Economic growth will slow significantly in 2014 in both industrialized nations and emerging markets. Germany’s GDP is expected to grow by just 1%, according to a study by Roland Berger Strategy Consultants and the International Controller Association (ICV) entitled ‘Operations Efficiency Radar – Top levers for the 2014 CFO agenda’.
The Chinese economy will also cool down significantly after years of double-digit growth: just 6% GDP growth is expected next year.
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Given the poor economic forecasts, companies need to make customer requirements and products even more central to their strategy if they want to continue growing profitably.
But that’s exactly where they fall down – especially when it comes to developing new products and business models for up-and-coming markets. Thus, 75% of firms still lack a clear understanding of the needs of customers in emerging markets. These are the findings of the new.
Oliver Knapp, partner at Roland Berger Strategy Consultants, said: "Firms should orient their business strategy toward the products that customers really want and which they can produce at minimal cost. That’s the only way they can develop solutions that can be marketed effectively. Yet most companies still lack the necessary market knowledge."
Top of the CFO agenda: Production efficiency, growth and controlling
Of the ten most important levers in 2014, German companies put improving production efficiency in the number one position. They also want to identify new growth opportunities and strengthen their controlling, creating more transparency within their companies.
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By GlobalDataConrad Günther, member of the board of the International Controller Association, said: "For the first time in the history of the Operations Efficiency Radar, finances and controlling are among the top three agenda items for CFOs. That clearly reveals that firms consider controlling a key function for managing the business."
When it comes to the product portfolio, the top ten levers are focused more clearly on customers than in the past.
Thomas Rinn, partner, Roland Berger, said: "Firms want to be more strongly guided by what customers want when optimizing product characteristics so that they can successfully bring their products to market."
The top three levers on the CFO agenda differ greatly from industry to industry. Thus, the automotive industry and machinery & plant engineering industry plan to focus on increasing production efficiency, while the high tech and consumer goods industries plan above all to strengthen controlling.
Frugal products: A key component of the product portfolio
Although many firms pay special attention to emerging markets when it comes to their product portfolio, most respondents in the study admitted that they weren’t yet doing enough to tailor their products to the needs of customers in local markets.
Thus, 75% of firms lack are not aware of the exact needs of customers in emerging markets, and just 8% fully exploit the opportunities represented by frugal products.
In this respect, the Operations Efficiency Radar 2014 reveals a clear gap between the important function of these simple, affordable solutions and firms’ actual plans.
Around 40% of firms consider frugal products to be increasingly important, but their actual plans for 2014 are rather more cautious: just 23% of respondents plan to develop their portfolio in this direction.
Products for industrialized nations
Firms also have some catching up to do with regard to their products for industrialized nations.
Rinn added: "Two-thirds of firms neither understand fully what product features customers in industrialized countries want, nor do they know what customers are prepared to pay for these products."
Respondents were also skeptical with regard to planned costs. Two-thirds already know that they will not meet their target costs.
Knapp said: "Clearly, most firms have a lot of catching up to do with regard to optimizing their products and adjusting them for local markets. They should not underestimate the potential of having a customer-oriented product portfolio – both in industrialized countries and emerging markets. And that’s the only way that firms can continue growing even in a poor economic climate."
