Europe Key Trends in 2017
2017 was an interesting moment in time which brought to light an opportunity for re-evaluation and reconfiguration for many businesses and industries in the face of several disruptions. As we start 2018, I wanted to highlight some of the key trends in Europe and what we should expect in the year ahead.
1. Disruption in the Market
Whether it be political, technological, or industry-related (new market entrants), disruption seems to be our new normal. With these disruptions, people and companies have to react more instantaneously, yet decisively.
We are seeing many business leaders still struggle on how to respond to disruption especially when they are being disrupted and not the disruptor. Oftentimes, they must make a choice between being disrupted or being the disruptor. Choosing to commit to one or the other can be challenging. It also requires changes in strategy and in the resulting operating model shifts. We expect to see a continued disruption with fortune favoring those brave enough to capitalize on opportunities in a shifting landscape.
2. Geo-Political Issues Affecting the Global Economy
What makes the geo-political issues of 2017 stand out is its high level of uncertainty.
In the US, the President Donald Trump has been unpredictableregime continues into its second year. Economically, the US position has strengthened and on the back of tax reform there is greater confidence, although cheap money supply is really the root of the expansion. In some ways the concern is overheating. We see this in the private equity markets where values are relatively high again. This has made it difficult to peg what his next policy will be, much less get a grasp of what his position and rhetoric would bring to the global stage in the next 18 months.
For Brexit and the ongoing negotiations within the European Union, its effects in the UK will vary per industry sector. While we anticipate its impact to hit the financial industry, retail sector and food manufacturing first, it’s still too early to tell how it could play out.
In France, we saw the entry of Emmanuel Macron as a centrist figure. Moving towards internal reform while having a pro-European or globalist approach externally signifies a substantial change for the country. Overall, there is hope of attracting businesses to create decision centers in France which could lead to an economic transformation for the country. Only time will tell how that will play out.
3. The China Effect
The China effect is now moving in reverse. Instead of the rest of the world going to China in the past, China is now going to the rest of the world. With plenty of available capital, Chinese outbound M&A is buoying up private equity markets and increasing competition on deals.
4. Rising Activist Investor Climate in Europe
Many corporates still struggle with growth and profitability in zero-sum game markets such as Europe, especially with an increasing activist investor climate. Subsequently, shareholder activism has forced corporates to act and has increased pressure on business leaders for asset return improvement.
5. Technology Defining Tomorrow
Globally, technology is changing how we do business today. From how consumer behavior to how people digest content for entertainment to business operations to bitcoin or cryptocurrency investments and tracking — technology is defining what the future will be for both corporates and consumers.
We know technology is ever-changing and expect these changes — small or revolutionary — to keep driving progress and growth.
We also expect that corporates, companies and consumers will have an increasing need for security and risk protection. There has been a rising focus on enterprise risk management, in particular, cyber risk, geo-political risk, and supply chain risk/reputation. So as we continue to evolve with technology, we anticipate the need for constant evaluation, assessment and preparedness.
A new year often comes with change. For Europe, that change has been continuous disruption and business volatility. This business environment requires a quick-moving, open-minded approach. It’s essential for European businesses and business leaders within an organization to move forward with the focus and willingness to embrace the opportunities presented in 2018.
Based on the market trends in Europe, I believe the following will be key to success in the year ahead:
1. Culture. Fostering organizational engagement and a culture that thrives on rapid change.
2. Proactivity. Assessing and anticipating the changes ahead allows you to move faster than the changes happening around you.
3. Openness. Avoiding the comfortability of being insular. Lateral hires can be helpful in bringing constructive disruption and the right change to a company.
Those who do the above will fair better than those resting on their laurels of yesterday. Change can be a good thing. Change can not only provide a fresh start to grow bigger and better but also to grow different.
To learn more about our Alvarez & Marsal Europe team, visit: https://www.alvarezandmarsal.com/