CEOs continue to transform their organizations and are increasingly concerned about product relevance, customer loyalty and keeping current with new technologies, according to new KPMG CEO Outlook Study
NEW YORK, July 20, 2015 /CNW/ - In a major new study released by KPMG International, which tracks insights on the coming three years, chief executives of global businesses said they are confident about the ability of their companies to grow over the next three years and are expressing confidence about the prospects for the global economy.
According to the 2015 KPMG CEO Outlook Study of 1,278 CEOs, 69 percent of CEOs in Europe, 66 percent in Asia Pacific and 52 percent in the US are more confident than they were last year about growth and the global economy in the next three years. In assessing their own company's growth prospects, 70 percent of European CEOs and 68 percent of Asia Pacific CEOs indicated they are more confident than a year ago. In the US, where the recovery is well underway, 19 percent are more confident than a year ago with another 46 percent expressing the same level of confidence about their prospects for growth. Most importantly, CEOs globally are set to hire, with 78 percent of respondents indicating they are expecting to be in hiring mode through mid-2018.
"The overall message we've gotten from CEOs around the globe, is that they are positive about their prospects over the next three years, and importantly that they are looking to hire more people," said John Veihmeyer, Global Chairman of KPMG International. "There is a more positive change in confidence versus the prior year, in Europe and Asia compared to the US, which is in part reflective of the US being in a more advanced stage of the economic recovery."
According to the KPMG study, CEOs are grappling with escalating competitive pressures. In order of importance: 86 percent are concerned about the loyalty of their customers; 74 percent are worried about new market entrants; 72 percent are worried about keeping pace with new technologies; 68 percent are concerned about their competitors' ability to take business away from them; and 66 percent are concerned about the relevance of their product or service in the next three years.
Status Quo: Perhaps the Riskiest Position for any Organization
Importantly, 44 percent of the CEOs indicated that they are only 'somewhat comfortable' with their current business model, with five percent expressing that they are 'uncomfortable.' In the study, 29 percent of leaders said their organizations are likely to be transformed into significantly different entities in the next three years.
While the results indicate that CEOs are acutely aware of the need to transform their businesses in order to survive and prosper, almost one-third of CEOs say their business is not taking enough risk with their global growth strategy and more than half (56 percent) said they have not fully implemented a company-wide process for innovation.
Half of respondents noted additional challenges with how their business needs to improve the way it manages data and analytics and how they need to do more to prepare for a cyber-security event.
"CEOs continue to confront business challenges of unprecedented complexity," said KPMG's Veihmeyer. "Many CEOs in our study have repeated what I am hearing when I meet with business leaders—that they need to take more calculated risks with their growth strategies. They know that they are going to have to have to do things differently, and they are looking hard at their organizations to determine how they can transform to stay relevant and strengthen their competitive positions."
Strategic Priorities over the Next Three Years
Globally, executives have their sights set on the following, in order of importance: developing new growth strategies, having a stronger client focus, expanding geographically, reducing their cost structures, enhancing speed to market, and fostering innovation. When asked whether their primary focus would be on growth or operational efficiency over the next three years, 94 percent of US CEOs cited growth, while their Asian and European counterparts said they were focused on operational efficiency.
In terms of issues having the greatest impact on their company's prospects and performance, the top three issues identified by CEOs were 'global economic growth,' followed closely by the 'regulatory environment,' and 'disruptive technology.'
Central Europe, US Top Expansion Targets
When asked which areas they expected to devote significant capital to over the next three years, CEOs identified expansion outside their home countries as the number one area. US CEOs are focused on Europe, especially Central Europe, followed by South America and China. For CEOs in China, Japan, the United Kingdom, Germany, Spain and France, the US is the region offering the greatest potential for new growth. "The resiliency of the US economy makes the US an attractive investment target for companies based in Europe and Asia," said KPMG's Veihmeyer.
Today, 52 percent of the CEOs say their current growth strategies are built primarily around organic growth, with 42 percent saying it is a combination of organic and inorganic growth through acquisitions and six percent saying it's primarily inorganic.
When asked to consider their anticipated growth strategies over the next three years, 59 percent of CEOs expect their priority will be organic growth, 22 percent indicated an even split between organic and inorganic growth through acquisitions, and 19 percent say it will be through inorganic growth. Twenty-nine percent of US CEOs demonstrated a more acquisitive strategy, identifying inorganic growth as a main growth driver.
To view the infographic, animated video and for additional information about the CEO Outlook Study, please visit kpmg.com/CEOoutlook. You can also follow the conversation @KPMG on Twitter, using the hashtag: #CEOoutlook.
About the 2015 KPMG CEO Outlook Study
The survey targeted 1,278 CEOs in 10 key markets (Australia, China, France, Germany, India, Italy, Japan, Spain, UK and US) and nine key industry sectors (automotive, banking, insurance, investment management, healthcare, manufacturing, technology, retail/consumer markets and energy/utilities). A quarter of the respondents have over US$10B in annual revenue, with no responses from companies under US$500M.
About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 162,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, please visit www.kpmg.com.
SOURCE KPMG International