Each year CFO Research, in collaboration with American Express, surveys senior finance executives at large companies around the world to better understand their strategies for strengthening their businesses during the coming year. In the 2015 Global Business and Spending Monitor, we found that many businesses around the world fell short of last year’s ambitions to capitalize on economic growth. Today, particularly outside of North America, business leaders are rethinking growth strategies to cope with economic uncertainty, market volatility, and the aftermath of recession.
Many of the 565 finance executives surveyed now appear to be heeding the old adage, “You have to spend money to make money.” Asked where they plan to invest this year to support business growth, respondents show the most interest in sales and marketing and in new product and service development — categories that focus on identifying and addressing demand, winning market share, and boosting revenues. In both categories, 37% of all respondents plan to increase their companies’ outlays over the coming year. In addition, 36% of respondents anticipate increased investment to improve production efficiency, and 31% plan to invest more in adding production capacity. (See Figure 1.)
Canadian businesses are positioning themselves to forge ahead in the pursuit of expanded sales. The number of Canadian respondents planning to increase investment in new product and service development soared to 60%, a huge jump over the 17% that planned such increases in 2014.
Canadian responses show similar surges in plans to invest in sales and marketing activities (45% versus 24% in 2014). Likewise, in response to another survey question on spending plans, a high percentage of Canadian executives say they expect their companies to increase spending on advertising, marketing, and public relations (63% versus 21%). Clearly, Canadian business leaders will be targeting new revenue growth in the coming year.
Companies in other countries also are focusing on spending and investment aimed at boosting revenue growth, survey results suggest. About half of the respondents in both Hong Kong (50%) and China (48%) plan to increase investment in sales and marketing, compared with an average of 37% across all respondents in the survey. The largest increases in the number of respondents who anticipate more investment in sales and marketing emerged in Mexico (45% of respondents versus 13% last year) and the United Kingdom (41% versus 25%).
In Asia, China and India lead the way in terms of improving production efficiency, with 45% of respondents in each country planning to increase investment. Hong Kong is not far behind, at 43%. Plans to increase production capacity are highest in Hong Kong (43%) and China (42%).
United States: Focus on M&A
The United States presents an interesting and different picture. Survey respondents in the U.S. are more likely than their peers in most other countries to say that their companies expect to increase investment in mergers and acquisitions. Forty percent of U.S. respondents report that their companies plan to increase investment in M&A, compared with 28% of all respondents to the survey.
The 40% of U.S. respondents expecting an increase in M&A is 12 percentage points higher than last year’s results, and places the U.S. among the leaders in pursuing growth through M&A opportunities. U.S. respondents also stand out in that they give approximately the same weight to increasing investment in M&A as they give to increasing investment in organic growth, either through new product and service development (36%) or through sales and marketing activities (39%).
While the U.S. economy remains one of the most stable in the world, it is also one of the most mature, and the survey findings may reflect the fact that finance executives feel that their best prospects for growth lie in building from the outside in.
Finance executives in both France (40% of respondents) and the United Kingdom (39%) match the level of interest in M&A seen in the U.S. Overall, French respondents have the bleakest outlook for their own economy of any country covered by the survey, and so finance leaders there may see transactions as one of the best paths leading out of their current difficulties.
U.K. business leaders, on the other hand, seem more determined to spend their way back to fiscal health than to cut back, and they appear to be considering both organic and inorganic opportunities for doing so.
On the Move
With the amount of available business data continuing to increase, companies are looking to give their employees better access to information and enable better analysis of it. As a result, mobile technology is attracting interest from executives in the survey. The CFO of a U.K. infrastructure and engineering firm, for example, notes that “remote working is very high on our agenda.” Mobile technology is helping this company meet its growing need for specialized skill sets that are difficult to source in some of the geographic locations in which the firm is expanding. With remote working, says this CFO, “we find ways of making it less important where people actually live.”
Better meeting of customer needs and allowing employees to work remotely are the two most important benefits of the greater use of mobile technologies, according to survey respondents. (See Figure 2, above.) Respondents from some Latin American countries (Chile, Mexico, and Argentina) and Spain are among the most likely to make mobile technology a priority. For some geographies, mobile is where customers and their money can be found; in others, mobile can allow a business to leapfrog infrastructure challenges to grow in new markets.
Senior finance executives themselves seem to be convinced of the benefits of mobile technology. In a separate CFO survey, nearly 9 out of 10 respondents (89%) say that advances in mobile technology and better connectivity to enterprise systems have substantially increased the frequency with which they check mobile devices for messages. Two-thirds (66%) of respondents agree that responding to business e-mails/messages outside of normal business hours enables them to be more effective managers, and 79% agree that doing so enables them to be more efficient in their jobs.