Global Business Executives Deeply Divided On One-Year Outlook

2016 Views from the C-Suite: Proceed with Caution

Rising cybersecurity risks top overall challenges; technology presents the greatest challenge and opportunity in business operations

C-suite sees expanding globalization as most important external opportunity, despite slowing emerging markets and trade growth

Executives bullish on long-term U.S. economic and innovation outlook, but view this year's presidential election as crucial test

News provided by

A.T. Kearney

Jun 28, 2016, 05:00 ET

WARSAW, Poland, June 28, 2016 /PRNewswire/ -- Global CXOs are split 50-50 in their outlook on key potential global developments for the year ahead, according to the 2016 Views from the C-Suite published by A.T. Kearney's Global Business Policy Council. Executives are most divided on China's economic outlook; whether populist political leaders will continue to gain support in major developed markets; and the ability of emerging markets to stage a comeback and contribute more to global growth.

This year's split is a marked contrast to last year's results, when a clear majority of global executives agreed on likely outcomes across a range of developments. The results in 2016 reflect the rising uncertainty of the global strategic operating environment, and could explain why many international businesses appear to be delaying new investment and slowing planned expansion. Our results show that business leaders are "proceeding with caution."

The 2016 Views from the C-Suite was released this morning to senior leaders at the Global Business Policy Council's annual CEO Retreat, convened this year in Warsaw under the theme of "Runaway World! Leading in a Time of Extreme Global Upheaval," which captures the convulsive global change reflected in the results of Views from the C-Suite, and has dominated the conversation among the CEOs and thought-leaders gathered.

"The most striking element of this year's study is just how deeply divided global business executives are on the majority of the issues governing the short-term outlook," says Erik Peterson, managing director of the Global Business Policy Council and co-author of the study. "These divergent assumptions and expectations almost certainly indicate vastly different corporate goals and strategies across companies. We may have entered into a period that could lead to a massive corporate shakeout, with big winners and losers."

Technology issues are among the top of both opportunities and challenges for global C-suite executives (see Figure 1). Rising cybersecurity risks top the list of challenges. And from a business operations perspective, executives believe that the adoption of new technologies such as cloud computing, big data, and mobile technologies will largely determine future success or failure. Technological innovation, intellectual property protection, and R&D investments are also critical considerations for business leaders this year. It is increasingly important that companies adopt the right technologies for their business and then invest sufficiently in their implementation to foster success. At the same time, mitigating the potential downsides of technology will be imperative.

In the external environment, executives point to expanding globalization as the top opportunity (see Figure 2). Given continued weak global trade growth, this view suggests that global executives may be less focused on traditional merchandise trade, and more focused on the expansion of international investment and services. This could signal the next wave of 21st-century globalization, as companies embrace more localized strategies in critical markets. The global C-suite focus on globalization in spite of slower trade growth is consistent with the findings of the 2016 A.T. Kearney Foreign Direct Investment Confidence Index, in which more than 70 percent of executives said that they plan to increase FDI in the next three years as a critical means to growth.

"Examining the state of the global environment today, we see a world turning its back on globalization. Global business executives are frustrated with low global economic growth and rising inequality translating into populism and growing protectionism around the world," says Paul Laudicina, chairman of A.T. Kearney's Global Business Policy Council and co-author of the study. "We were surprised that CXOs are confident in a strategy that sees globalization picking up pace again. This suggests that either the executives we surveyed see early indicators of a turnaround not yet apparent in trade data, or that the optimism is unwarranted—which unfortunately remains our best judgment based on available data."

In particular, CXOs see the United States as a bright spot. Global executives are especially bullish on the future of the United States over the next decade, although they see the 2016 presidential election as a watershed moment. An overwhelming 80 percent of global executives believe that the United States will maintain its global lead in innovation, and 74 percent are confident that the U.S. economic trajectory will be strong through 2026. However, they will be watching the November 2016 presidential election very carefully as a sign of what is to come: more than four out of five global executives believe that the election will be important in determining U.S. economic performance over the next 10 years.

Global C-suite executives believe the ability to control costs will be a crucial source of differentiation. Business model efficiency is among the issues at the top of their list of both opportunities and challenges (see Figure 1). Within this issue, executives identify reducing costs as the top opportunity, while simultaneously highlighting rising costs as the foremost challenge. The cost and availability of capital is also a top-of-mind issue for global executives in terms of both challenges and opportunities (see Figure 2). Companies that see the low cost of capital and other reduced costs as supporting the improvement of their business model may have a competitive advantage over those businesses that face rising costs.

While 42 percent of global executives point to "agility in strategy execution in the face of changing market conditions" as a key opportunity in the coming 12 months, even more of the C-suite should be paying attention to this issue (see Figure 1). The macroeconomic performance of major economies around the world continues to be weak and volatile, and global executives point to challenges in worsening regulatory and tax policies. The 2016 Views from the C-Suite findings point to the fact that in the constantly shifting external environment, the ability of companies to adapt nimbly to new opportunities and challenges will be a crucial driver of business success or failure.

About A.T. Kearney
A.T. Kearney is a leading global management consulting firm with offices in more than 40 countries. Since 1926, we have been trusted advisors to the world's foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues.

To learn more about A.T. Kearney, please visit www.atkearney.com.

About the Global Business Policy Council
Established in 1992, A.T. Kearney's Global Business Policy Council (GBPC) is a specialist unit of A.T. Kearney that is dedicated to help business, government, and other leaders anticipate and plan for the future by analyzing critical over-the-horizon political, economic, and social dynamics. Through world-class global meetings, regular publications, and strategic advisory services, the GBPC is committed to engaging in thoughtful discussion and analysis of the trends that affect businesses and governments around the globe.

To learn more about the Global Business Policy Council, please visit www.atkearney.com/gbpc.

About Views from the C-Suite
The 2016 Views from the C-Suite study uses primary data from a proprietary survey administered to 400 senior executives of the world's leading corporations. The survey was conducted in April 2016.

Respondents include C-level executives and board members. About 25 percent of respondents are CEOs and about 20 percent are board members; the remaining 55 percent are other C-level executives. All companies participating in the survey have annual revenues of $500 million or more.

The participating companies are headquartered in 25 different countries in all regions of the world. For the purposes of reporting survey results, respondents are aggregated into three regions: Americas, Asia (which also includes a few respondents from Africa), and Europe. About 40 percent of respondents are based in the Americas, and about 30 percent each work in Asia and in Europe.

Survey respondents also represent a wide array of sectors, which we have grouped into three mega-sectors: industry (primary goods, aerospace and defense, infrastructure and construction, telecommunications and utilities, heavy industry, and light industry), services (transportation, healthcare and pharmaceuticals, wholesale and retail, financial services, and nonfinancial services), and information technology (IT). Executives at service-sector firms account for 44 percent of the survey respondents, 33 percent work at industry-sector firms, and 17 percent at IT firms.

For past editions of Views from the C-Suite, please go to: https://www.atkearney.com/gbpc/thought-leadership/issue-deep-dives/views-from-the-c-suite

For information:
Konajilo Barrasso
[email protected]
212.705.1026

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