BCG Executive Perspectives CEOs Dilemma Competitive Cost Advantage
BCG Executive Perspectives CEOs Dilemma Competitive Cost Advantage
BCG Executive Perspectives CEOs Dilemma Competitive Cost Advantage
Perspectives
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Executive Summary | Building resilience through competitive cost position
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Inflation and volatility are becoming the “new reality” across the globe
Drop in demand and Supply chain Volatility in Central banks fight Varying government
general uncertainty distress global markets with consequences support for COVID-19
-25 pp. (from 83% to 58%) 111 days (+34% y/y) new ~2 times higher S&P 500 Investors expect central Removal of foreclosure
drop in consumer freight time to US from volatility than in 2021 banks to raise global and eviction moratoriums,
sentiment index1 China monetary-policy rates to rental assistance, and
1. From 05/2021 to 06/2022 2. Euromonitor International; 3. Tesla, Netflix, Redfin, Meta, Twitter, Apple; 4. World Bank press release; 5. New York Times
Source: Federal Reserve Economic Data, US Bureau of Labor Statistics, World Bank, press search, BCG analysis 5
Global macro update | Economic snapshot for October
GDP forecasts1 (Real GDP YoY) Equity market performance (YTD change)7 Job openings rate4
2021A 2022E 2023E 2024E Jul '22 Aug '22 Sep '22 Q1 '22 Q2 '22 Q3 '22 Change10
US 5.9% 1.7% 0.4% 1.4% S&P 500 -13.3% -17.0% -24.8% US 7.3% 6.8% 6.5% -0.3ppts
Eurozone 5.3% 3.0% -0.1% 1.5%
Eurostoxx 50 -13.7% -18.2% -22.8% Eurozone 3.1% 3.2% - +0.1ppts
Global 6.0% 2.9% 2.3% 2.9%
Unemployment rate5
Corporate spreads (High Yield)8
Jul '22 Aug '22 Sep '22 Change10
2 Commodity prices and inflation Jul '22 Aug '22 Sep '22 Change10
US 3.5% 3.7% 3.5% -0.2ppts
US 4.69% 4.84% 5.52% +68bps Germany 3.0% 3.0% - 0ppts
Commodity prices2
Jul '22 Aug '22 Sep '22 Change10 Eurozone 5.90% 5.60% 6.31% +71bps France 7.4% 7.3% - -0.1ppts
Brent oil
Jul '22 Aug '22 Sep '22 Change10 Jul '22 Aug '22 Sep '22 Change10 Jul '22 Aug '22 Sep '22 Change10
US 8.5% 8.3% 8.2% -0.1ppts US 2.5% 2.5% 3.25% +75bps US 52.8 52.8 50.9 -3.6%
8.9% 9.1% 9.9% +0.8ppts 0.5% 0.5% 1.25% +75bps Eurozone 49.8 49.6 48.4 -2.4%
Eurozone Eurozone
1. Bloomberg, data as of 11/01/2022. 2. Data presented as end of month figures. Brent oil in $/bbl; US Natural gas (Henry Hub) in $/MMbtu; Dutch Natural gas (TTF front month future) in
EUR/MWh. 3. CPI monthly seasonally adjusted data from Bureau of Labor Statistics; HICP monthly data for Eurozone from Eurostat. 4. Seasonally adjusted rates; Bureau of Labor Statistics for US;
Job vacancy rate from Eurostat for Eurozone. 5. Bureau of Labor Statistics for US; Eurostat for Eurozone. 6. Federal Reserve for US; ECB for Eurozone (main refinancing rate). 7. Bloomberg. 8.
Bloomberg US Corporate High Yield Average OAS; Bloomberg Pan-European High Yield Average OAS 9. ISM manufacturing PMI for US; S&P Global Eurozone Manufacturing PMI from Markit for 6
Eurozone. 10. Change Sep vs Aug 11. Change Q1 '22 vs Q2 '22. Note: All displayed numbers are based on end of month figures, and changes represent incremental changes vs. previous months.
BCG Executive
Perspectives
AGENDA
A view of the world
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The time to act is now | Companies that build resilience rapidly in changing
environments have a much higher chance of success
Developing resilience is a key way for companies to create significant long-term value by increasing preparedness
to hedge against external shocks and disruptions
Building resilience creates competitive advantages
and allows companies to rise above their peers:
Resilient company
Total 1• Rapid execution of no-regret actions to absorb
shareholder
return the shock
3
Total 2• Adapt to new circumstances and ensure a high-
value of speed recovery
2 resilience 3• Reimagine their business to the new
circumstances in the 12 months following the
+25pp -20pp
Recovery Time
1. Performance relative to industry in response to future crises, i.e., successful resilient transformations enhance company performance by 25%; Source: Press; BCG Henderson analysis 8
Cost pressure is increasing globally, exacerbated by an unprecedented labor
market disruption
… culminating in labor
Evolving skill needs Existing employees are …and some have left Talent shortage is
bottlenecks as demand
leave talent shortages looking for new the workforce especially pronounced
outpaces supply,
in key areas opportunities… altogether in digital roles
recruiting struggles
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Data scientist
Software engineer
US total
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Sources: Job switch data from Future Forum Pulse Survey, conducted January 27-February 12, 2022. Number of respondents = 10,818 knowledge workers across US, Australia, Germany, Japan,
France, and the UK; For labor force quits, participation and job openings: International Labour Organization, BLS, BHI Center for Macroeconomic, Federal Reserve, press search; Quit rates are
computed by dividing number of quits by employment and multiplying that quotient by 100; includes non-farm industries 9
Companies have ~doubled their SG&A costs since last crisis and successfully
passed it to consumers; that will no longer be possible in a recession
SG&A1 costs have grown 1.9х since 2009; that didn't affect But over the past 4 quarters, we
margin due to price increases see much higher margin pressure
150 16
1. S&P 500 companies. Note: SG&A and revenue values were turned into indexes; 2009 value equals 100%
Source: S&P Capital IQ; Federal Reserve Bank of Minneapolis; Social Security Administration 10
BCG Executive
Perspectives
AGENDA
A view of the world
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Contributors to cost are numerous and complex – companies must pull
various levers to achieve a competitively advantaged cost position
• Simplification • Make or repair or buy • Tech landscape simplification • Digital supply chain
• Consolidation/scaling • Variance reduction • Lean manufacturing process • Production efficiency
• Redundancy elimination • Contract mgmt. (incl. tech suppliers) • Digitization, automation • Design to value
Support labor costs reduction Support labor costs Support labor costs
Support labor costs reduction
Value discovery sprint
Support nonlabor costs red. Support nonlabor costs Support nonlabor costs
Support nonlabor costs red.
buckets
measures successfully
~2000 implemented and safeguarded
Increased spans of control and Rationalized IT portfolio and Eliminated low-value work and
reduced duplicative work reconsidered travel and optimized, outsourced, and
across the organization by expense policies to decrease automated processes for
consolidating locations low-value spending employees to focus on key
tasks
Groundwork for Largest opportunities related High-level design principles Roadmap built to achieve
North America Europe, Middle East, Asia Pacific Central Resilience Team
South America
Gideon Walter Frank Cordes Ravi Srivastava Tuukka Seppä
Managing Director & Senior Managing Director & Senior Global Leader Ops. Practice Managing Director & Senior
Partner, Operations Partner, Operations [email protected] Partner
[email protected] [email protected] New Delhi [email protected]
New Jersey London Helsinki
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