Asia Pacific: joint ventures and strategic alliances will play greater roles in business growth over the next 3 years

The global perspective

According to the latest CEO Survey performed by PwC, about 78% of CEOs are trying to create more flexible work environments as part of their people strategies, with 77% saying they are redeploying pivotal employees within the organisation. This suggests companies believe they need to retain and develop capabilities in-house to drive organisational success over the long term yet are also faced with balancing the need to reduce costs against programmes that support critical talent and improve productivity. Naturally, companies that achieve the right balance will be better placed for a return to growth.

Moreover, many of the CEOs claimed to be entering into “survival mode.” PwC’s survey shows how the financial crisis shattered short-term confidence. The percentage of CEOs who were “very confident” about their one-year revenue growth prospects dropped to 21%, the lowest level in six years. Uncertainty about the future is still running high and confidence no doubt continued to deteriorate after PwC completed the survey.

Asia Pacific perspectives

According to the same survey, CEOs in Asia Pacific believe that joint ventures and strategic alliances will play greater roles in business growth over the next three years than cross-border mergers & acquisitions. This may reflect the lower costs and risk levels associated with joint ventures, as well as the increasing popularity of collaboration when dealing with cross border growth.

To achieve medium-term growth objectives, CEOs have to contend with a lack of capital, tight credit conditions and uncertainty around company and asset valuations. However, merger and acquisition activity has decreased and only 19% of Asia Pacific CEOs say they have completed such a transaction within the last year. Still, joint ventures are a different platform when it comes to risk mitigation, as they involve partnerships that tend to play out over many years in changing conditions.

The key theme emerging from this year’s survey is the need to achieve a viable balance between short-term and long-term perspectives. Never before have such daunting threats to short-term business survival coincided with the need to formulate long-term business strategies geared to address “big picture” risks. What remains unclear is the extent to which global businesses are truly assimilating their experience of this financial crisis into their long-term thinking.

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