Thought Leadership Gallery
International
We are mired in recession but seeking recovery everywhere in the world. The global downturn has been painful and prolonged; and even though it hasn’t stopped cross-border trade and commerce, it has slowed international expansion at many companies.
Find out where those companies are today, where they're headed, and how they're going to get there, given that the economic outlook remains unclear on just about every continent.
- Different financing options
- Now is the time to grow
- Revisit the status quo
- New foreign market opportunities
Bill Armstrong
Partner
International
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
There’s clearly less room for error. In a robust economy you can make a few false starts with significant initiatives and expansion. But with the current market, companies are lucky to get a single shot to make the right decision. Today, it’s no longer about being first to market—it’s about being safest to market. Executives and entrepreneurs feel it’s better to take a bit more time and get things right straight out of the gate. Part of the reason for this is that the credit markets are still challenging. Normally you’d see companies make operations decisions before securing financing, but the opposite is occurring. Here’s a good example: A company has design centers in Hungary and the Czech Republic, but it wants to move the designers to China. In the past the firm would shut down its European operations and set up in China, then do the hiring and let the financial people figure it out. Now there are many issues and questions surrounding credit facilities. And you have to ask whether you have the constraints within the finance covenants, whether you can shut down, and whether you can migrate people. The operations rationale is strong here, but this might not be the best finance decision.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
Companies saw change on the horizon. Their margins were eroding, and executives worked quickly to address the changing market—making new plans and moving ahead. But because they acted quickly, the information they had wasn’t totally right or complete, which created less than optimal results. So one key lesson is to take a bit longer to make decisions in this economic environment. A good example is the procurement cycle. No one wants to take a chance with excess inventory. They’ll even give up the incremental benefit of a larger order because they don’t want their inventory to be out of line. This can be the difference between surviving or not.
Recessions and downturns often lead to innovation and new opportunities––how are you seeing that in the industries you serve?
As our imports start to decline, the trade deficit shrinks, and this is forcing investors who want to capture share in the U.S. market to do things differently. The best examples again come from creative financing. Chinese venture capitalists, for example, are now looking to do joint ventures with U.S. companies to gain entry into U.S. markets. Clients are also engaging in innovative ways of finding funding. If a company can’t get a U.S. bank to fund a project, it’s now finding opportunities in places such as Malaysia, Singapore, or Luxemburg to create funding. The bottom line is that unusual times generate unusual thought processes.
Bob Bunting
Chair
International
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
So many business decisions look good in a robust economy. But they don’t always look so great when the economy goes south. And that’s why a lot of the savvier clients I speak with are cleaning their closets right now in a down economy. That means eliminating unprofitable product lines, jettisoning unprofitable or unproductive client relationships, rethinking whom you extend credit to, resetting expectations, and walking away from nonessential services. The real essence of this process is that waste goes away so you can focus on what your business is good at. You shed what you’re not so good at in tough times.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
The standout lesson is clear: You’ve got to be decisive. It’s critical. Too often, when we finally confront a tough decision and make it, we kick ourselves and ask why we waited so long to act, why we didn’t act sooner. Usually it’s the result of analysis paralysis. I think the lesson is how to balance acting and analyzing. Let’s say you have a mediocre subsidiary you want to sell, but you wait, and each day the asset becomes less and less valuable. In the end, you do sell; but you know your delay cost you.
Recessions and downturns often lead to innovation and new opportunities––how are you seeing that in the industries you serve?
I think the countercyclical mind-set is the right one now. In times like this, people are scared to buy or invest. But I think we should be buying and investing instead of running for shelter. We need to create new product lines that take the weakened competition on; we need to hire exceptional talent because it’s available; we need to invest in opportunities. It’s a great time to do all of that. You have to use the downturn to create an upside for your company and yourself.
Mark Fitzpatrick
Partner
International
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
It seems that most companies have now accepted that markets will likely be depressed for the near future, and management is now looking forward. Many companies have right-sized their businesses for the current economic reality, and they’re moving ahead by exploring other revenue opportunities and other ways to minimize costs and keep loyal employees engaged and motivated.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
Keeping employees focused and motivated is as critical as ever. Many leaders are inspiring their employees and trying to convey an optimistic, “we shall prevail” attitude throughout the organization. Continuing to inspire these individuals helps boost not only employee and company morale but also the overall sentiment about the economy.
Recessions and downturns often lead to innovation and new opportunities––how are you seeing that in the industries you serve?
As we all know, unfortunately, there have been many companies that have downsized and are asking for more than ever from their remaining employees. Since necessity is the mother of invention, management is revisiting “the way we’ve always done it” and exploring new ways of doing business, leaving no stone unturned. How can we attract new customers? How can we collect cash faster? How can we complete orders more quickly? How can we improve our procedures? What contractual arrangements can we enter into or modify? It’s refreshing that people are willing and able to revisit the existing norms, processes, and guidelines and identify ways to be better businesspeople.
Roy Deaver
Senior Manager
International
In response to the recession and market downturn, how are clients focusing on the future and moving their businesses forward?
Companies are still planning to expand globally and don’t want to leave any opportunities on the table. So while they’re more diligent in where and how they extend their market reach, they’re not curtailing major initiatives. But international activity is running the gamut—some companies are completely shelving expansion plans, while others are entering several new markets. For the most part, though, the decisions being made are vetted more thoroughly. This may lead to a scaling back or holding back on phases of companies’ overall plans. Generally, the more capital-intensive expansion projects are less likely to occur today. With increased domestic scrutiny, companies are finding it easier to make the decision to move outside the United States when a large investment is not needed.
In what key ways have you seen business leaders in your industry apply lessons learned from the past year?
International companies are making more prudent decisions. They know that a managed approach to expansion is best during an uncertain economy. They understand that you don’t have to open offices in 35 different countries right now. Companies are opening where they need to and then making a plan for five years down the road. The shotgun approach is gone. Managers are also changing how they populate foreign offices. They’re no longer staffing up quickly with local resources; instead, they’re using fewer, current employees—ones already familiar with the company and its goals. In some cases the administrative costs that may be incurred overseas are prohibitive, and companies are conducting as much of their global business as they can from the United States. Ultimately, businesses are looking closely at the cost of globalization and modifying expansion plans to focus on those that produce the best ROI.
Recessions and downturns often lead to innovation and new opportunities––how are you seeing that in the industries you serve?
The weaker economy has caused some foreign governments to offer opportunities to businesses. These come in the way of investment incentives, tax rate reductions, or more favorable tax regimes. Some countries have been more aggressive in this regard than others. When they compare this with some of the proposed changes to U.S. tax policy on corporations, more companies are seeing that there may be some advantages to being outside the United States. As a result, even though companies are taking a more diligent approach in their international expansion than in the past, these new advantages are causing companies to look at new markets more closely. It’s possible that certain countries will recover before others. Businesses should be aware of this when planning their international strategy.
International Contacts
Bill Armstrong
949-221-4077
Bob Bunting
206-302-6816
Roy Deaver
206-302-6401
Mark Fitzpatrick
206-302-6435
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