of megadeals (US$10b+) we see in the next 12 months. Acquisitions Portfolio analysis, including strategic divestment (spin-off/IPO) Shareholder activism, including returning cash to shareholders Corporate citizenship/wider stakeholder engagement Climate change 28% 25% 23% 22% 21% 0 10 20 30 40 50 Companies still plan to create jobs, even in outperforming economies Q: With regard to employment, which of the following does your organization expect to do in the next 12 months? Globally, the trend is toward employment stability and growth, but regional variations are more disparate. US companies continue to post stronger hiring intentions, and UK companies are still creating jobs, even as they both approach what was previously considered full employment. Continental Europe is steadier than it has been for several years, while Chinese and Japanese companies are more inclined to reduce their workforce. 65% Apr 15 6% 29% 49% Oct 15 6% 45% 56% Apr 16 16% 28% Create jobs/ hire talent Keep current workforce size Reduce workforce numbers Capital Confidence Barometer | 5
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Capital Confidence Barometer

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