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Smart growth strategies needed to address business pressures


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13 October 2010: The latest Australian Industry Group/Deloitte Private CEO survey Growth Strategies for Business has identified strategies that businesses are adopting to ensure growth at a time when many business sectors are coming under increasing pressures from the higher dollar, skill shortages, wage rises and the expectation of hikes in interest rates. The survey also identifies actions that governments can take to facilitate business growth and profitability.

The ability for businesses to improve their market share, form alliances, take part in mergers and add value to existing products and services are among the key growth strategies business are implementing. In addition to these strategies, the almost 400 companies surveyed have also identified a number of priority areas where they are seeking external assistance to achieve their growth ambitions. These include strategic planning, people management and process improvement.

Ai Group Chief Executive Heather Ridout said, "While businesses remain cautious, reflecting the patchiness of economic conditions, this survey signals a strategic shift from cost cutting to developing growth strategies and identifying opportunities. Businesses consider macroeconomic stability to be a leading priority for government along with reducing red tape, encouraging innovation, coordinating the provision of infrastructure and reforming the tax system including by reducing company tax. By taking action in these areas, governments can lift the productivity of Australian businesses and assist in countering the structural pressures that many businesses are facing as a result of the mining boom," Mrs Ridout said.

Businesses across construction, manufacturing and services continue to face challenging conditions with close to one-third of small businesses recording negative growth over the past twelve months. Cash flow restraints, weak consumer sentiment, the strong Australian dollar together with labour constraints continue to restrict growth across industry. Encouragingly, most companies anticipate a lift in profits over the next year with the services sector the most optimistic, despite recent sluggish conditions. Also, three-quarters of all businesses surveyed expect to add additional staff over the next couple of years with public companies ranking people management & human resources as the highest priority area for growth.

According to National Leader Deloitte Private, David Murray, businesses can sustain their profit growth by managing their cash flow and having credit available to help finance growth plans; this has been difficult in the current economic climate due to constraints on finance availability.

"Winning companies will be those who focus on innovative ways to develop and retain their best people, focus on their profitable clients and increase their market share by merger opportunities or organic growth.

"Looking offshore to develop growth plans also needs to be included in the mix and we are fortunate to have close proximity to Asia which is currently experiencing strong growth," Mr Murray said.

Mr Murray recommends businesses also focus on the quality of their products and services so they can differentiate themselves in the market place.

"It will be those businesses which focus on innovative product development that will have a higher chance of actually obtaining the finance to help their future growth," Mr Murray said.

Australian Industry Group/Deloitte Private CEO survey Growth Strategies for Business

Key findings:

  • Businesses report that improving their market share, forming alliances, taking part in mergers and adding value to existing products and services are among the key growth strategies.
  • Strategic planning is seen overall as the area most needing attention in preparation for an economic upturn and this is highly supported by construction companies. However talent management & human resources is the highest priority for public companies (more than 20% of respondents). This is also seen as the key focus for the services sector. Businesses in manufacturing view improving processes as key to preparing for an upswing.
  • Cash flow restraints (74.5% of respondents), weak consumer sentiment (50%) as well as the strong Australian dollar and labour constraints continue to restrict growth across industry.
  • Almost one-third of small businesses recorded a reduction in profits over the last year.
  • During the past twelve months the services sector has performed the strongest with almost half of respondents in that sector recording a 10% profit growth and one quarter recording a more than 20% lift.
  • Most companies anticipate stronger profits over the next twelve months, with the services sector the most optimistic.
  • Almost 80% of all companies surveyed view skills shortages as an important constraint to business growth, manufacturing (75.5%), construction (84.3%) and services (77.2%).
  • Three-quarters of all businesses expect to hire new staff in the next couple of years.
  • Managing the economy and protecting it from recession was identified as the key priority for government (28.2% of respondents).

Note: The full survey can be found at www.aigroup.com.au/policy/reports and www.deloitte.com.au.

Background: The findings of the survey are based on the responses of 378 private and public business CEOs from businesses of all sizes in August 2010. The businesses surveyed generated approximately $98 billion in sales revenue in 2009-10 and employ around 55,900 people. Data was collected from 25 industries and is aggregated into the three key industry sectors of manufacturing; construction; and services. Moreover, the results are also analysed by size of business (based on annual turnover).

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Jane Kneebone
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Deloitte Australia
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Corporate Affairs & Communications
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Name:
Tony Melville
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Ai Group
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Director
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Email
anthony.melville@aigroup.asn.au

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