IRISH BUSINESSES are taking the advice “don’t waste a recession” and are second only to countries in Asia Pacific in believing the economic downturn is serious enough to warrant an entirely new approach to business strategy, according to new research.
A global survey by tax practitioners found that, broadly speaking, European business leaders feel we are in an unprecedented set of circumstances and are being cautious about what it means for their business model. US respondents were more optimistic about their ability to respond, while companies in Japan and Singapore see it as a chance for a wholesale review of their business models.
Ireland was closer to Singapore than to the rest of Europe, with 67 per cent planning changes in the short-term and 63 per cent planning long-term change.
“In comparison with many European markets, companies in Ireland appear to be acting more radically and with greater pace to develop new strategies for changed markets,” said Terence O’Rourke, managing partner with KPMG in Ireland.
Short-term change is being driven by changes in customer spending, cited by 78 per cent of the 27 Irish respondents. Industry consolidation was a factor for half those polled.
The most common change being considered is cutting staff numbers (93 per cent), followed by improving internal procedures and the supply chain (89 per cent).
For the 63 per cent of businesses considering more far- reaching, long-term changes to strategy, pricing (88 per cent), new business models (65 per cent) and new products (59 per cent) are the most common responses.
The survey finds Irish businesses split on what Government tax policy should be, with 26 per cent saying tax cuts were their preferred option and a similar number calling for tax increases.
A notable aspect of the survey is the large number of executives who say the current recession is unprecedented and they have no relevant experience to help them manage through it. This was felt particularly strongly in Germany (42 per cent), Italy (42 per cent) and Hungary (40 per cent).
Reflecting what O’Rourke describes as “a more recent corporate memory of hard times”, just 15 per cent of Irish respondents took this view.
While Irish executives seem more pragmatic about the current environment, they are more pessimistic about the prospects of an upturn. A clear majority in most of the countries polled expected markets to recover in 2010. However, Ireland, in common with Britain, Luxembourg, Poland, Hungary, Belgium and Japan, does not expect a recovery until 2011.
KPMG concludes: “Irish business appears to be particularly challenged by the economic downturn. But there is clearly energy and determination to do what is necessary to overcome these difficulties and develop new strategies for changed markets.”
The report is entitled Never Catch a Falling Knife– apparently a quote from a German respondent which KPMG felt summed up the mood of uncertainty amongst executives.
The survey polled 852 executives in 29 countries. They represented companies in a variety of sectors and with turnovers from $250 million to over $5 billion.
