Business Challenges and Trends

Several business issues are now gaining prominence. So, what are the most significant challenges?

Among the toughest challenges facing businesses are social issues. These are diverse and include work-life balance choices, diversity issues, reduced loyalty to employers and greater expectations, labour market turbulence and skills shortages, and demographic changes.

Customers are exerting greater influence and choice than ever before. For example, the growth of the Internet, combined in Europe with the adoption of the Euro, has meant greater price transparency. Businesses are now far less able to charge different prices for the same product in different markets: consumers have more information and ability to buy selectively.

Business models are exploiting this ‘new consumerism’. For example, the growth of low cost airlines in North America and Europe is one example, so, too, is the rise of on-line retailing. Market inertia is not what it used to be.

Because of this, firms are rediscovering the need to bond with their customers. In the future, expect a renewed surge of loyalty campaigns as firms strive to retain existing clients, sell them more and attract business away from competitors. This will affect some sectors more than others.

Markets are increasingly international and, consequently, globally competitive. Consequently, international structures and operations are being rationalised and operations are being transferred to low cost providers. Talent pools are now global and this is both an asset and a challenge for organizations. It also brings to the fore greater national and cultural identity issues.

In these circumstances, building strong cross-cultural teams is a continuing challenge for many businesses. This is particularly the case as major new markets emerge, notably in China and India but also other developing countries and regions such as Brazil, central Europe and Mexico. Finding and retaining the right people and harnessing their skills is now a priority for corporations looking to serve these markets.

Many sectors are finding that regulation, especially government and supranational regulations (such as EU directives), increasingly affect business and employment. This is occurring in areas such as health, safety and accident prevention, environmental management and corporate governance. Also, pressures for greater social responsibility may escalate. Customers and employees increasingly want businesses to behave ethically, and firms that have enjoyed some success in this area have positioned their business as genuinely valuing strong external relationships.

Technology continues to deliver innovations and potential problems in equal measure. Speed and agility matter, but even so, the Internet is eliminating advantages and reinventing sectors, and new channels are redefining sales, product and service propositions.

Knowledge and communication are increasingly seen as a competitive necessity. Organizations therefore need to adapt to changing circumstances including a constant demand for information, analysis and shared knowledge.

Shareholders are continuing to maintain an intense pressure on organizations to manage with integrity and create shareholder value. This is occurring at a time of slowing economic growth in the developed economies of Europe and North America. In attempting to achieve growth, organizations will face consolidation of traditionally strong sectors, rapid expansion as well as the demise of new enterprises, and reliance on supply-chain excellence.

In our view, success is more likely to come to those organizations with strong business relationships within the firm and externally with clients, suppliers, opinion-formers and other stakeholders.