Managing turbulent times

Par Dr. Olaf Wandhöfer, Dr. Franz-Josef Seidensticker and Lars Dingemann

Etude

Managing turbulent times

Par Dr. Olaf Wandhöfer, Dr. Franz-Josef Seidensticker and Lars Dingemann

First published on novembre 13, 2012
min


*Please note that the full study is only available in German.* *If you are interested in the study, please order it via contact formular.* ******* This decade, companies' long-term growth plans have been thwarted by short-term external challenges brought about by the volatile global economy. A holistic approach enables companies to remain in control and consistently exploit the opportunities which arise in times of economic crisis. Bain & Company applies an integrated model for strategically aligning the operating business in the future as well as for considering the perspectives of capital market, financial and transaction strategies. This decade, economic developments will be characterized by two opposing trends: On the one hand, the global economy will continue to expand over the long term. According to a long-term forecast of Bain & Company, the global gross domestic product will grow by an annual average of about 4 percent to USD 90 trillion by 2020. On the other hand, the instability of the financial system and the high public debt caused by governments and - depending on the region – companies and private households will continue to fuel volatility on real and financial markets. Bain & Company's integrated model for corporate management helps the top management to remain in control - even in conditions of this kind - and to consistently exploit the growth opportunities being offered. Besides classic corporate strategy, our model also encompasses capital market strategy and communications alongside financial and transaction strategies, and thus combines the perspectives of corporate strategy and corporate finance. This holistic approach can be applied at any time, but in uncertain economic conditions it is particularly useful for embracing the way in which all the dimensions of corporate management interact. By developing scenarios and carrying out stress tests, risks can be exposed and evaluated. In the current market climate, the cornerstones of corporate strategy are still the same: Companies should focus on a strong core business, gain and defend market leadership and at the same time scrupulously expand into closely related business fields. With the goal of maximizing total shareholder return, the corporate strategy should be supplemented by a comprehensive capital market strategy and communications. The financial strategy is of major significance in times of economic instability. Companies must define a set of clear financial guidelines which, on the one hand, are commensurate with the company's own risk appetite, while at the same time, allowing the necessary investments to be made. Stress tests help to evaluate the financial risks. Transactions offer attractive growth opportunities, especially in times of crisis. All options of the transaction structure and strategy should be examined alongside the potential repercussions these could have for a company's position on the financial and capital market. A company that is able to combine corporate, capital market, financial and transaction strategies in a climate of volatility will create a stable base for participating in long-term growth through organic or anorganic investment. This analysis of Bain & Company highlights all four dimensions of the integrated model and explains their significance using examples from practice.

Please note that the full study is only available in German. If you are interested in the study, please order it via contact formular.

***

This decade, companies' long-term growth plans have been thwarted by short-term external challenges brought about by the volatile global economy. A holistic approach enables companies to remain in control and consistently exploit the opportunities which arise in times of economic crisis. Bain & Company applies an integrated model for strategically aligning the operating business in the future as well as for considering the perspectives of capital market, financial and transaction strategies.

This decade, economic developments will be characterized by two opposing trends: On the one hand, the global economy will continue to expand over the long term. According to a long-term forecast of Bain & Company, the global gross domestic product will grow by an annual average of about 4 percent to USD 90 trillion by 2020. On the other hand, the instability of the financial system and the high public debt caused by governments and - depending on the region – companies and private households will continue to fuel volatility on real and financial markets.

Bain & Company's integrated model for corporate management helps the top management to remain in control - even in conditions of this kind - and to consistently exploit the growth opportunities being offered. Besides classic corporate strategy, our model also encompasses capital market strategy and communications alongside financial and transaction strategies, and thus combines the perspectives of corporate strategy and corporate finance. This holistic approach can be applied at any time, but in uncertain economic conditions it is particularly useful for embracing the way in which all the dimensions of corporate management interact. By developing scenarios and carrying out stress tests, risks can be exposed and evaluated.

In the current market climate, the cornerstones of corporate strategy are still the same: Companies should focus on a strong core business, gain and defend market leadership and at the same time scrupulously expand into closely related business fields. With the goal of maximizing total shareholder return, the corporate strategy should be supplemented by a comprehensive capital market strategy and communications. The financial strategy is of major significance in times of economic instability. Companies must define a set of clear financial guidelines which, on the one hand, are commensurate with the company's own risk appetite, while at the same time, allowing the necessary investments to be made. Stress tests help to evaluate the financial risks. Transactions offer attractive growth opportunities, especially in times of crisis. All options of the transaction structure and strategy should be examined alongside the potential repercussions these could have for a company's position on the financial and capital market.

A company that is able to combine corporate, capital market, financial and transaction strategies in a climate of volatility will create a stable base for participating in long-term growth through organic or anorganic investment. This analysis of Bain & Company highlights all four dimensions of the integrated model and explains their significance using examples from practice.