GCC Companies Growing Despite Challenging Business Environment
Dec 16, 2015
Heidrick & Struggles survey finds business leaders in the region optimistic about economic outlook; Expect to continue to invest and increase headcount in 2016
DUBAI, United Arab Emirates, Dec. 17, 2015 /PRNewswire/ -- A study conducted by Heidrick & Struggles (NASDAQ: HSII), a premier professional services firm serving the leadership needs of top organizations around the globe, shows that senior business leaders in the Gulf Cooperation Council (GCC) are optimistic about the economic outlook despite historically low oil prices and anticipated government spending cuts that could contribute to tougher market conditions in 2016.
According to Heidrick & Struggles' 'Navigating in the Changing Dynamics in the GCC Region Survey 2015', close to 40% of respondents said that their company sales have increased more than 10%. The growth drivers primarily have been government-sponsored spending ahead of Expo 2020 Dubai, as well as infrastructure construction resulting from the target to double retail space in the Emirate by 2020. However, among the respondents, 21% of companies reported a decline in sales.
"Despite the volatility and uncertainty in the GCC business environment, many regional business leaders are confident in their ability to deliver sustainable value. It is remarkable that in the face of these challenges, senior leaders are reporting business growth for 2015 and predicting further growth for 2016," said Steve Mullinjer, Regional Leader, APAC at Heidrick & Struggles.
"Our research shows that to deliver value in an uncertain environment, business leaders need to focus on evidence-based decision-making to drive the development of their business strategy," Mullinjer continued. "This represents a 'new normal', where visionary leaders determine a strategy based on the feedback and evidence gathered from different levels of employees within an organization, and then drive the strategy across the organization through alignment and engagement."
Business conditions are getting tougher, but opportunity is available
Nearly nine in ten respondents agreed that the business environment in the region has become more volatile over the last 18 months and more challenging than in 2014. Reduced customer spending (34.6%), more intense market competition (33.6%), talent recruitment (31.6%) and the need for increased productivity (31.6%) are the four biggest challenges participants say they are facing. The reduced oil price (79.2%), government spending cuts (51.4%) and wider regional conflicts (38.6%) were cited as some of the factors that may contribute to tougher market conditions and could indicate a similar business environment outlook for next year.
"This has been a turbulent year and business dynamics have been changing rapidly in the region," said Michael Morcos, Managing Partner of Heidrick & Struggles' Middle East and North Africa Practice. "Many businesses have been impacted by issues such as the significant reduction in the oil price, growing regional conflicts, increases in labor costs, and stronger market competition. This has resulted in business leaders becoming more agile, and has encouraged them to think differently about senior team deployment so they can respond effectively to the changing dynamics."
Leaders maintain optimistic outlook as government-led initiatives continue
Companies in general have a neutral-to-positive outlook on economic conditions over the next three years (neutral 37.6%; positive 42.5%). In fact, up to 70% of respondents are expecting sales to increase. Government-led initiatives are the key factors that contribute to the positive outlook, including the developing infrastructure (39.5%), the GCC's robust economic growth forecasts (37.2%), spending ahead of Expo 2020 Dubai (37.2%), as well as confidence in the GCC political leadership (32.5%), especially for respondents in conglomerates and the Industrial and Consumer sectors. The majority of business growth in the next three years is expected to come from the Middle East, as 25.7% and 16.8% of respondents said that growth will come from within the GCC region and Iran, respectively.
Businesses in the GCC will continue to invest and hire
Compared to 2014, more than half of the respondents had increased their investments in the GCC so far in 2015. Of these, 23.7% are aiming to expand their business in other geographies and 17.8% are looking for M&A opportunities, with around 3% considering closing their offices within or outside the GCC. In addition, more than half of the respondents said they will increase their headcount in 2016, while 26% said they have no plans to add to the headcount.
"Business leaders in the GCC have continued to deliver value despite the uncertain and volatile environment. As we move toward 2016, governments will play a critical role in driving business confidence and additional growth in the region," said Michael Morcos.
About 'Navigating in the Changing Dynamics in the GCC Region Survey 2015'
Conducted in September and October 2015, the survey solicited responses from 119 senior executives from multinationals, family-owned businesses, government-related entities and governmental organizations operating in the GCC region, with 47% of them from organizations with more than 5,000 employees.
About Heidrick & Struggles
Heidrick & Struggles (NASDAQ: HSII) serves the executive talent and leadership needs of the world's top organizations as a premier provider of leadership consulting, culture shaping and senior-level executive search services. Heidrick & Struggles pioneered the profession of executive search more than 60 years ago. Today, the firm serves as a trusted advisor, providing integrated leadership solutions and helping its clients change the world, one leadership team at a time. www.heidrick.com