ERNST & YOUNG SRL

  |  2013-02-28

Pricing pressure and cost cutting – top risks for business in 2013

As the global economic outlook remains uncertain, companies have shifted their thinking away from waiting for an upturn and are concentrating on optimizing their business by cutting costs and increasing efficiency, according to a report released today by Ernst & Young.

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Pricing pressure and cost cutting – top risks for business in 2013 / Top opportunities in 2013 – innovation and rapid-growth market demand

 

Based on a survey of senior executives from 641 companies in 21 countries; Business Pulse: Exploring the top 10 risks and opportunities in 2013 and beyond is the latest report in a series started in 2008 to track the risks and opportunities facing businesses globally.

 

 


Pricing pressure is the biggest risk highlighted by companies in 2013, with the C-suite now accepting that they must find new ways to be profitable in response to shrinking developed markets. This is reflected in companies turning to innovation and rapid-growth markets in order to create new opportunities. This contrasts with 2011 when companies were focused on the risks associated with regulation and compliance, and the most significant opportunity came from the execution of operational strategy.

 


With anemic developed market growth, and fierce price competition, the world has long looked to new markets for expansion opportunities. But to exploit these rapid-growth markets, companies must relate the opportunity directly to their degree of risk tolerance. It is not a question of how companies get into these markets; it is a question of how they win.
Operational agility: tuning for greater performance.

 


High wages and input costs, as well as significant new regulatory burdens on various sectors, mean that cost cutting and the related pressure on profits is cited by respondents as the second-biggest risk they face, with companies needing to make tough decisions on how to cut costs without damaging product and service standards.

 


For multinational organizations trying to balance the desire for cost competitiveness in key markets, as well as growth in new markets, rethinking the cost and location of operations from a global perspective can create opportunities. As a result, operational agility is crucial to surviving and flourishing in a volatile world economy, with executives in developed markets citing this as their second-biggest opportunity.

 


The number one opportunity is innovation, especially within the rapid-growth markets, both in terms of new products or services and within operations. This is reflected in research and development spending in rapid-growth markets growing four times as fast versus developed markets.

 


Innovative organizations drive a culture and set up policies to promote and reward innovation systematically. Having a clear vision of what this means for your business is key. External contributions such as commercial and academic partnerships can help too, as innovation often occurs through networking and critical mass.

 

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Scoring Methodology by ERNST&YOUNG


 
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