Three Out of Four Exectives Doubt if Their Core Businesses Can Survive without Change

NEW YORK – At a time of year when many reflect on past performance and look toward the future, there is an increasing sense of concern shared by global business leaders on their outlook for profitable growth and competitive advantage during the next five years. This is according to a new survey released today by Bain & Company, the global business consulting firm. Those business leaders anticipate that major changes will reshape their companies over the next ten years, with:

• three-quarters acknowledging the need to re-define their core business,
• nearly 70% seeing a need to add a major core capability, and,
• two-thirds admitting that relationships with core customers require re-definition.

Despite that nearly half of the global leaders surveyed project growth rates for their businesses will be more than 20% higher (with one in ten projecting growth rates more than 50% higher) over the next five years – as compared with the growth rates of the last 10 years – those leaders overwhelming believe it will be more difficult to sustain profitable growth (70% of those surveyed agreed) and maintain their key sources of competitive advantage (80% of survey participants agreed) as a result of the increasing speed of global business.

Bain’s survey analyzed beliefs about growth, competition and business challenges among senior executives of 261 companies in North America, Europe and Asia-Pacific. Survey findings were consistent across regions and were based on in-depth interviews conducted with executives in October, 2004.

“Executives are increasingly distressed over their organization’s ability to compete globally,” said Chris Zook, head of Bain’s Global Strategy Practice and author of the study. “With shrinking reaction times, growing sources of cheap labor and increasing attacks from different and more aggressive global competitors, many executives are asking – what do we do?”

The survey suggests that strategy half-lives continue to shorten, with a number of factors chipping away at the ability of companies to effectively differentiate their products and services. Asked to identify the degree of difficulty that specific competitive challenges pose for their organization in the coming years, more respondents called the “more rapid globalization of competitors” a “major factor” than any other, including:

Major Factors making a competitive edge difficult Percent of responses

• “More rapid globalization of competitors” (51%)
• “Greater speed of information and capital flow” (46%)
• “Accelerating speed of technology developments” (46%)
• “Increasing commoditization of products” (46%)
• “Global sourcing as an increasing equalizer” (35%)
• “Shifting power to mega-purchasers” (19%)
• “Other” (11%)

“There is a fundamental re-definition of business underway,” added Zook, “and tomorrow’s global landscape will be shaped by how today’s executives respond to both the degree and speed of that change.”

Growth projections and competitive concerns varied by industry. Some key findings include:

• Technology and Telecommunications companies expect to grow at a faster rate than any other industry – 57% of respondents expect to experience greater growth, compared with only 39% of Manufacturing/Automotive companies,
• Consumer Goods and Retail firms are most concerned that maintaining profitable growth will become more difficult – 88%of Consumer/Retail companies voiced this concern compared with 61% of Financial/Professional Services firms,
• For the Manufacturing and Automotive sectors, “more rapid globalization of competitors” was far and away most frequently identified as a “major factor” in maintaining a competitive edge (68%), followed by “global sourcing as an equalizer” (58%).

For more information or an interview with survey author Chris Zook, please contact: Cheryl Krauss, e-mail: cheryl.krauss@bain.com or ph.: 646-562-7863, or Frank Pinto, e-mail: frank.pinto@bain.com or ph: 917-309-1065.

About Bain & Company, Inc.
Bain & Company is one of the world’s leading global business consulting firms, serving clients across six continents on issues of strategy, operations, technology, organization and mergers and acquisitions. It was founded in 1973 on the principle that consultants must measure their success in terms of their clients’ financial results. Bain’s clients have out performed the stock market 3 to 1. With offices in all major cities, Bain has worked with over 2,500 major multinational and other corporations from every economic sector, in every region of the world. For more information visit www.bain.com.