Vision - March 2009 - (Page 23) 7 Moves CE Companies Can Make in Challenging Times By Kumu Puri hile the economic times are tough, we’ve heard little about the genuine opportunities that exist for CE companies to take action to improve their competitive positions now and prepare for future success. Now is not the time to hunker down, succumb to knee-jerk reactions and wait things out. That’s a recipe for failure. Rather, now is the time to take advantage of this unprecedented market situation and lay the groundwork for transformational and structural changes. Indeed, being proactive in these challenging times is a recipe—in fact an imperative—for managing through this market cycle, fine-tuning differentiating capabilities, expanding market share and accelerating toward sustainable high performance. In Accenture’s research into performance of companies in the U.S. soon after the 1990–1991 recession there was a clear distinction between those that followed a strategy of managing their cost structure and strengthening their strategic position, and the rest. Those who took the bolder path outperformed their industry peers for six years following the recession. With this positive mindset, following are seven actions CE companies should seriously consider: Strategically Cut Costs The most pressing challenge for hightech companies is rapid and sustained cost management. In times of uncertainty, keeping costs low to preserve profit margins is paramount. Cost-cutting needs to be balanced against funding future growth. As a result, cutting costs associated with declining or overlapping product categories, while preserving investments in emerging categories, is an approach that balances short-term needs with long-term performance. W the user experience. Research has found that high performing companies examine their customers by segment, geography and usage patterns. These exceptional achievers then personalize and boost the quality of the customer experience to more closely match what consumers want. 6 3 Drive Global Operations CE companies need to adopt a new networked operating model that can address their company’s need to grow, access talent, secure resources, manage volatility and risk, and achieve superior and sustainable economic returns. In many cases, this model is made possible by outsourcing select business operations. These include outsourcing of the supply chain, global training and development, and finance and accounting operations. The current market downturn is an opportunity to embrace a corporate-wide, global operating model aimed at lowering costs. Now is prime time for changing business models and industrializing processes so they are more repeatable and reusable. Maintain Price Discipline Companies that drop prices too aggressively and across too many products and services are usually making a big mistake. This makes it much tougher to raise prices when market conditions improve because the price cuts will have de-valued the company’s brand and consumers will be more reluctant to pay the higher prices. Before pulling the price-cutting lever, CE companies should consider which products in their portfolio are differentiated and where to take action. This is also the time to fine-tune the product mix by, for example, focusing on the entry-level products that meet the needs of belt-tightening consumers. Focus on Specific Market Segments Continue to invest in well-targeted market segments such as broadband connectivity and mobility. The same Accenture survey revealed that nearly 44 percent of the respondents do not plan to drop those connections during a prolonged recession. According to the survey, only 3.7 percent of those surveyed are willing to stop using home Internet access – the lowest percentage of any connectivity service. Ranking second lowest was mobile phone service (8.7 percent are willing to stop using) and cable or satellite TV (9.6 percent are willing to stop using). Also, focus on the CE game market, including games played on wireless handheld devices. These products, along with ever-smarter mobile devices and global positioning satellite (GPS) systems, are expected to remain popular. Final Thoughts The current economy, while challenging, offers great opportunities for CE companies to make aggressive changes to their businesses to grow stronger. Think of capitalizing on the convergence of CE devices, network and content industries to deliver compelling new consumer experiences. At the same time, streamline and focus operations to be well on your way to achieving high performance. • Kumu Puri is a senior executive with Accenture’s Consumer Technology practice. Reach her at kumu.puri@accenture.com. March/April 2009 7 4 1 Acquire Key Capabilities and Assets CE companies need to think proactively about how their potential acquisitions may better position them in the market. Companies that acquire a target firm in a recession benefit from a lower “entry price” and less competition. CE companies with a strong financial position can make strategic use of acquisitions to achieve economies of scale, reduce capacity, and therefore price pressure, and add to organic growth. Of course, successful M&A integration remains a key driver for achieving estimated synergies regardless of the economy. 5 2 Sharpen Consumer Focus An increasingly critical driver of consumers’ purchase decisions is the overall experience surrounding the product. This spans the time when they first open the box, through their use of the product, through when they might seek technical assistance. Companies seeking a stronger, sustainable differentiation beyond price must focus on www.ce.org Invest in Innovation It may seem counter-intuitive to invest during an economic downturn, but making targeted, strategic investments can reap big business rewards when the market improves. Accenture research has discovered that CE companies that outperform their competition continue to invest in refreshing their product portfolio – regardless of market conditions. This is true even if the investment a company makes temporarily weakens its balance sheets. 23 http://www.ce.org
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