WHILE top executives in the Philippines are “cautiously optimistic” about the country’s growth prospects due to the reforms and initiatives taken by the Duterte administration, most of them remain upbeat about their business and respective industries, as they commit to continue establishing partnerships and alliances here and in the region, revealed PwC Philippines (PwC).
In the Management Association of the Philippines (MAP)-PwC CEO Survey 2017 Report, the company found that the majority of the 120 CEOs surveyed are as bullish as the government on the economy, with 68 percent of them believing that meeting the 2017 GDP target is attainable. Sixty-three percent of them, likewise, believe that 2018 goals will be met.
Given the strong macroeconomic fundamentals and positive indices to date, the prevailing business climate for them is conducive enough for revenue growth by 2020, as 57 percent have expressed high confidence in the prospects of their companies.
Also, 54 percent of CEOs were very positive about the opportunities that abound in their industries over the next three years.
“They are more confident in their own company because they can control what’s happening in the company,” PwC Philippines Assurance Partner Aldie P. Garcia told reporters during the company’s announcement of the survey results during a news briefing held recently in Makati City.
Industry-wide, 55 percent of CEOs and business leaders are very confident about their respective sectors’ revenue growth prospects over the next 12 months, while 54 percent shared the same sentiment for the next three years.
“While this number is only slightly higher compared to prior years, this cautious optimism is shared by global CEOs,” he said, while citing that the confidence level of business leaders in the country is actually consistent with that of their counterparts overseas, as shown in PwC’s separate survey covering 1,300 CEOs across 81 different countries.
Top business concerns
A LOT of cautiousness in the business community could be attributed to several issues domestically and internationally, according to PwC Philippines Managing Partner for Deals and Corporate Finance Mary Jade T. Roxas-Divinagracia.
“So apart from the external factors like the uncertainty of what’s happening in the Korean Peninsula, some of the overprotectionism policies of other countries [could be considered],” she said.
“Internally, some of the threats are terrorism. Also, we’re still in the stage of catching up when it comes to basic infrastructure. So these are the things that, while they are positive, somehow dampen that optimism that they have. But I think 55 percent is still a very positive number,” she added.
From the business standpoint, CEOs view bribery and corruption, technological changes including cybersecurity, and the ability to respond to crisis as the main risks that may hinder growth.
Increased emphasis on implementing cybersecurity has been prompted by persistent attacks that have, in certain cases, crippled operations.
The tempered positivism among the business leaders in the country could be boosted with the role of the government in ensuring that they remain competitive in an integrated Asean community.
Based on the research, CEOs said that good governance, integrity and transparency in all business transactions should be mainly prioritized by the state.
This will be followed by building adequate physical infrastructure, as well as maintaining peace and order nationwide.
All these, if done, will enable the local companies and business leaders “to capture the right opportunities in a very dynamic economy,” Garcia said.
Alliances
THE business community takes responsibility to also do its part to nation-building by establishing partnerships both in the local and global arenas.
Overwhelmingly, 75 percent of the respondents indicated that they will enter into a strategic alliance in the next 12 months.
“This is a very significant confirmation that our CEOs and business leaders now are more open to collaboration, more open to partnerships, [or] more open to alliances. This is to them reimagining the possibility of pursuing their own business goals by tying up and partnering with other entities. Not only our partnerships are being redefined. Strategic alliances are also being expanded and borders taken down,” the assurance partner of PwC said.
For those who intend to forge alliances, they are keen not only on partnerships within their industry. In fact in the survey, 52 percent are very likely to compete in other sectors.
“So their concept of partnerships and alliances goes beyond their current business model. They want to venture into other industries. They want to test the waters in terms of other businesses,” Garcia cited.
The CEOs’ top preferred industry is consumer and retail. It’s followed by health care, pharmaceutical and life sciences; retail and wholesale distribution; technology; food and beverage; and real estate.
“If you look at the 52-percent number, it might not be a very big number. But if you compare it versus last year’s response at about 45 percent, that’s a 7-percent jump in CEOs who are more likely or very likely to compete in other industries for purposes of measuring investor confidence,” he said.
Not only they’re wanting to cover new territories and compete in other industries, he added, but they are also looking to explore other territories, as 45 percent of the respondents said they will likely compete in other countries.
Garcia emphasized that this is very important considering the integration of the economies of all the 10 member-states of Asean has already been in place since 2015, and the whole regional sentiment about the business model is very encouraging.
The top three countries on the bucket list of the business leaders are Vietnam, Indonesia and Malaysia, respectively.
“They were selected by our CEOs because of relative political stability, ongoing reforms similar to what we are having here in the country, and, more important, a bright economic prospect,” he said.
“So we were able to establish, based on the survey, that our CEOs are going for and hardly beating those collaborative mindsets.”
Drivers of collaboration
FOR the CEOs, there are many factors they consider in forging alliances with other companies just like their counterparts worldwide.
Per the survey, 52 percent said they want to enter into a strategic partnership to gain access to new customers. On the other hand, 44 percent expect to gain access to new geographical markets and that’s why inbound and outbound deals and transactions are inclusive, especially these days. Meanwhile, 39 percent agreed that they intend to enter into strategic partnerships for them to strengthen their brand or reputation.
Garcia likewise noted that in the survey and their face-to-face interviews, the CEOs highlighted the role of technology.
To wit, 71 percent of the participants said that they want to strengthen their innovation, digital and technological capabilities for them to capitalize on new opportunities.
“This is a very significant [result] from prior year’s response, and this is also significantly higher versus that of the global survey. The global CEOs are only at about 50 percent to 51 percent,” he said.
In addition, 59 percent of the business leaders have come to a realization that their entity, industry and business model will be greatly impacted by the latest technologies and innovations over the next five years.
“We are preparing to be disrupted. They are preparing to be the disruptor. And 30 percent of them are willing to enter into strategic partnerships just to gain access to new and emerging technology,” the executive said.
Ideal partner
LOOKING for the right ally is no easy task as there are many qualities that make or break the deal, as shown in the survey.
The respondents said they see to it that their product or service offering is fit. Next is the management team’s capability. Then, they consider the potential partner’s network or market coverage. Interestingly, financial resources are ranked only fifth on the list.
“This is a good indication for our CEOs that the type of strategic alliance that they are looking for is not only driven by financial strength,” Garcia said. “It’s moving up the value chain that they are looking for more than just one in terms of strategic partnerships and alliances.”
Keeping the partnership going is another challenge that business leaders also face nowadays. Based on the study, 55 percent of the respondents revealed that they have walked away from a potential alliance or terminated the partnership simply because “the partnership is no longer working or can no longer work.”
The key factors to have a successful partnership, the PwC found out, are the shared vision, compatibilities of personalities in the management team and delivering promises.
“Culture is becoming more and more important. When they shake hands, they sometimes forget that sometimes their people in the end will have to work together. And many times after shaking hands and signing the partnership agreement, they realize that they have two different cultures, they do not have a change strategy, a process where they melt the two cultures, and in so doing it’s actually more destructive,” said Dr. Donald Patrick Lim, MAP governor-in-charge.
“So it’s not as easy as it looks. And with the onset of Asean, what we we’re seeing is that we don’t have to look far. We can actually look at a lot of our Asean neighbors. We can actually work with them, complement each other’s businesses and core competencies and, hopefully, we generate competitive products and solutions that we can be globally competitive,” he added.