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Greater efficiency is the way forward for Middle Eastern businesses
By Garry Gürtler, vice-president for Middle East region at Regus.
October 30, 2013 9:47 by kippreport
There’s a repetitive quality to the reports of economic commentators right now. Month after month, their assessments of the state of the economy report similar diagnoses of ‘fragile’ or ‘measured’ global recovery.
The latest edition of the Regus Business Confidence Index seems to reinforce this view that the world continues along the same cautious path. Between April and October this year, the index has changed by just one point, while the number of companies worldwide reporting revenue growth stayed the same (at 49 per cent and 39 per cent respectively).
So are Middle Eastern business sentiments virtually identical to what they were six months ago? Actually, no. If you look deeper into the research, so much has changed. The surface may appear as unaffected, but there’s significant activity underneath – it’s a bit like watching ducks or swans swimming.
Movements under the surface
Firstly, confidence in emerging and mature economies is travelling in different directions. The Regus Business Confidence Index shows that optimism in mature economies rose by five points in six months, while it fell by nine points for emerging economies. The latter are still slightly more confident overall, but the gap is narrowing. Also, the only economy with the highest confidence levels is not a BRIC country, but Germany.
Equally, while the global index only moved by one point, individual countries have revealed some dramatic mood swings: The UK is up by 23 points in April 2013 to 117 points (the overall index stands at 113 points, from a starting point of 100 in 2009). Meanwhile, Mexico is rather less buoyant, with an index score that’s plummeted from 135 points to 111. Definitely, ripples are prevalent on the surface.
The research also shows that change is afoot in the way businesses operate. Faced with limited global growth prospects, companies are focusing on operational efficiency as a way to achieve sustainable profitability growth. They’re making significant changes in the way they operate every day, including their relationships with service providers and HR management.
Businesses target efficiency gains
Regus’ research surveyed more than 20,000 businesses globally regarding their plans for becoming more efficient and four priorities emerged:
• Using better and more efficient service providers (53 per cent)
• Achieving higher returns on marketing and advertising investment (41 per cent)
• Improving staff retention (36 per cent)
• Using less fixed office workspace (34 per cent)
Within this picture, individual country trends stand out. For example, in India and China, where rapid growth has intensified the competition for talent, improved staff retention heads the list of priorities. In the UK, where there has been extensive media coverage on broadband tariffs and service quality, 62 per cent of firms are intent on getting better value from suppliers of services, such as telecom and utilities.
The quest for better service providers
Changes in the way firms use suppliers and what they expect from them is one of the trends noted in a report by Ernst & Young, called Trading Places. It notes that businesses will maintain the trend of increasingly seeking single global suppliers to service multiple markets – 67 per cent of companies reveal that they’re developing their supply chain to service their growth in emerging markets.
Following such practises enable companies to enjoy consistent standards worldwide – to know that their service providers are available to support them in each new market and reduce the paperwork entailed in dealing with multiple service providers. For example, salesforce.com – the world’s largest CRM platform – uses Regus’ flexible workspace in more than half of its global locations. Being able to handle its worldwide needs, via a single point of contact, makes its global expansion more manageable and efficient, and helps maintain resources.
Saving on resources
That same intent – using resources better – lies at the heart of all four efficiency strategies highlighted in the Regus Business Confidence Index: Competent relationships with suppliers save time and money; retaining talent avoids the high costs of recruiting and training new staff; avoiding huge upfront capital costs; and inflexible rental commitments of traditional fixed workspace frees up money to invest in other aspects of the business.
Mature and developing economies may be taking different directions in terms of confidence businesses, but those are remarkably similar in terms of how they’re targeting greater efficiency and competitiveness. They’re avoiding the mistakes of previous years, such as locking themselves into fixed real estate, and looking forward to a more efficient and agile future. Businesses in the Middle East region should absorb these same lessons.