Navigator 2020 Germany - Together we thrive - Presseportal

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Navigator 2020 Germany - Together we thrive - Presseportal
Navigator 2020
Germany

                 Together we thrive
Contents                                          1. Overview

1. Overview                                       Competitiveness and                               Current status of business                                   Germany
                                                                                                                                                                 Global
2. Business outlook                               customer focus help
                                                                                                                         Surviving day-to-day
3. Future strategy                                German businesses adapt
4. International trade                            to the new normal
5. Reshaping supply chains                                                                                    10%                                  19%
6. Sustainability
Survey methodology                                German expectations of business growth
                                                  have waned in the wake of COVID-19. As                          Adapting to a changing environment
                                                  a result, companies are taking a more
                                                  cautious approach to future investing
                                                  than their global peers. However, the
                                                  proportion adapting to the new normal
                                                  mirrors the global figure, achieved

Introduction
                                                  through focusing on entrepreneurialism,
                                                  competitiveness and customer-centricity.
                                                                                                      58%                                                     58%
                                                  Looking ahead, intra-regional trade remains
                                                  dominant, with fewer German businesses
The German government’s response to               anticipating an upswing in international
COVID-19 has been impressive, both in terms       trading. Supply chains are a concern, with
of public health and fiscal support. The latest   priority given to suppliers within home regions
fiscal package in June included VAT cuts to       that can deliver fast, plus improved security,
boost spending and employment. Shortly            cost reduction, and lower exposure to one
                                                                                                                      Thriving in the new normal
before our 2020 Navigator survey opened,          single market.
it also extended its short-time working
scheme and relaxed its corporate insolvency       Although generally seen as good for business,
law. But unemployment and corporate               Germany’s engagement with sustainability is
bankruptcies could rise when these initiatives    lower than globally. Pressure from consumers              32%                                     24%
end, hampering recovery in 2021. And as           and governments, among other influences, is
everywhere, further waves of COVID-19             likely to increase the focus.
pose an ongoing threat.

                                                                                                                                                Navigator 2020 Germany   |   2
2. Business outlook

                                                                                                                                                                                 %
German business is less                                                                       When businesses expect to return
optimistic about future                                                                       to pre-COVID levels of profitability
growth than its global peers

                                                       65       %
                                                                                                              Already ahead of our
                                                                                                              pre-COVID levels       End of 2020 to 2022          2023 to 2025

Consistent with global findings,                                                                    Spain
optimism among German businesses has
declined. Only 15% feel more confident                                                              Russia
than a year ago – the lowest in Europe,
and half the global proportion.                  of businesses expect                              France

Expectations of revenue growth have also
                                                 to return to pre-COVID
                                                                                                  Belgium
fallen by 20% compared with 15% globally.        profitability levels by
What’s more, the proportion of German
                                                 the end of 2022                                       UK
companies that fall into the higher growth
category is below the global average.                                                              Greece

Encouragingly, more German businesses                                                            Germany
say they are thriving in the new normal than
globally. They’re also slightly ahead of the                                                          Italy
global average for when they might return
to pre-COVID levels of profitability.                                                          Netherlands

Of the strategies available to aid recovery,     Top 3 drivers of business growth                  Ireland
enable growth and increase competitiveness,
German businesses intend focusing on
defensive cost-cutting, pro-actively expanding
                                                      1             2              3               Poland

                                                   Company      Introduction   Technology-
to new markets and improving products and
                                                    culture /      of new         driven          Sweden
services.                                          motivated     products &    efficiencies
                                                   workforce       services
                                                                                               Switzerland

                                                                                                                                                           Navigator 2020 Germany   |   3
2. Business outlook (continued)

                                                                                                   %
How   business outlook has changed
  CHANGE IN BUSINESS OUTLOOK VS PAST 12 MONTHS [Q15]
  Germany
                                                                                                         Business investment
in the last 12 months*
                                                                                                         German companies are more conservative

                                                                                                                                                                                59%
                                 More pessimistic    More optimistic or
                                                                                                         about investing than their peers: six in
                                                     expect to stay the same                             ten (59%) intend increasing investment,
                                                                                                         compared with two-thirds globally and
                                     22             2019                                  77
      Germany
                                                                                                         in Europe (67% and 64%). They are also
                            34                      2020                        65                       cautious about the level: a third (34%)
                                                                                                         plan to increase investment by 10% or
                                                                                                         more, compared with half globally.
                                        20          2019                                      80
        APAC
                              32                    2020                            68                   These businesses will focus investment on                     of German businesses
                                                                                                         product innovation, the customer experience,
                                                                                                         employee wellbeing, expansion into new
                                                                                                                                                                       intend to increase
                                        20          2019                                      79
       Europe                                                                                            markets and marketing. But in each case                       investment in their
                           36                       2020                       62
                                                                                                         the proportion is lower than globally.
                                                                                                                                                                       business in the
                                              12    2019                                            88   Four in five companies plan to increase                       next year, despite
       North
      America                      26               2020                                 73
                                                                                                         investment in technologies that facilitate product/           the challenging
                                                                                                         service innovation, automation/operational
                                                                                                         efficiency, and targeting new customers.                      environment
                                              13    2019                                           86
       South
      America                           18          2020                                      80

                                                                                                         Strategies of German businesses to benefit
       MENAT
                                             15     2019                                           85
                                                                                                         from growth drivers and address threats
                                     22             2020                                  77

                                                                                                                 1               2                3                4                 5
       Rest of
                                        18          2019                                       82           Cutting costs    Expanding         Improving       Investing in     Collaborating
       Africa                                                                                                                 into new       the quality of    new skills /      more with
                              32                    2020                            67
                                                                                                                               markets      the products /      employee      industry partners
                                                                                                                                                services        wellbeing          / peers
*Excludes businesses answering 'Don't know'

                                                                                                                                                                                 Navigator 2020 Germany   |   4
3. Future strategy

                                                                                                                                                                                                                                                                                                  %
For German businesses,                                                      Investment priorities enabling
entrepreneurialism                                                          businesses to move forward
and innovation are key
to future success
                                                                            85 84                                           81                     81                     80         79               77               75           74          72              72               68 63
More companies in Germany have

                                                    84
implemented changes over the last 12

                                                                 %
months than globally, with a higher
proportion of long-term/transformational
changes – particularly among corporate,
international and offline businesses. In
line with the global position, the key
reasons were cost reduction, advances
in digitisation, future uncertainty, and
regulatory requirements.                            of businesses have

                                                                             Product innovation

                                                                                                       Process innovation

                                                                                                                            Upskilling workforce

                                                                                                                                                   Employee wellbeing

                                                                                                                                                                         Customer
                                                                                                                                                                        experience

                                                                                                                                                                                     Sales channels

                                                                                                                                                                                                      New markets

                                                                                                                                                                                                                        Marketing

                                                                                                                                                                                                                                    Cashflow

                                                                                                                                                                                                                                                 Supply chain
                                                                                                                                                                                                                                               transformation

                                                                                                                                                                                                                                                                Cyber security

                                                                                                                                                                                                                                                                                 Sustainability

                                                                                                                                                                                                                                                                                                  Digital-only
                                                                                                                                                                                                                                                                                                         tools
                                                    undergone changes
German businesses believe the successful
companies of the future will be well-rounded
                                                    in the last 12 months
and defined by innovation. More than half
(55%) say that becoming more entrepreneurial
will make their business more customer-
centric. Half say it will make them more
competitive, and just under half (45%) say                                  Top 5 facets of a successful entrepreneurial business
it will improve their people focus.

There are clear and tangible benefits to
                                                                                                     1                                             2                                 3                                    4                           5
                                                                                                   Technical                                    Agility /                          Open-                            Recognising                  Speed
becoming more entrepreneurial: three in ten                                                       innovation                                  capacity for                      mindedness /                         the vailue                to market
businesses in Germany believe it will lead to                                                                                                   change                           inclusivity                          of failure
an increase in market share, in line with global.

                                                                                                                                                                                                                                               Navigator 2020 Germany                                  |    5
4. International trade

A less optimistic outlook                                                                   Priorities for expansion in the next 3-5 years
prompts Germany to
                                                                                            Markets, territories and regions in which German businesses are looking to expand
maintain focus on
intra-regional trade
                                                         63          %                        Markets & territories   Regions

Fewer German companies think
international trade has or will become
more difficult than their global peers.
This reflects the lower proportion (40%         of companies expect
compared with 64% globally) who
believe protectionism has increased.
                                                their international trade
                                                prospects over the next
Despite this, fewer businesses expect their
                                                1-2 years to be positive
international trade prospects over the next
couple of years to be positive (63% compared
with 72% globally). But sentiment appears to
be improving, with more German companies
not reducing external trade in the past two     Protectionism
years, as well as not considering doing so in
the next two years, than in 2019.               Percentage of businesses that think
                                                that countries/territories/governments
Intra-regional trade remains dominant in        are becoming more protective of their
Germany – seven in ten businesses trade
within Europe, with Austria and France the
                                                domestic businesses
                                                                                               10%                                                                                 11%
                                                50
most important markets. And slightly more
                                                                                                 US
                                                                                                                 5%                                               19%              APAC
German companies (15%) are opting to
operate domestically only than in 2019 (11%),   40                                           (9% in 2019)                         11%             42%                           (14% in 2019)
                                                                                                               Central                                            Austria
instead of expanding internationally.
                                                30                                                            and South                                        (18% in 2019)
                                                                                                                                  France          Europe
                                                                                                               America
                                                  2017        2018       2019        2020                                       (8% in 2019)   (48% in 2019)
                                                                                                             (9% in 2019)

                                                                                                                                                               Navigator 2020 Germany    |   6
5. Reshaping supply chains

Supply-chain anxiety
                                                                                                                                                                                                                                                                                                                                                                                                                  %
                                                                                                    Priorities for the supply chain
motivates companies to                                                                              (Priorities immediately in 2021 and beyond)
reassess selection criteria

                                                          44%                                       70 69 68
                                                                                                                                                                                                     65
                                                                                                                                                                                                                                        62 61                                                           61 60 60
Nearly nine in ten German companies
(89%) have concerns about their supply
                                                                                                                                                                                                                                                                                                                 58
chains, chiefly around increasing costs,                                                                                                                                                                                                                                                                                                                                                                          51
instability and insufficient agility.
                                                   of businesses expect
In response, they are selecting suppliers
according to their operational resilience and      that reshaping their
ability to deliver quickly, as well as their use   supply chain will
of digital/technology. Businesses have also
focused on suppliers located within their
                                                   reduce costs
home regions.

Of the companies that have made changes,
slightly more have reduced their supply chain
(20%) than have diversified it (17%) – the
reverse of the global trend.

                                                                                                     Use of digital/technology

                                                                                                                                 Resilient/able to deliver quickly

                                                                                                                                                                     Suppliers closer to customers

                                                                                                                                                                                                     Tighter specifications/contracts

                                                                                                                                                                                                                                        Future pandemic control

                                                                                                                                                                                                                                                                  Suppliers’ sustainability practices

                                                                                                                                                                                                                                                                                                        Greater transparency

                                                                                                                                                                                                                                                                                                                                 Focus on home region

                                                                                                                                                                                                                                                                                                                                                        Work with more suppliers

                                                                                                                                                                                                                                                                                                                                                                                   Transport/storage management

                                                                                                                                                                                                                                                                                                                                                                                                                  Work with fewer suppliers
Looking ahead to 2021, businesses will invest      Top 3 benefits of reshaping
in areas of the supply chain that reflect the      the supply chain
changes they’ve been making. They expect
these priority areas to reduce costs, as well
as minimise exposure to one single market,
                                                         1            2                3
                                                        Cost       Reduction      Enhancement
while also improving security.                        reduction   of exposure      of security/
                                                                     to one     reduction of risk
                                                                     market      to supply chain

                                                                                                                                                                                                                                                                                                                               Navigator 2020 Germany                                                                    |                    7
6. Sustainability

Greater focus on                                                            Companies believe a greater focus
sustainability is expected to                                               on sustainability will drive growth
benefit German business

                                                                            50%      expect modest growth
                                                                                     of up to 5%

German companies recognise that
sustainability is good for business,
                                                                            19%      expect growth of
                                                                                     between 6% and 9%

                                                 86
although less so than their global

                                                              %
peers. And while nearly three-quarters

                                                                             4%
(73%) expect an increased focus on                                                  expect growth of
sustainability to result in sales growth,                                           10% or more
this is also a lower proportion than their
global counterparts (86%).

Approximately three-fifths of German
companies have set targets for a broad range     of German companies
of environmental, social and governance-         think there are multiple   Measuring sustainability
related (ESG) elements. Again, though, this
is a lot lower than the global proportion,
                                                 opportunities for their    More companies in Germany have been measuring all 3 aspects compared with 2019
which stands at around three-quarters.           business from improving
The metrics that have seen the biggest
                                                 its environmental and
increases since 2019 include energy usage        ethical sustainability
(almost twice the level of a year ago), labour
                                                                            2019                  65%                        55%                      34%
standards, and executive salaries and
compensation.                                                                                                                                         40%
                                                                            2020                  76%                        70%
Over the year to come, businesses believe
that consumers, governments and supply
chains are the most likely to ramp up
pressure to be sustainable.                                                                  Environmental                   Social               Governance

                                                                                                                                          Navigator 2020 Germany   |   8
About HSBC Navigator Germany                       For further information about
The HSBC Navigator survey, which is the            the research please contact:
largest of its kind, is conducted on behalf of
HSBC by Kantar. The study gauges sentiment         Kate Woodyatt
and expectations of businesses in the near to      HSBC Global Communications
mid-term future on topics including: business      katewoodyatt@hsbc.com
outlook, future strategy, international trade,
supply chains and sustainability. It is compiled   Or click on
from responses by decision-makers at 10,368        www.business.hsbc.com/navigator
businesses – from small and mid-market to
large corporations – across a broad range of       Note
industry sectors in 39 markets.                    There may be a slight discrepancy between
                                                   the sum of individual items and the total as
Sample sizes for each market were chosen           shown in the tables due to rounding.
to ensure the statistical accuracy of results,
with 350 businesses surveyed in Germany.           Whilst every effort has been made in the
Global results are based on an average of the      preparation of this report to ensure accuracy
39 markets (using weights based on each            of the statistical and other content, the
market’s share of world trade). The survey was     publishers and data suppliers cannot accept
conducted between 11th September and 7th           liability in respect of errors or omissions or
October 2020. Interviewees were polled on a        for any losses or consequential losses arising
range of questions including how COVID-19          from such errors or omissions. The information
has affected their business and potential          provided in this report is not intended as
for growth. The survey represents a timely         investment advice and investors should
source of information on the fast-evolving         seek professional advice before making any
international business environment.                investment decisions.
.

                                                                                                    Navigator 2020 Germany   |   9
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