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Anticipating the Future is Key to Thinking through Strategy
The non-recovery, recovery across the world has been a challenge. The consensus in the United States seems to be that only the United States, among large economies, is likely to contribute much to developed-country growth over the next few years. Slow growth and the strains of such a wide divergence among Germany and the continued struggles in Spain, Greece, and Southern Europe continue to cause Europe to focus attention on holding the Economic Union together. In short, today’s environment doesn’t make for a great environment for finding growth.
While it is true that the U.S. economy has recently shown positive signs—and more than other countries—this is the sixth year since the recession officially ended. Yet, businesses still have seen nothing like the bounce from previous recessions that historically have occurred. Rather, we have resumed lackluster growth, which would have been more typical of a mid- or end-of-cycle performance.
Being unprecedented, this situation requires care in prediction. However, anticipating the future is key to thinking through strategy. The best bet is that this will be a long and gradual recovery with a slow return to higher levels of employment, bringing workers back into the workforce. While not the signal that many are waiting for to motivate expansion, such an environment is not so bad. And, for some, the future will bring good times. But as we prepare for moving forward in a lower gear, it is important for companies to determine whether they are positioned well in the markets and segments that are moving forward.
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Without an overall big bounce, companies should focus on pockets of strength, i.e., particular markets and segments of markets, that have made up the “glass-half-full” part of this half-recovery situation. One obvious theme is the boom in energy production and the subsequent fall in energy prices. The B2B end customers who produce and refine oil will be in a cyclical downturn until prices recover. However, industries that compete in global markets and bear significant energy costs, will see a strong performance in the United States based on better competitiveness. Chemicals, metals, and glass companies that use natural gas will be more competitive in the United States than even most developing countries. Their suppliers will experience high demand. When the economics were working against them, so that competing around the world was a challenge, postponing investments and making due with older equipment was mandatory for the end customers in these basic industries. With a very positive competitive situation already in store, suppliers who can help support and sustain an emerging superior competitive position will be highly valued.
This is not the best of times, when everyone wins, nor the worst of times, when few win. Yet it may be the most confusing of times, when certain market segments are attractive and others are not. Selecting targets—end customer industries and end customers with the right positioning to match the needs of the markets of the next few years—will be key to success.