How to seek industry leadership in the post-crisis era

Like many other companies, the financial crisis has also hit the global challenger companies. The challenger companies are still fighting, focusing on the new global environment, actively adjusting their business portfolio, and constantly seeking to lead the world in order to play an unprecedented industry influence after the crisis.

The current financial crisis has had a huge impact on economies, industries and companies around the world. This impact has already affected many companies in emerging markets, including some of the 2009 BCG100 new global challengers. As early as the pre-crisis period, these top 100 companies have become more threatening new competitors on the international stage. They use their many advantages in the birthplace of the Rapid Development Economy (RDE) to continue to “striking the city” in the global market, creating an impressive shareholder value.

Is this global financial crisis restricting or accelerating their development speed? Among the challengers are companies from China and India, which are booming economies, large-scale economic stimulus plans by the government, and companies from developed countries with stagnant economic development. What are the differences in the impact of these different industries and different regions? How should the senior management of established multinational companies anticipate the status of these challengers in the post-crisis era?

The impact of the financial crisis This crisis affects both challengers and established companies in a variety of ways, both positive and negative. Negative impact: These companies face declining global demand, capital costs continue to rise, and stock valuations continue to shrink. Positive impact: The government has introduced economic stimulus plans, and consumers and companies that are becoming more cost-conscious are deeply attracted by the affordable products and services provided by some challengers. Some of the effects are a double-edged sword: the decline in commodity prices is good news for buyers, but it is unfavorable for sellers. The impact of currency fluctuations on all companies is also beneficial.

The continuous decline in global demand also jeopardizes all types of businesses. According to Goldman Sachs' July and August 2009 Global Economic Analysis, compared with 2008, the import volume of the world's advanced economies will decrease by 14.4% in 2009; consumer spending will fall by 0.9% during the same period, and domestic fixed asset investment will decline. 14.1%. So far, the decline in demand in Europe and North America has led to a sharp decline in exports from major fast-growing economies.

Similarly, rising capital costs are also constraining the development of challengers and established companies. In response to this phenomenon, governments have taken measures to inject liquid capital into the economy. Despite this, financial risk premiums and capital costs remained much higher than pre-crisis levels in the months following the crisis.

The company also found that it is not so easy to use the company's stock as cash because of the sudden fall in stock prices and the difficulty of issuing stocks and the difficulty of issuing new shares. Lack of opportunities in low valuation and public listings makes it difficult for companies to raise new equity to support their continued expansion, making it difficult to increase capital liquidity and reduce debt ratios, especially for companies with heavy debt.

On the positive side, governments around the world have promulgated policies to help their economies recover. In addition to trying to improve liquidity, they are also actively stimulating domestic demand, enhancing consumer confidence and helping the major industries in crisis. These economic stimulus plans issued by the country where the challenger is located have generally performed well, not only helping companies to withstand the impact of the crisis, but also helping them to appear in a more powerful market in the post-crisis market.

At the same time, consumers are more sensitive to costs, they are beginning to downgrade their consumption and buy low-priced products – some challengers and established companies have already benefited from this trend. In addition, the huge business dilemma faced by established companies has also brought many opportunities for the expansion of some challengers. For example, as companies in high-cost markets have begun to pay attention to reducing spending, they are beginning to look for suppliers with relatively low costs in fast-growing economies. We expect local companies in the fast-growing economies to increase their share of the global export market in 2009.

Similarly, the impact of currency fluctuations on challengers is also good or bad. Since the outbreak of the crisis, the currencies of most fast-growing economies have depreciated against the dollar, albeit to a large extent. From July 1, 2008 to June 30, 2009, the relative value of RMB against the US dollar remained basically unchanged; while the value of the Russian ruble against the US dollar was almost 1/3; in the same period, the Indian rupee depreciated against the US dollar by about 10 %. These changes have profoundly affected the relative competitiveness of different fast-growing economies and the attractiveness of different export markets.

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