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Accenture MC Aftershock
Accenture MC Aftershock
The journal of
high-performance business
High-Performance Business
Aftershock
By Caroline Firstbrook
How will this new reality affect business in three areas critical to success—the
customer, competitive dynamics and the prospects for growth? And what are the
implications for how managers configure their businesses and lead their people?
Shifting power in the value chain and General Motors Corp. has
In many industries, imbalances in announced plans to end franchise
supply and demand (resulting from agreements with 1,100 US dealers.
underinvestment during the reces- In better times, this would have
sion) will create price volatility as meant big payouts. When GM
demand returns. For example, the announced the closing of its
World Steel Association predicts a Oldsmobile division in 2000, it
global drop in steel demand of 15 had to pay more than $1 billion
percent in 2009, driven by more in compensation to the dealers.
than 25 percent declines in Europe
and North America. Looking downstream, changing
customer circumstances will
Such spikes will not be limited to ripple back up supply chains, forc-
commodity industries. Shipbuild- ing otherwise healthy companies
ing and aircraft manufacturing into difficulties from which many
are just two industries where a will not recover. For example,
slowdown in demand and a conse- makers of electronic components
quent reduction of manufacturing have already felt the impact of
capacity is likely to create short- reduced demand for consumer
ages and push up prices in the electronics, and a similar pattern
medium term. In the first quarter has emerged upstream for automo-
of 2009, Airbus, the commer- tive manufacturers. In the publish-
cial aerospace division of EADS, ing industry, plunging advertising
secured only eight net new orders revenues have accelerated the
(after cancellations), down from decline in profitability for news-
395 net new orders in the same papers and magazines, bringing
period in 2008. Although it has many to the brink of insolvency.
a substantial order backlog to
deliver against, Airbus recently
announced a modest reduction New competitors
in output for later this year and Bankruptcies and financial distress
predicted further cuts to come. will change the faces of many
industries. In some cases, this
The specter of failure among will result in diminished capacity,
suppliers may force downstream potentially improving returns for
customers to buy them out in order those companies that remain in
to secure access to resources that the market. However, capacity may
are scarce or difficult to replicate. also simply change hands, often
Supplier consolidation and bank- at fire-sale prices that allow new
ruptcies could create additional entrants to compete from a much
problems for buyers, shifting the lower cost base.
balance of power and nullifying
established rules and agreements. Meanwhile, attractively priced
acquisition opportunities will
As part of its restructuring plans, likely draw new investors into
Chrysler Group is canceling con- Western markets. Several emerg-
4
Outlook 2009
tracts with 800 of its 3,200 dealers ing-market multinationals have
Number 3 in the United States, for example, already demonstrated their inten-
tion of using M&A as a basis to New rules
extend their footprint into the Increased regulation will be part of
more profitable markets of the the new reality for many industries,
developed world. as governments seek a more active
role in managing such key industries
China’s Sichuan Tengzhong Heavy as banking, housing, manufactur-
Industrial Machinery Co., for ing and health care. These range
example, has tentatively agreed from proposed cap-and-trade rules
to purchase GM’s Hummer brand designed to control the industrial
of large sport utility vehicles and emission of greenhouse gases to
pickup trucks, while the Industrial sector-specific actions such as carbon
and Commercial Bank of China is dioxide abatement measures in the
slated to buy a 70 percent stake in auto industries of Western Europe and
a Canadian subsidiary of The Bank the United States. The end result will
of East Asia, giving it a valuable be added costs and new constraints on
foothold in the Canadian market. what companies can and cannot do.
5
Outlook 2009
Number 3
Prospects for growth
The heady days of ready cash and loose credit already seem like
distant memories. How will companies sustain their ability to invest
in growth and choose where and how to grow?
10
Outlook 2009
Number 3