UK Economy in Double Dip Recession
As the UK officially steps back into
recession, there have been a lot of articles in the press trying to
gauge the level of optimism or otherwise. The general view seems to be
that, whilst the UK might officially have had two quarters of (slightly)
negative growth, nothing has really changed. The UK economic
environment “on the ground” amongst medium-sized businesses remains
tough, but there are still opportunities.
How are mid-sized company leaders responding?
Most of the research and commentary amongst
medium-sized companies seems to indicate a fair amount of optimism. For
example, in an interim update to their annual growth survey, ECI Partners announced
in March 2012 that nearly 80% of companies surveyed expected growth in
turnover of >6% in the next 12 months, with 50% expecting growth of
10% or more.
Similarly, analysis of the Top Track 250
over the past year showed that, despite the tough economy, 86% had
increased their sales over the past year. If we can agree that the
economy is not significantly harder (though definitely not easier) than
last year, then is there any reason to assume that the results will not
be just as equally encouraging this year?
Impact of the troubles in Europe
One significant change over the past year or
so, however, is the emergence of the debt crisis in Europe. Many, if
not the majority, of medium-sized companies see international expansion
as their main source of growth (close to 70% of the companies in ECI’s
survey). Furthermore, evidence suggests that medium-sized companies,
especially in the technology sector, prefer more mature markets like
US, Germany and Austria to emerging markets such as Brazil, Russia ,
India and China. So the challenges in Europe may well have a
significant impact on results this year.
So are there alternative sources of growth?
Given the challenges of European markets in particular, companies will need to respond in a number of ways:
- Develop existing customers. The first place to start in all growth strategies is the existing customer base. Mid-market companies should stay very close to their most valuable customers, improve service levels of maximise customer retention and then seek opportunities for growth in the current customer base (eg. through price increases and cross-sell/up-sell opportunities).
- International Expansion outside Europe. To counter the issues in Europe, companies may respond by expanding into non-European markets. Lord Green’s recent trade mission to Turkey provides an example of a market that is seen as being a great opportunity. Whilst the BRIC markets may be seen as difficult and/or risky to penetrate in the short term, other opportunities may exist in the Far East through “safer” markets such as Singapore or Japan
- Fine-tuning the Sales engine. Markets are very competitive, which puts additional pressure on sales channels. An effective sales operation, supported by a strong supply of Marketing-generated leads, is a pre-requisite for growth. It may even be time to look at the sales channel strategy to evaluate whether the current sales strategy ois covering the market opportunities effectively.
- Product innovation. Lastly, growth can come from product development and innovation. In tight economic conditions, it is often tempting to pull back on product development, but continual investment in this area will be essential over the next few years.
Optimism is the only option
Despite the gloomy news every day, the only
sensible response seems to be an optimistic one. Opportunities do
exist, but they will be more difficult to find and harder won.
Mid-sized company leaders will need to re-evaluate their growth
strategies and plans to ensure that they are achievable in the current
environment. To quote a currently popular phrase, we need to … “Keep
Calm and Carry On!”
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