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The disruptive decade p3/ What worries CEOs most? p5/ A three-pronged
approach p10/ Its a question of trust p22
Dealing with
disruption
Adapting to survive
and thrive
1,330
CEOs in 68 countries
36%
See page 3
82%
www.pwc.com/ceosurvey
Preface
Dennis M. Nally
Chairman, PricewaterhouseCoopers
International
Contents
The disruptive decade
A three-pronged approach
10
10
Concentrating on thecustomer
14
18
22
28
30
Figure 1: CEO confidence has gone up and down sharply over the past decade
Q: How confident are you about your companys prospects for revenue growth over the next 12 months?
60%
52%
50%
48%
50
41%
40
40%
31%
30
36%
26%
31%
20
21%
10
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Base: All respondents (2013=1,330; 2012=1,258; 2011=1,201; 2010=1,198; 2009=1,124; 2008=1,150; 2007=1,084; 2006 (not asked); 2005=1,324;
2004=1,386; 2003=989)
Source: PwC 16th Annual Global CEO Survey
SARS epidemic
Hurricane
Katrina
(US)
2003
2004
2005
2006
Source: PwC
Hurricane Sandy
(US)
2007
2008
2009
2010
2011
2012
2013
Major disruptions
We asked CEOs about their
organisations ability to cope with the
potential impact of various disruptive
scenarios. The majority thought their
organisations would be negatively
affected, with major social unrest being
cause for the greatest concern (see
Figure 3). Indeed, CEOs are far more
concerned about this than they are
about a slowdown in China, possibly
because theyve already factored the
latter into their calculations.
Figure 3: Major social unrest tops the list of scenarios that would have the worst impact on CEOs organisations
Q: How well would your organisation be able to cope with the following scenarios, if they happened within the next 12 months?
(respondents who answered negative impact)
Major social unrest in the country in which you are based
75
Recession in the US
67
63
56
53
53
52
51
%
Figure 4a: Volatile conditions top the list of economic and political threats, but concerns vary by where CEOs are located
Q: How concerned are you about the following potential economic and policy threats to your business growth prospects?
(top four threats global CEOs named)
88%
89%
Africa
81% Global
71%
56%
54%
Middle East
Uncertain or volatile
economic growth
North America
Global
Latin America
Government response
to fiscal deficit/debt
75%
69%
65%
66%
Middle East
61%
Global
Africa/Asia Pacific
Global
50%
Western Europe
Overregulation
Latin America
Base: All respondents (North America=227; Western Europe=312; Asia Pacific=449; Latin America=165; Middle East=32; Africa=50)
Source: PwC 16th Annual Global CEO Survey
Figure 4b: Volatile conditions top the list of business threats, but concerns vary by where CEOs are located
Q: How concerned are you about the following potential business threats to your growth prospects?
(top four threats global CEOs named)
65%
62%
50%
Asia Pacific
Global
82%
58%
68%
Africa
52%
Global
45%
Middle East
Africa
Global
49%
Asia Pacific
Global
35%
31%
Western Europe
57%
Middle East
Energy and
raw material costs
Latin America
Shifting consumer
spending/behaviour
Base: All respondents (Western Europe=312; Asia Pacific=449; Latin America=165; Middle East=32; Africa=50)
Source: PwC 16th Annual Global CEO Survey
6 Jackie Calmes & John H. Cushman Jr., Obama Unveils Proposal to Cut Corporate Tax Rate, The New York Times (22 February 2012), http://www.nytimes.com/2012/02/23/business/economy/
obama-introduces-plan-to-cut-corporate-tax-rate.html?pagewanted=all
A three-pronged approach
Growth is not necessarily about
revenue growth. In this uncertain
environment there is more and more
emphasis on bottom line growth.
Peter Terium, CEO, RWE AG, Germany
Targeting pockets
ofopportunity
Two-thirds of all CEOs are focusing on
a few carefully selected initiatives
rather than nurturing numerous
different ideas and then weeding out
the weakest. Thats easier said than
done because every business unit
naturally thinks its plans should take
precedence. But theres considerable
8 Ranjay Gulati, Nitin Nohria & Franz Wohlgezogen, Roaring Out of Recession, Harvard Business Review 88, no. 3 (March 2010): 6269.
9 Ibid.
Figure 5: CEOs are pursuing the opportunities for organic growth in existing markets
Q: Of these potential opportunities for business growth, which one is the main opportunity in
the next 12 months?
32%
Organic growth
in existing
domestic market
25%
New product
or service
development
17%
17%
New M&A/joint
ventures/strategic
alliances
8%
Organic growth
in existing
foreign market
New operation(s)
in foreign markets
Figure 6: Two faster and two slower economic lanes are developing
Poland
3.4%
France
1.2%
Indonesia
6.2%
Australia
3.1%
Japan
0.9%
Brazil
4.0%
Canada
2.3%
United Kingdom
2.1%
South Africa
3.6%
United States
2.4%
Netherlands
1.1%
Germany
1.3%
Ireland
2.2%
Struggling to grow
Italy
0.3%
China
7.3%
South Korea
3.6%
Spain
0.9%
India
6.6%
Mexico
3.7%
Portugal
0.5%
Saudi Arabia
4.2%
Russia
3.8%
Greece
0.6%
Turkey
5.1%
Aggregates
Eurozone
1.0%
3.0%
5%
6%
Canada
8%
UK
Russia
12%
23%
31%
Germany
US
5%
Japan
China
10%
India
7%
15%
Indonesia
Brazil
10 PwC projections.
11 PwC, World in 2050 (January 2013).
12 Daniel Inman, Southeast Asias Growing Appeal, The Wall Street Journal (3 December 2012), http://online.wsj.com/article/SB10001424127887324020804578151761632189982.
html#mod=djemITPE_t
13 Eric Bellman, Indonesia Boosts Infrastructure Investment, The Wall Street Journal (7 December 2012), http://online.wsj.com/article/SB10001424127887323501404578165794187322794.html
14 PwC, World in 2050 (January 2013).
15 Caroline Scott-Thomas, Nestl eyes big food industry opportunities in Africa, Food Navigator (26 November 2012), http://www.foodnavigator.com/Financial-Industry/Nestle-eyes-big-foodindustry-opportunities-in-Africa
16 PwC, World in 2050 (January 2013).
17 Ibid.
Concentrating on
thecustomer
Producers
Nigeria
25
20
Saudi Arabia
Malaysia
15
Mexico
10
India
Indonesia
Brazil
5
South Africa
Vietnam
China
-5
South Korea
-10
Russia
Consumers
-15
0
20
40
60
80
100%
Projected consumption potential over 2011-20 period
(proxied by GDP per capita growth)
18 PwC, Introducing the PwC Global Consumer Index (October 2012), http://press.pwc.com/GLOBAL/global-consumer-spending-slowdown-eases.-pwc-releases-first-ever-global-consumer-indexgci/s/bc11166a-cd72-4ea7-93fa-c167d10a5cb5
Dont know/refused
Customer growth/retention/loyalty strategies
17
51
23
54
23
1%
25
54
21
1%
Organisational structure
26
52
32
50
1%
22
1%
17
1%
%
No change
31
Some change
100
A major change
19 Bryan Urbick, Innovation Through Co-creation: Consumers Can be Creative, Innovation Management (26 March 2012), http://www.innovationmanagement.se/2012/03/26/innovationthrough-co-creation-consumers-can-be-creative/
Finland-based international
communications and information
technology company Nokia is a case
in point. our focus is very much
on disruption disrupting ourselves,
disrupting the trends that have been
established in the industry and moving
forward with new strategies, new
products and new ways of managing
our organisation in order to keep pace
and indeed accelerate the pace beyond
others. says President and CEO
Stephen A Elop.
Improving operational
effectiveness
Under pressure to meet demanding
customer growth targets within tightly
defined investment parameters, CEOs
know theyll have to change the way
their companies function. Nearly half
say improving operational
effectiveness is one of their top three
investment priorities this year.
Anders Nyrn, President and CEO of
global investment firm Industrivrden
AB, based in Sweden, spoke for many
CEOs when he told us: Given that the
global economy and the global pace
of life are getting faster in all aspects,
one needs to become more agile and
efficient about everything including
running a company. Its essential that
you streamline operations and become
leaner wherever you can, so as to be
able to react more quickly to changing
market conditions.
objectives. As ArtemKonstandyan,
CEO of Russias Promsvyazbank (PSB),
notes, Downsizing is not a goal in
itself. Were trying to streamline our
operations and improve staff
performance.
An example? Many companies
discovered in the aftermath of the
tsunamis in Southeast Asia and Japan
that the quest to maximise the
efficiency of their supply chains had
severely impaired their ability to cope
with disruption. Todays CEOs have
clearly learned from that experience:
50% are diversifying their supply
chains and working with suppliers
in a wider range of territories.
CEOs are also wary about
inadvertently cutting value in the
course of cutting costs and slashing
the workforce is one action that can
certainly backfire. This probably
explains why 25% have kept their
companys headcount the same for
the past 12 months, while 48% have
actually increased it. It may explain,
too, why 77% of CEOs plan to revise
their strategies for managing talent
in the coming year; they realise they
wont be able to attract and retain new
customers without well-trained, highly
motivated employees.
Figure 10: Cost-cutting tops the list of restructuring activities CEOs plan to put in place in 2013
Q: Which, if any, of the following restructuring activities do you plan to initiate in the coming 12 months?
70%
47%
31%
Implement a
cost-reduction
initiative
Outsource a
business process
or function
Figure 11: Involving less senior managers in strategic decisions is seen as most effective in preparing them for leadership
Q: Do you deploy any of the following to develop your leadership pipeline?
Q: If so, how effective are they?
100
% of CEOs who deploy the following to develop their leadership pipeline
79
80
61
58
60
62
71
69
% of CEOs who
dont rate their
initiatives as
highly effective
40
37
33
20
11
13
Shadowing
senior
executives
Programmes
to encourage
diversity
among
business
leaders
22
22
Encouraging
global mobility
and
international
experience
Rotations to
different
functions/
challenges
24
19
Dedicated
executive
development
programme
Active
succession
planning,
including
identifying
multiple
successors
Involving
managers below
board level
in strategic
decision-making
Somewhat effective
Dont know/refused
20 Pankaj Ghemawat & Sebastian Reiche, National Cultural Differences and Multinational Business, Globalization Note Series, 2011.
21 Karen L. Newman & Stanley D. Nollen, Culture and Congruence: The Fit Between Management Practices and National Culture, Journal of International Business Studies 27, No. 4 (4th Quarter,
1996), pp. 753-779.
Dont know/refused
Customers and clients
17
45
14
35
16
47
22
44
24
35
Local communities
38
45
The media
46
40
12
49
40
10
%
Have little or no influence
Base: All respondents. (1,330)
Source: PwC 16th Annual Global CEO Survey
80
1%
45
1%
50
1%
36
1%
2%
32
39
1%
16
1%
1%
1%
0
100
76%
72%
Africa
56%
Middle East
50%
Global
51%
68%
North America
Framework to support
a culture of
ethical behaviour
Africa
Africa
49%
Global
31%
64%
Central and
Eastern Europe
Workforce
diversity and
inclusion
41%
Global
40%
Global
30%
Central and
Eastern Europe
Reducing
environmental
footprint
North America
Non-financial reporting
(incl. corporate
responsibility reporting)
Figure 14: CEOs see developing a skilled workforce as the top joint priority between business and government
Q: Which three areas should be the Governments priority today?
%
80
Ensuring financial
sector stability
% of CEOs who think issue should
be a top three government priority
60
Improving the
countrys infrastructure
40
Reducing poverty
and inequality
Securing natural resources
that are critical for business
20
20
40
% of CEOs raising investment to address issue
60
29 Econsultancy, Social Media Statistics Compendium, Global (November 2012). Marketers were asked to indicate the two most important uses of social.
80 %
The following questions, derived from the conversations weve had with CEOs,
focus on some of the biggest challenges facing todays business leaders as they
strive to find growth and stay competitive through constant turbulence.
Karen Agustiawan
Stephen A Elop
Alex Arena
Larry Fink
Jos Gall
Martin Blessing
Piyush Gupta
Andrew Brandler
Yasuchika Hasegawa
Alison Cooper
Steve Holliday
Artem Konstandyan
Sndor Csnyi
Pertti Korhonen
Andrei Dubovskov
Alex C. Lo
Chief Executive
Imperial Tobacco Group
UK
President
Uni-President Enterprises Corporation
Taiwan
Dr. Weihua Ma
Valentina Stanovova
A.M. Naik
Anders Nyrn
Seymur Tari
Aireen Omar
Peter Terium
Alonso Quintana
Peter Tortorici
Yves Serra
Douglas D. Tough
Shikha Sharma
Executive Chairman
Larsen & Toubro Limited
India
Senior Vice-President
Capital Group
Russia
Carl Sheldon
To read quotes from interviews and watch selected videos, visit www.pwc.com/ceosurvey
Research methodology
and key contacts
This is the 16th Annual PwC Global CEO Survey
Weve conducted interviews with CEOs in 68countries
worldwide, adjusting the number of interviews in line
with each countrys GDP to ensure CEOs views are
fairly represented.
In total, we conducted 1,330 interviews
with CEOs in 68 countries between
5September and 4 December 2012. By
region, 449 interviews were conducted
in Asia Pacific, 312 in Western Europe,
227 in North America, 165 in Latin
America, 95 in Central and Eastern
Europe, 50 in Africa and 32 in the
Middle East. The interviews were
spread across a range of industries,
with further details by region and
industry, available on request.
The majority of interviews were
conducted by telephone, with some
country exceptions: interviews were
conducted face-to-face in Africa and the
Philippines; postal surveys were used
in Japan and Korea; and online surveys
were completed in Australia, Iceland
and Singapore. The US and Greece also
used a mixed approach of telephone
and online. In addition, members
of our global CEO panel were invited
to take part online, with 230 CEOs
providing their views. All interviews
were conducted in confidence and on
an unattributable basis.
PwC helps organisations and individuals create the value theyre looking for. Were a network of firms in 158 countries with more than 180,000 people who are
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Please see www.pwc.com/structure for further details.
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www.pwc.com/ceosurvey