GT IBR 2011 - The global economy in 2012

GRANT THORNTON INTERNATIONAL BUSINESS REPORT

The global economy in 2012: a rocky road to recovery

Contents

01 Foreword

02 The past 12 months

04 The year ahead

05 Business confidence

08 Business operations

13 Investment

15 Inflation

18 Employment

22 Access to finance

24 Topical issues

30 Methodology

32 IBR participants

Grant Thornton IBR 1

Foreword

The International Business Report(IBR) became a quarterly survey in2011, allowing us greater flexibility in analysing and understanding theimpact of key events on businessgrowth. This new approach allows us to deliver not only the economicperspective of business leaders onevents such as the Arab Spring,renewable energy and global leaseaccounting changes, but also deepinsight into strategic issues such as theproportion of women in seniormanagement and corporate socialresponsibility activities. Drawing onmore than 13,000 interviews in 40economies, this report explores thetrends that will shape the speed andtrajectory of the recovery over thenext 12 months, including demand,employment, investment, inflationand access to finance.

We have witnessed a large amount ofpolitical and economic turmoil overthe past 12 months, from uprisings inthe Middle East and North Africa tothe tsunami in Japan and the sovereigndebt crisis in the eurozone. Resultingvolatility in commodity prices,disruptions to supply chains andgeneral uncertainty has impactedbusinesses across the globe, slowingthe recovery in both mature andemerging markets.

As the IBR enters its 20th year, theglobal economic outlook is uncertainand social unrest is growing. Inmature markets, debt crises and theimpact of ageing populations remainunresolved whilst emerging marketsare grappling with persistent inflationand a shortage of skilled workers. Astechnology advances, competitionincreases and the balance of economicpower flows to high-growth marketssuch as Brazil, China and India, theglobal economy is undoubtedlyentering a new phase.

Despite this apparent adversity,many of our clients are thriving. Byremaining agile and adaptable tochange, these dynamic organisationsare able to capitalise on opportunitiesquickly. In a turbulent world, theylook set to reap the richest rewards.

ED NUSBAUM CHIEF EXECUTIVE OFFICERGRANT THORNTON INTERNATIONAL

2010

2 Grant Thornton IBR

The past 12 months

Global businessoptimism isrobust (23%), led by buoyantLatin America 4

Jan20

11

M&A activity setto rise over theyear asbusinesses lookfor strategicacquisitions16

Feb

2011

8 Mar

2011

InternationalWomen’s Day –proportion ofseniormanagement rolesheld by womenfalls back to 20%14

Mar

2011

WorldEnvironmentDay – publicopinion drivingCSR activity5

Jun20

11

Businessconfidence picksup in maturemarkets, boostingthe global averageto 34%

Mergers and acquisitions: globalprospects for growth

International Business Report 2011

BRICSgroup ofeconomiesmeet for the firsttime inChina

14 Apr

2011

Death of MohamedBouazizi ignitesArab Spring

18 Dec

2010

Tunisiangovernmentfalls

14 Jan

2011

EgyptianPresident, Hosni Mubarak,resigns

11 Feb

2011 UN Security

Councilbacksinterventionin Libya19

Mar

2011 Sony disclose that hackers

breached their online video gamenetwork, stealing details of morethan 77 million customers

27 Apr

2011

Estimated 2 billion peoplewatch UK Royal wedding

29 Apr

2011

OsamaBinLadenkilled

Portugalbecome thirdmember ofeurozone tobe bailed out,followingGreece andIreland

16 M

ay20

11

Brent crudeoil climbsaboveUS$125 a barrel

8 Ap

r20

11

1 May

2011

11 M

ar20

11 Earthquakeand tsunamihit Japan

23%

34%

World events

IBR releases

2011


Global businessoptimism falters(31%) as naturaldisasters, politicaland economicunrest bite6

Jul2

011

Arab Springreignitesrenewableenergy debateas businessesacross the globecall for moreinvestment inrenewables tolimit impact of oil price shocks9

Sep20

11

Businessconfidencetumbles tolowest levelsince 2009(3%)

Ed Nusbaumcalls for a$1tr bailoutfund and cut to ECBinterest rate 6

Oct

2011

24 Oct

2011

IBR Food &Beverage report released 25

Nov

2011

IBR 2011 Global OverviewD

ec20

11

Arab Springaffects one-in-fivebusinessesglobally, but justone-in-ten will avoidregion long-term21

Jun

2011

GRANT THORNTON INTERNATIONAL BUSINESS REPORT

The world economy in 2012: a rocky road to recovery

Managing through uncertainty:Food and beverage industry in transitionWary consumers and rising prices challenge executives around the globe

16 Nov

2011 Emerging markets

steal social medialead on old worldrivals

Christine Lagardeappointed head of the IMF

28 Jun

2011

SouthSudansecedesfromSudan

9 Jul2

011

Secondbailout agreed forGreece28

Jul

2011 US sovereign debt

downgraded to AA+following political battleover debt ceiling6

Aug20

11

YingluckShinawatraappointed asfirst femalePrime Ministerof Thailand

5 Au

g20

11 Gold reachesUS$1,900per ounceafter globalstock marketstumble

23 Aug

2011

28 Sep

2011

Italy’s debt ratingslashed by threegrades as eurogloom deepens 4

Oct

2011

Steve Jobs, co-founder of Apple, dies 5

Oct

2011

Barnierproposals aim to boostcompetition inaccountancy

31 Oct

2011 Global population

reaches 7 billion

3 Nov

2011 ECB cuts eurozone

interest rate withforecasts downbeatfor regional growthin 2012

9 Nov

2011

Majority ofbusinesses areunaware ofIASB/FASB leaseaccountingproposals

Russia to join WTO followingagreement withGeorgia

20 Oct

2011 Colonel

Gaddafi captured and killed in Libya

31%

3%


Whilst a stuttering global recovery has seen growthestimates cut across the board, the transfer ofeconomic power from mature to emergingeconomies is speeding up. On a purchasing powerparity basis China could overtake the United Statesin 2016 as the world’s largest economy, although itwill remain markedly less well off on a per capitabasis.

The recovery in mature economies has stalled asgovernments and consumers deleverage followingthe financial crisis. With businesses cautiouslysitting on cash and global trade slowing, growthprospects in mature markets look weak. The latestIMF forecasts show advanced economies growingby just 1.6% in 2011, and 1.9% in 2012, anaemicgrowth in comparison with pre-crisis levels.

With the global economy forecast to expand byaround 4% in both 2011 and 2012, growth is beingdriven by emerging markets. As a group these areexpected to grow by 6.4% in 2011 and 6.1% in2012. Oil producing economies in the Middle Eastand North Africa are running large trade surplusesand opening up to investment following the ArabSpring, suggesting that the shift in economic powercould accelerate further.

That said, further and faster integration into theglobal economy exposes emerging economies to theslowdown in mature markets whilst inflationremains an issue in the key markets of Brazil, Chinaand India. Consequently, whilst confidence hasimproved year-on-year, businesses remain cautiousabout their prospects for the year ahead.

The year ahead

FIGURE 1: EMERGING ECONOMIES CATCHING UPFORECAST GROWTH IN GDP

Developing Asia 8.2 8.0

Emerging economies 6.4 6.1

Sub-Saharan Africa 5.2 5.8

ASEAN-5 5.3 5.6

CIS 4.6 4.4

Latin America and Carribean 4.5 4.0

World 4.0 4.0

MENA 4.0 3.6

Advanced economies 1.6 1.9

EU 1.7 1.4

G7 1.3 1.7

2011 2012

SOURCE: IMF (2011)

“Economies such as China are catching up fast.With growth rates in mature markets notexpected to reach pre-recession levels anytimesoon, a rebalancing of global economic power is well underway.”

XU HUA GRANT THORNTON CHINA

Global business confidence for the year ahead hasfluctuated as the strength of the recovery, whichinitially seemed to be gathering force, hit a wall. Atthe back end of 2010, confidence in emergingmarkets, especially Latin America, boosted theglobal average to 23%, and when mature marketsbegan to catch up in Q1 this climbed to a veryhealthy 34%, the highest since 2008.

However, the impact of political turmoil,economic uncertainty and natural disasters onbusinesses became evident in Q2 as globaloptimism dropped to 31%. By Q3 it became clearthat the stuttering recovery had stalled, with thesovereign debt crisis ravaging mature markets;global optimism fell to just 3%, its lowest levelsince the depths of the global recession in 2009.

Whilst businesses in emerging markets haveremained more confident about the prospects fortheir economies over the next 12 months, they havenot been immune to the slowdown in the globaleconomy. Optimism in the BRIC economies fellfrom 57% in Q1 to 25% in Q3. However,businesses in mature markets have suffered evenmore: optimism amongst businesses in the G7 fellfrom 27% in Q1 to -8% in Q3 (indicating thatmore businesses were pessimistic about theireconomies over the next 12 months than wereoptimistic).


Business confidence

“The situation in Greece is very difficult.Government austerity measures have dried uplucrative public sector contracts and increasedtaxation. Businesses are trying to keep theirheads down and focus on the bottom line.”

VASSILIS KAZASGRANT THORNTON GREECE

FIGURE 2: QUARTERLY BUSINESS OPTIMISM (2011)NET PERCENTAGE OF BUSINESSES INDICATING OPTIMISM FOR THEIR ECONOMY OVER NEXT 12 MONTHS

70

60

50

40

30

20

10

0

-10

-20

Q4 2010 Q1 2011 Q2 2011 Q3 2011BRIC 54 57 44 25

G7 11 27 27 -8

Global 23 34 31 3

SOURCE: GRANT THORNTON IBR 2011


Over the longer term the polarisation betweenemerging and mature markets is more pronounced,with confidence in the BRIC economies well abovethat of the G7. Year-on-year, global businessoptimism declined slightly from 24% in 2010 to22% in 20111. In the BRIC economies, levels ofoptimism for the year ahead averaged 47% across2011 compared to just 14% in the G7.

That said, whilst 8% more businesses in the G7countries were optimistic in 2011 compared to2010, 13% fewer businesses were optimistic in theBRIC economies. This demonstrates thecautiousness of businesses in the emerging marketsas they become increasingly exposed to strongglobal economic headwinds.

Despite an uncertain economic climate themajority of businesses remain optimistic for theoutlook of their country’s economy over the next12 months, led by emerging economies – India(+86%), Chile (+85%) and the Philippines(+85%). Business confidence also remains high inthe United Arab Emirates (+76%) suggesting thatconfidence has not been damaged unduly by the‘Arab Spring.’

The troubled PIGS economies (Portugal2,Ireland, Greece and Spain) remain overwhelminglypessimistic. Greece (-46%) and Spain (-45%) inparticular face extremely difficult economicconditions with soaring unemployment and asteady decline in bond ratings. Italy’s businessconfidence also plummeted between Q2 and Q32011, falling by 66 percentage points reflectingconcerns over a high debt burden and a slow rate ofgrowth which have seen bond yields climb over7%. Japan’s confidence remains low (-67%) whereexisting economic challenges have been compoundedby the fallout from the earthquake and tsunami inMarch this year.

1 2011 refers to the Q3 rolling average incorporating data from Q4-2010,Q1/Q2/Q3-2011

2 not included in IBR

“The past 12 months have been far fromsmooth. Three massive earthquakes have causedhuge disruption to businesses and theiremployees. The good news is that the RugbyWorld Cup has been a massive success.”

PAM NEWLOVEGRANT THORNTON NEW ZEALAND

FIGURE 3: ANNUAL BUSINESS OPTIMISM (2003-11)NET PERCENTAGE OF BUSINESSES INDICATING OPTIMISM FOR THEIR ECONOMY OVER NEXT 12 MONTHS

80

70

60

50

40

30

20

10

0

-10

-20

-30

-40

-50

2003 2004 2005 2006 2007 2008 2009 2010 2011BRIC – – – – 81 80 39 60 47

G7 -18 38 36 20 22 15 -41 6 14

Global 3 40 41 39 45 40 -16 24 22


“Considering the difficulties in the eurozone,business confidence has held up remarkablywell in Germany. Whilst the regional picture isfairly gloomy, exports to emerging economieshave remained resilient.”

KLAUS-GÜNTER KLEINWARTH & KLEIN GRANT THORNTON, GERMANY


FIGURE 4: ANNUAL BUSINESS OPTIMISM BY COUNTRY (2011)NET PERCENTAGE OF BUSINESSES INDICATING OPTIMISM FOR THEIR ECONOMY OVER NEXT 12 MONTHS

India

Philippines

Chile

United Arab Emirates

Germany

Georgia

Mexico

Sweden

Canada

Argentina

South Africa

Brazil

Singapore

Vietnam

Hong Kong

Switzerland

Turkey

Botswana

Malaysia

Thailand

China (mainland)

New Zealand

Denmark

Armenia

Belgium

Australia

Taiwan

Finland

Poland

United States

Russia

Netherlands

Italy

France

United Kingdom

Ireland

Spain

Greece

Japan

Very pessimistic Slightly pessimistic Slightly optimistic Very optimistic



Expectations of business performance – how muchbusinesses are selling and how this is affecting theirbottom line – have fluctuated along with widereconomic expectations; an indication of how theuncertainty in the global economy is damagingbusiness growth prospects. With governments andconsumers in many mature markets deleveraging,the hope was that investment and exports wouldtake up the slack. However, the results show adramatic fall in business growth prospects in thelast quarter: global expectations for revenue (-10percentage points) profits (-9) and exports (-5) alldropped sharply in Q3.

That said, average expectations for 2011compared with 2010 improved, although lesssharply than in the previous 12 month period whenthe recovery seemed more certain. Across 2011,business expectations for profitability and exportexpectations returned to 2008 levels. Turnover(53%) however, remains below the 2008 result(63%).

Business operations

“Despite the knock-on effects of the Arab Springon one side and the sovereign debt crisis in theeurozone on the other, the economy is performingrobustly. Profitability is up as businessesincreasingly find economies of scale in theiroperations.”

AYKUT HALITGRANT THORNTON TURKEY

FIGURE 5: PERFORMANCE INDICATORS – REVENUE, PROFITS AND EXPORTSNET PERCENTAGE OF BUSINESSES EXPECTING AN INCREASE OVER THE NEXT 12 MONTHS

80

70

60

50

40

30

20

10

0

-10

2003 2004 2005 2006 2007 2008 2009 2010 2011BRIC 44 58 63 61 70 63 11 40 53

G7 15 18 18 20 20 18 4 16 21

Global 31 42 45 46 52 41 -5 29 40



Expectations for profitability have shown thestrongest increase year-on-year. This continues thetrend from IBR 2010 and is extremely positivegiven the dramatic fall in 2009 when profitabilityprospects turned negative for the first time in IBRhistory. The greatest increase in expectations overthe past 12 months was observed in Turkey whereconsumer spending fuelled a 39 percentage pointincrease. In Mexico expectations rose by 36percentage points. Once again businesses inemerging markets dominate the top spots forprofitability expectations, with Vietnam (90%)followed by India (79%) and then Mexico,Philippines (both 68%) and Brazil (66%).

Expectations for increasing exports rose to 21% in 2011, similar to results observed in 2006.The EU, which for all its problems remains thelargest single market in the world, leads the way(29%). Businesses in Turkey remain the mostoptimistic for exports in 2011 (54%), followed bythe United Arab Emirates (41%), perhaps reflectingexpectations that the Middle East and North Africawill open up to outside investment following theArab Spring. Businesses in Denmark and Germanyare also optimistic for export prospects over thenext 12 months – making the top five alongsideSingapore.

FIGURE 6: IN SEARCH OF PROFITABILITY – TOP AND BOTTOM 5 COUNTRIESNET PERCENTAGE OF BUSINESSES FORECASTING PROFIT GROWTH OVER NEXT 12 MONTHS, BY COUNTRY


Vietnam: 90%

India: 79%

Mexico: 68% Philippines: 68%

Brazil: 66%Global: 40%

Switzerland: 24%

Spain: 16%

Poland: 15%

Japan: -8% Greece:

-11%

“Household finances remain under pressure from a marked decline in real incomes anda 17 year high for unemployment rates; government spending is hit by fiscal constraintsand exports are faltering as global growth eases. However, in the longer term, we expectmore forward momentum as the valuation gap shrinks and as the Business GrowthFund encourages bank funding to flow more quickly. In the meantime, businesses needto continue challenging the way things are done to find new, creative ways to ride outor even rise above the numerous economic challenges.”

SCOTT BARNESGRANT THORNTON UNITED KINGDOM

BUSINESSES CITING A SHORTAGE OF ORDERS/REDUCED DEMAND AS A CONSTRAINT IN 2011

32%

Revenue expectations have increased in 33countries from 2010. The most notable decline from2010 was in Greece (31 percentage point drop). Themost optimistic business communities in terms ofrevenue prospects are within the emergingeconomies: Vietnam (92%), India (87%) and Chile(85%). Vietnamese businesses remain the mostupbeat (92%) followed by India (87%) and Chile(85%). Expectations for revenue are far lessbuoyant in Greece (4%), Japan (17%), Ireland(28%) and Spain (30%).

DemandImproved prospects for profits and revenues comeon the back of a recovery in global trade with fewerbusinesses citing a shortage of orders/reduceddemand as a constraint in 2011 (32%) comparedwith 2010 (39%). Perhaps unsurprisingly,businesses in the troubled PIGS economies aresuffering most from a drop in demand asgovernments and consumers tighten their belts:41% cite a shortage of orders/reduced demand as aconstraint, followed by 34% in APAC (excl. Japan).

However, a look at the quarterly results makesfor more sombre reading. Globally, the proportionof businesses citing a fall in demand increased byfive percentage points in Q3, and some of theregional figures were more severe: both theeurozone and Association of South East Nations(ASEAN) registered 10 percentage point increases,whilst all other regions (apart from Latin America)cited a squeeze on order books.

Following the disruption to supply chains it isperhaps little surprise to see businesses in Japan asthe most concerned about a shortage oforders/reduced demand (67%), followed by two ofits neighbours, Thailand (51%) – which has alsosuffered severe flooding since July – and Vietnam(48%). European businesses, especially those inGreece (48%), France (42%) and Spain (40%), arealso concerned by a lack of orders.

FIGURE 7: FALLING DEMANDPERCENTAGE OF BUSINESSES CITING A SHORTAGE OF ORDERS/REDUCED DEMAND AS A CONSTRAINT ONGROWTH, BY REGION


PIGS: 41%

APAC (excl. Japan): 34%

BRIC: 32%G7: 32%

Global: 32%

ASEAN: 31% EU: 27%

North America: 25%

Latin America: 18%


BUSINESSES CITING THE IMPACT OF REGULATIONS AND RED TAPE ASA CONSTRAINT ON BUSINESS EXPANSION IN 2011

30%

BureaucracyGlobally the impact of regulations and red tape hasmarginally declined as a constraint for businessexpansion, from 32% in 2010 to 30% in 2011.However, businesses in BRIC economies are moreconcerned about bureaucracy over the next 12months with 35% citing it as a constraint this yearas opposed to 29% in 2010.

Troubled Greece continues to top the list ofeconomies where businesses feel the most underpressure from bureaucracy (57%), an interestingresult in an economy struggling to make thestructural reforms necessary to recovercompetitiveness. It is followed by two emergingeconomies from different sides of the globe: Braziland Poland (both 50%). Just two mature economies– Greece and Australia (37%) – are included in thetop 10.

India has moved up the bureaucracy ranking tofourth this year following a 22 percentage pointincrease in the number of businesses citing it as aconstraint on expansion. Regulations and red tapehave long been an issue for businesses in India and,given that performance expectations and optimismare high, the research suggests that simplifyingprocesses could unlock a great deal more potentialin an already booming economy.


FIGURE 8: SQUEEZE ON ORDER BOOKSPERCENTAGE OF BUSINESSES CITING A SHORTAGE OF ORDERS/REDUCEDDEMAND AS A CONSTRAINT ON GROWTH, BY COUNTRY


Japan67%

Thailand51%

Vietnam48%Greece 48%

Taiwan 42%

France 42%

Spain 40%

China (m

ainland) 3

9%

Ireland

38%

Poland37%

FIGURE 9: LEVELS OF BUREAUCRACY HOLDING BACK GROWTHPERCENTAGE OF BUSINESSES CITING REGULATIONS/RED TAPE AS ACONSTRAINT ON GROWTH, BY COUNTRY


Greece

57%Brazil 50%

Poland50%India 47%

Vietnam 44%

Russia 44%

Thailand 43%

Botswan

a 41%

Argentina

37%

Australia37%


Businesses in the lower right quadrant areconfident about growth prospects, but less soabout orders. They include those in some of thelarge, rapidly expanding emerging economiessuch as China, Russia and Turkey which couldpose an issue for longer term global economicgrowth.

Meanwhile, those in the upper left quadrant seem to be suffering from increasedcompetition, with stronger order books failingto result in higher revenue prospects. Thisquadrant includes four members of the G7 –Canada, Italy, the United Kingdom and theUnited States – indicating the challengesbusinesses in mature markets are facing inadapting to a changing global economy.

Prospects for 2012Businesses in the Latin American economies ofArgentina, Brazil, Chile and Mexico look well-placed for growth moving in to 2012 with bothstrong order books, and higher revenueexpectations (the upper right quadrant). Otheremerging economies such as India, South Africaand the Philippines also look set for a strong 12months, as well as those European countrieswhich, at least initially, recovered quicker fromthe downturn: Germany and Sweden.

By contrast, businesses in the PIGSeconomies expect another tough year in 2012.They are joined in the lower left quadrant bythree other European countries – France,Switzerland and Poland – and Japan in a groupof countries where prospects for businessgrowth look weakest.

FIGURE 10: EXPECTATIONS FOR ORDERS AGAINST REVENUES

Lower revenuesStronger order books

Higher revenuesStronger order books

Lower revenuesWeaker order books

Higher revenuesWeaker order books


Thailand

US

Turkey

Germany

Malaysia

Taiwan

Singapore

Canada/Switzerland

IrelandRussia

Japan

Australia

UK

Greece

France

Argentina

Vietnam

Botswana

NetherlandsBelgium

Brazil

MexicoItaly

SwedenSouth Africa

Philippines

Denmark India

Poland

Spain

Hong KongArmenia

Finland Chile

China (mainland)

Georgia

UAE

New Zealand


With consumers and governments in many maturemarkets sidelined by heavy debt, the strength ofbusiness investment is increasingly vital to thehealth of the global economy. Prospects forinvestment in new buildings and plant & machinerygrew robustly following the downturn, but haveslowed since. Expectations for R&D investmenthave declined since 2010. The fragility of therecovery, rising commodity prices and a pervadinguncertainty have undoubtedly made businessesmore cautious about investment.

Whilst many businesses in mature markets arebeing forced to focus on cost savings and thebottom line, investment sentiment remains buoyantin emerging economies. In Latin America, 53% ofbusinesses expect to increase investment in plant &machinery over the next 12 months, 35% in R&Dand 26% in new buildings. Their ambitions arematched by businesses APAC (excl. Japan) where47% expect to increase investment in R&D, 42% in plant and machinery and 25% in new buildings.

At the other end of the spectrum, expectationsfor investment in new buildings are lowest in theEU (11%), exacerbated by low expectations in thePIGS economies (6%). In terms of plant andmachinery, investment prospects are weak across

Investment

“A lack of investment in R&D is a concern forthe long-term future of businesses. Despite theuncertain economic outlook, setting aside timeand capital to expand products and servicesshould remain high on the agenda.”

MIKE MCGUIREGRANT THORNTON UNITED STATES

FIGURE 12: BUSINESS INVESTMENT PLANSNET PERCENTAGE OF BUSINESSES EXPECTING TO INCREASE INVESTMENT OVER NEXT 12 MONTHS

APAC (excl. Japan) Latin America BRIC ASEAN Global EU North America G7 PIGS

New building 25 26 23 26 17 11 17 13 6

Plant & machinery 42 53 45 46 34 31 30 30 25

R&D 47 35 42 33 23 20 13 15 21


FIGURE 11: EMERGING MARKETS LAGGING BEHIND ON INFRASTRUCTURE PERCENTAGE OF BUSINESSES CITING INFRASTRUCTURE AS ACONSTRAINT ON GROWTH

Transport ICT

BRIC 26 21

Global 13 14

G7 8 11


Businesses throughout the BRIC economiesshow dissatisfaction with local infrastructure.Businesses in India are particularly concerned; more than a third cite both transport and ICTinfrastructure (both 36%) as an impediment togrowing their business. The situation in mainlandChina is slightly better but 25% of businessesbelieve transport infrastructure is holding themback, and 22% cite ICT infrastructure. Businesses in Brazil and Russia are slightly less dissatisfied withtheir ICT (16%) but more than one in five cite localtransport infrastructure as a growth constraint.

Elsewhere, businesses in Turkey (49%) andThailand (40%) cite local transport infrastructure asa constraint on their ability to grow whilst those inVietnam (39%) and Thailand again (28%) cite ICTinfrastructure. In Mexico too, more than one infour businesses cite both factors as constraint.


the mature economies, with the EU (31%), NorthAmerica, G7 (both 30%) and PIGS all below theglobal average. Expectations for investment inR&D are a full 27 percentage points lower in theG7 (15%) – dragged down by the North Americaresult (13%) – compared with BRIC (42%).

InfrastructureHowever, whilst these results offer further evidenceof a rapid redistribution of economic power, pastinvestment in infrastructure remains a hugeadvantage for businesses in mature markets. Indeed, 26% and 21% of businesses in the BRICeconomies cite transport and ICT (Information and communications technology) infrastructurerespectively as a constraint on expansion, more than double the rates in the G7.

FIGURE 13: CONNECTIVITY HOLDING EMERGING MARKETS BACKPERCENTAGE OF BUSINESSES CITING INFRASTRUCTURE AS A CONSTRAINT ON GROWTH

TRANSPORT INFORMATION AND COMMUNICATIONS TECHNOLOGY


Thailand38%

India36%

Turkey 32%

Brazil 25%China (mainland) 25%

Mexico 25%

Russia 21%

Botswan

a 20%

Greece

18%

Philippines18%

Turkey49%

Thailand40%

India 36%

Mexico 28%

China 22%

Japan 21%

Botswana 20%

Philippine

s 17%

Georg

ia 17%

Taiwan17%


PricesInflationary pressures, driven by loose monetarypolicy and high commodity prices, are loweringreal incomes and reducing spending power acrossthe globe. In the UK, inflation hit a record high of5.2% in September, whilst the European CentralBank declined to reduce interest rates in Octoberciting a rise in inflation to 3% in the previousmonth.

In emerging markets, rates are even higher:India raised interest rates for the 13th time in 19months in October as they try to curb a double-digit inflation rate; in China inflation has easedslightly in recent months but is still running at morethan 5%; and in Brazil inflation stands above targetat more than 7% even as the central bank lowersinterest rates in an attempt to stave off the effects ofthe global slowdown.

Expectations for an increase in selling pricesrose strongly between 2010 and 2011: businesscommunities in all but one country (Greece) aremore bullish about increasing selling prices in 2011.Expectations for price increases in emergingmarkets are strongest, with BRIC economyexpectations rising by 26 percentage points year-on-year compared with the 18 percentage point riseobserved in the G7 economies.

At the country level, Argentina (78%), India(64%), Botswana (61%), Turkey (60%) and SouthAfrica (57%) head the list of economies whereprices are expected to rise over the next 12 months.At the other end of the scale, the majority ofbusinesses in Japan (-32%), where deflation remainsa major concern despite interest rates being nearzero, expect to reduce prices. Businesses in thetroubled PIGS economies – Greece (-5%), Ireland(-3%) and Spain (0%) – are also looking to drop ormaintain prices.

Inflation

“Inflation is perhaps the key issue the CentralBank of India is dealing with right now. Withsalaries expected to rise over the next 12 months,businesses will be forced to raise prices tomaintain real profits.”

VISHESH CHANDIOKGRANT THORNTON INDIA

FIGURE 14: PRICES ON THE RISE NET PERCENTAGE OF BUSINESSES EXPECTING TO RAISE SELLING PRICES OVER NEXT 12 MONTHS

50

45

40

35

30

25

20

15

10

5

0

2003 2004 2005 2006 2007 2008 2009 2010 2011BRIC – – – – 43 27 21 26 52

G7 8 11 21 25 22 27 9 1 19

Global 11 17 26 29 32 30 14 11 27


SalariesSalary expectations have improved from 2010 at theglobal level: 64% of businesses expect to offersalary increases (matching inflation or higher) overthe next 12 months, compared with 51% in 2010.Employees in the Nordic region (84%), LatinAmerica (83%) and ASEAN (82%) appear mostlikely to get a pay rise in 2012, with those in thePIGS (47%) and EU (60%) least likely. At thecountry level, employees in South Africa (92%),Argentina and Chile (both 91%) look set to benefitfrom higher wages over the next 12 months. Thosein Ireland (14%), Greece (16%) and Japan (27%)are unlikely to be as fortunate.

At the global level, 15% of businesses expect tooffer employees real salary rises (that is above therate of inflation). In Latin America this rises to22%, followed by BRIC, APAC (excl. Japan) andASEAN (all 20%). At the other end of thespectrum the pressures on businesses in theeurozone are evident: just 7% of businesses in thecurrency union plan to offer above inflation payrises, dropping to 4% in the PIGS economies.

However, the most recent quarterly IBR resultsoffer some hope that inflation may ease over thenext 12 months. Globally the proportion ofbusinesses expecting to increase selling prices overthe next 12 months declined from 30% in Q2, to22% in Q3. In mature markets, there were someparticularly large quarterly drops, led by theNordic region (18 percentage point drop), NorthAmerica (14) and the EU (12). The declines inemerging markets were less severe, but expectationsdropped in the BRIC economies by 9 percentagepoints and in APAC (excl. Japan) and LatinAmerica by seven and six percentage pointsrespectively.



Those economies in the lower left quadrant appear to have less to fear frominflation in 2012. The results tie in with recentannouncements from the Bank of England andthe ECB which expect inflation to ease over thenext 12 months. This should boost real incomesand therefore consumer spending power incountries such as Greece, Germany, FranceIreland, Italy, Spain and the United Kingdom.Meanwhile, the spectre of deflation does notlook set to disappear in Japan.

Inflation in 2012 Wage-price spirals describe a vicious cyclewhere the two sides of the wage bargain(employers and employees) try to keep up withinflation to protect real incomes (profits andsalaries). The graphic below shows wherebusinesses are looking to boost both salariesand selling prices over the next 12 months, andso which economies are most vulnerable tosuch cycles.

Those economies in the upper rightquadrant appear in most danger from risinginflation over the next 12 months. The CentralBank of India’s battle with inflation is welldocumented, and the results suggest it willcontinue throughout 2012. Other largeemerging economies, such as Brazil, China,Mexico, South Africa and Turkey also findthemselves in this quadrant.

FIGURE 15: EXPECTATIONS FOR SALARIES AGAINST SELLING PRICES

Lower selling pricesHigher salaries

Higher selling pricesHigher salaries

Lower selling pricesLower salaries

Higher selling pricesLower salaries


Thailand

US

Turkey

Germany

Malaysia

Taiwan

SingaporeCanada

Ireland

Russia

Japan

Australia

UK

Greece

France

Argentina

VietnamBotswana

Netherlands

Belgium

Brazil

Mexico

Italy

Sweden

South Africa

Philippines

Denmark

India

Poland

Spain

Hong Kong

Armenia

Finland

Chile

China (mainland)

Georgia

UAENew Zealand

Switzerland


Hiring Nowhere is the polarisation between emerging andmature markets more stark than in the state oflabour markets. Governments in mature marketsare currently grappling with high unemploymentrates (more than 9% in the United States andFrance; more than 20% in Spain) as jobs disappearin the public sector and businesses in the privatesector remain cautious of overextending themselveswith the outlook so uncertain. Meanwhile, thefocus in emerging markets is weighted towardsupskilling the workforce and attracting talentedmembers of the diaspora home.

Employment opportunities have certainlyincreased over the past 12 months: globally, net23% of businesses hired staff over the past 12months, up 31 percentage points year-on-year.Regionally, hiring was strongest in APAC (excl.Japan, 40%) and Latin America (39%) and weakestin the eurozone (6%). However, the biggest swingwas observed in North America where net 27% ofbusinesses boosted staff numbers over the past 12month, a 57 percentage point rise from 12 monthspreviously.

Looking ahead, the economic and politicalturmoil of 2011 has certainly slowed employmentgrowth expectations. Globally, net 28% ofbusinesses expect to increase employment over thenext 12 months, up eight percentage points from 12months previously, but below the 33% observed in2008.

Employment

FIGURE 16: HOW EMPLOYMENT EXPECTATIONS TRACK RECORDED CHANGES (2002-11) NET PERCENTAGE OF BUSINESSES EXPECTING/REPORTING INCREASES IN STAFF LEVELS

50

40

30

20

10

0

-10

-20

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Actual 11 8 26 31 44 41 21 -8 23 –

Expected – 14 25 34 35 45 33 -4 20 28


BUSINESSES EXPECTING TO INCREASE EMPLOYMENT OVER THENEXT 12 MONTHS

28%BUSINESSES WHO HAVE HIRED STAFF IN THE LAST 12 MONTHS

23%


However, whilst the annual comparison lookspositive at the global level, the most recentquarterly figures tell a different story. As therecovery stalled in Q3, it is noticeable that theproportion of businesses looking to hire fell by 11percentage points to 23% globally. Regionally, therewere some huge falls with businesses in the Nordicregion (30 percentage point drop), North America(22) and APAC (excl. Japan) (14) all seeingemployment plans contract sharply.

FIGURE 18: EMPLOYMENT PROSPECTS FALL IN LAST QUARTER NET PERCENTAGE OF BUSINESSES EXPECTING TO INCREASE STAFFLEVELS – Q2 VS Q3


Nordic

-30%

NorthAm

erica-22%

APACexcl. Japan -14%BRIC -14%

G7 -13%

Global -11%

EU -8%

eurozone

-6%

Latin A

merica -2%

ASEAN7%

Regionally, businesses in Latin America are themost positive; 52% expect to increase employmentover the next 12 months, up from 39% in 2010.Businesses in APAC (excl. Japan) and BRIC are alsoupbeat with 48% in each group expecting to increasestaff numbers in the year ahead. By contrast just 15%of businesses in the eurozone expect to increase stafflevels in 2012, falling to -3% in the PIGS economies.

Given the economic backdrop it is perhapsunsurprising (yet nonetheless of concern to maturemarket governments) that businesses in emergingmarkets are most upbeat about hiring staff over thenext 12 months. In India, which has yet to fullybenefit from its demographic transition, businessesare the most positive about hiring plans in 2012(74%). Job opportunities in Vietnam (71%), Turkey(62%) and Chile (61%) are also expected toincrease significantly. Of mature economies, onlySweden (49%) makes the top 10.

FIGURE 17: EXPANDING EMPLOYMENT OPPORTUNITIES NET PERCENTAGE OF BUSINESSES EXPECTING TO INCREASE EMPLOYMENTOVER NEXT 12 MONTHS


India74%

Vietnam71%

Turkey 62%

Chile 61%

Philippines 55%

Brazil 54%

United Arab Emirates 50%

Sweden

49%

Thailan

d 49%

Georgia

49%


Skilled workersWith unemployment rates high, a lack of skilledworkers is not a major issue in many maturemarkets. However, higher growth rates, lowerunemployment and less capital-intensive industryin emerging economies make it a key issueconstraining businesses in these markets. Indeed, inthe BRIC economies more than two in fivebusinesses (41%) believe an inability to get the rightworkers is dampening their growth prospects, upfrom one in four in 2010. This compares to just23% of businesses in the G7.

With the strength of the recovery seeminglyever more dependent on emerging economies, theconcern is that the skills of workers may not be ableto keep up with demand. A lack of skilled workersis a major concern for businesses in Botswana(53%), Brazil, India (both 50%) as well as Turkey(38%), mainland China (36%) and South Africa(36%). By contrast, just 17% of businesses in boththe United States and the United Kingdom, whereunemployment rates remain stubbornly high,believe a lack of skilled workers is holding themback.

FIGURE 19: BUSINESSES IN EMERGING MARKETS STRUGGLING FOR SKILLED LABOURPERCENTAGE OF BUSINESSES CITING A LACK OF SKILLED WORKERS AS A CONSTRAINT ON GROWTH

45

40

35

30

25

20

15

10

5

0

2003 2004 2005 2006 2007 2008 2009 2010 2011BRIC – – – – 39 34 31 25 41

G7 31 23 28 32 36 35 27 21 26

Global 31 21 27 31 34 32 25 17 23


“Finding the right workers is a serious issue forbusinesses amid near record low unemployment.Businesses urgently require more skilled workersto fuel growth.”

MADELEINE BLANKENSTEINGRANT THORNTON BRAZIL


The lower left quadrant is home to thoseeconomies where businesses see plenty oftalent, but are simply not looking to hire asreadily. Governments in economies such asGreece, Ireland, Italy, Spain, the UnitedKingdom and the United States have shed aplethora of public sector workers in an effort to cut deficits, but with the private sector failing to create lots of jobs, the prospect ofunemployment rates dropping significantly in 2012 looks fairly bleak.

Employment in 2012 Looking ahead, some emerging economies maystruggle to maintain their robust growth rates ifthe skills of workers remain below the levelsrequired. Brazil, India, Thailand and Turkey allfind themselves in the upper right quadrantindicating that they plan to expand workforcessignificantly over the next 12 months, but areunsure about the talent available to them.Argentina, mainland China and Mexico alsofind themselves in this category.

Those economies in the lower rightquadrant also expect to hire more workers thanthe global average over the next 12 months, butare more confident about the talent on offer.They include Armenia, Chile, Sweden, thePhilippines and the United Arab Emirates.

FIGURE 20: EXPECTATIONS FOR HIRING STAFF AGAINST AVAILABILITY OF SKILLED LABOUR

Less hiringLacking skilled workers

More hiringLacking skilled workers

Less hiringSufficient skilled workers

More hiringSufficient skilled workers


Thailand

US

Turkey

Germany

Malaysia

Taiwan

SingaporeCanada

Ireland

RussiaJapan

Australia

UK

Greece

France

Argentina

Vietnam

Botswana

Netherlands

Belgium

Brazil

Mexico

Italy

Sweden

South Africa

Philippines

Denmark

India

Poland

Spain

Hong Kong

Armenia

Finland

Chile

China(mainland)

Georgia

UAE

New Zealand

Switzerland


Access to finance has improved for businessesfollowing the collapse in bank lending post-Lehmans. In 2009, more than 26% of businessescited shortages of long term finance and workingcapital, and the cost of finance as constraints ontheir ability to grow. Each factor dropped slightlyfrom 2010 to 2011, with the cost of finance fallingfastest (five percentage point drop year-on-year).

Businesses in North America expect to belargely free from financial constraints over the next12 months; just 15% cite the cost of finance, and16% both shortages of long term finance andworking capital. The situation in Europe appears alittle tighter, with concerns over the exposure ofmany of the region’s banks to potentially toxicsovereign debt. More than one in four businesses inthe EU cite each of the financial constraints,boosted by the PIGS where the figure is aroundtwo in five. More than a third of businesses in theBRIC economies cite the cost of finance (35%)compared with just 19% in the G7.

Access to finance

FIGURE 21: FUNDING CONSTRAINTS FALL BACK TO PRE-RECESSION LEVELSPERCENTAGE OF BUSINESSES CITING FINANCE AS A CONSTRAINT ON GROWTH

30

28

26

24

22

20

18

16

14

2003 2004 2005 2006 2007 2008 2009 2010 2011Cost of finance 20 18 17 21 23 27 28 28 23

Shortage of 24 22 20 22 23 26 27 26 24

working capital

Shortage of long 22 19 18 19 21 21 27 25 22

term finance


“Businesses should stay close to their lenders,especially in such uncertain economic times. Thesupportiveness of lenders in Canada bodes wellfor growth prospects.”

BILL BRUSHETT GRANT THORNTON CANADA


It is widely accepted best practice for businessesto stay close to their lenders, especially in times ofeconomic uncertainty. Globally, almost three-quarters of businesses class their lender assupportive (74%), up from two-thirds in 2010.Lender support is strongest in the Philippines(92%), followed by India (89%), Georgia (88%)and Japan (87%). Businesses also feel wellsupported in North America with both the UnitedStates (82%) and Canada (79%) in the top 10 onthis measure.

FIGURE 22: STRUGGLING FOR FUNDSPERCENTAGE OF BUSINESSES CITING FINANCE AS A CONSTRAINT ON GROWTH

PIGS BRIC APAC (excl. Japan) ASEAN Latin America EU Global G7 North America

Cost of finance 37 35 34 33 30 23 23 19 15

Shortage of

working capital 43 30 30 30 25 24 24 20 16

Shortage of long

term finance 41 28 27 26 27 22 22 19 16


FIGURE 23: BUSINESSES HAPPY WITH LEVEL OF SUPPORT PROVIDED BY LENDERSPERCENTAGE OF BUSINESSES CITING LENDERS AS SUPPORTIVE


Philippines: 92%

India: 89%

Georgia: 88%

Japan: 87%

Singapore: 86%Argentina: 83%

United States: 82%

Taiwan: 81%

United ArabEmirates: 80%

Canada: 79%

South Africa: 79%

Malaysia: 77%

New Zealand: 77%

Sweden: 77%

Chile: 76%Brazil: 75%


Globally just 8% of companies have afemale Chief Executive Officer. However thestory is different in Asian economies, Thailandleads the way with 30% of companies headedby women, followed by mainland China(19%), Taiwan (18%) and Vietnam (16%).

Women in business (Q1)Women currently hold 20% of seniormanagement positions globally, down from24% in 2009, and only up slightly from 2004(19%). The quarterly IBR results also foundthat the percentage of businesses that have nowomen in their senior management has risen to38% compared to 35% in 2009.

Across the world, Thailand boasts thegreatest percentage of women in seniormanagement (45%), followed by Georgia(40%), Russia (36%), Hong Kong and thePhilippines (both 35%). The countries with thelowest percentages are India, the United ArabEmirates and Japan where fewer than 10% ofsenior management positions are held bywomen.

G7 countries lag behind the global averagewith only 16% of women holding senior roleswhilst, regionally, Asia Pacific (excl. Japan)scores highest with 27%. Women have becomemost successful in increasing their share ofsenior management roles in Thailand, HongKong, Greece, Belgium and Botswana, wherethe percentage of women in these roles hasrisen by at least 7% since 2009.

Of the companies that employ women insenior managerial positions globally, 22%employ them in financial positions (e.g. ChiefFinancial Officer/Finance Director). This isfollowed by Human Resources Director (20%),Chief Marketing Officer and Sales Director(both 9%).

FIGURE 24: PROPORTION OF WOMEN IN SENIOR MANAGEMENT FALLS BACK TO 2004 LEVELSPERCENTAGE OF SENIOR MANAGEMENT ROLES HELD BY WOMEN

25

20

15

10

5

0

2004 2007 2009 2011

19 24 24 20


Topical issues


Businesses in the ASEAN region, NorthAmerica and the Nordic Region are most likelyto have undertaken initiatives in the past yearand the Philippines, in particular, is the topranked country for CSR activities. Businesses inmainland Europe are the least likely toundertake CSR activities, with Turkishbusinesses reporting the lowest level ofinvolvement in CSR activities over the past year.

Of those initiatives – workforce activities wereranked most highly, followed by communityactivities. 73% of respondents had engaged inactivities which actively promoted workforcehealth and well-being, particularly in Argentina,Finland, the Philippines and Sweden. Some 64% had allowed flexible working and providedinternships/apprenticeships and work experience– particularly in Finland. The least commonactivities for businesses included calculating theircarbon footprint (19%) and sourcing local,ethically traded or organic goods (28%).

The results suggest that respondents are splitas to whether the reporting of CSR and othernon-financial information should be integratedwith financial reporting; 44% were in favourand 40% were against, with businesses in LatinAmerica markedly more in favour than anyother region (81%).

Corporate Social Responsibility (Q1)Despite the backdrop of economic uncertainty,there has been limited change in the volume ofCSR activity undertaken since IBR 2008. Infact, businesses across the globe are increasinglyrecognising the importance of sociallyresponsible and transparent business practicesto distinguish themselves from competitors inthe market place, to attract the right staff, andto strengthen their relationships with customersand other businesses.

The main drivers for CSR at a global levelremain a mix of internal and external factors:cost management and recruitment/retention ofstaff, and public attitudes/building brand (allcited by 56% of respondents), although costmanagement and recruitment/retention of staffhave become relatively less important since2008. The ASEAN, Latin America and BRICeconomies in particular rank these factorshighly. Given the focus of businesses on theirbottom line and survival, environmental driversacross the globe have declined since 2008 andrank as one of the least important (36% ofrespondents) alongside investor relations (35%of respondents) in 2011.

FIGURE 25: LEVELS OF CSR ACTIVITY UNDERTAKEN IN PAST 12 MONTHS

Most activity

Some activity

Least activity

Not in IBR



FIGURE 26: IMPACT OF ARAB SPRING ON BUSINESSES PERCENTAGE OF BUSINESSES

NEGATIVELY AFFECTED BY UNREST LESS LIKELY TO DO BUSINESS IN REGION


on order books that businesses will have felt assupply routes between these countries weredisrupted, with governments in the regionfocusing on political issues rather than trade.With its close trade links to the region, Turkeywas hit particularly hard: 53% of businesses felta negative impact.

Despite these immediate impacts, however,the long term outlook still holds much promiseand only 10% of those consulted said that theywere now less likely to do business in theregion. This suggests that, despite the upheaval,the region should be viewed by businesses asone with real opportunities for the future.

The Arab Spring (Q2)Since the wave of demonstrations and protestsin the Middle East and North Africa whichengulfed much of the region from December2010, businesses around the world arecontinuing to count the costs. As the regioncontinues to experience major political change,more than a fifth (22%) of businesses globallyreport that the unrest has had a negative impacton their business. This figure is highest inNorth America where a quarter (26%) ofbusinesses report a negative impact.

Businesses had a number of issues to dealwith as a result of the Arab Spring. Fuel pricesincreased, pushing up operations andproduction costs. There is also the direct effect

North America: 26%

APAC: 23% G7: 23%

Global: 22%

ASEAN: 21%EU: 18%Nordic: 18%

BRIC: 14%

Latin America: 11%

Global: 10%

EU: 9% Nordic: 9%

Latin America: 8%

North America: 6% G7: 6%

BRIC: 17%

ASEAN:13%

APAC: 15%


Indeed, many businesses would be willingto endure the short term pain such investmentmight create: 51% of respondents said theywould accept higher energy costs in the shortterm in order to reduce their economy’sreliance on oil and have more stable prices inthe longer term. However, whilst this stancewas supported by 60% of businesses in NorthAmerica and 53% in the G7, just 35% of thosein the BRIC economies agreed.

Renewable energy (Q2)As the intensity of the Arab Spring rose, so didthe price of oil: Brent Crude climbed aboveUS$125 a barrel in April, up from US$85 abarrel at the start of the year, and remains aboveUS$100 a barrel as 2011 draws to a close.Disagreement amongst OPEC nations onincreasing supply persuaded the InternationalEnergy Agency to release more than 60 millionbarrels from emergency stocks, but the resultssuggest that 44% of businesses would nowsupport increased government investment inrenewable/alternative energy. Support isparticularly strong in APAC and ASEANeconomies.

FIGURE 27: BUSINESSES SUPPORT FOR INCREASED INVESTMENT IN RENEWABLE/ALTERNATIVE ENERGYPERCENTAGE OF BUSINESSES

70

60 61

50 52

40 44 44 42 41

38 36

30

20

10

0

ASEAN Asia-Pacific G7 Global North America Latin America European Union BRIC



Of those who were aware of the changes,33% thought the change would increase costand complexity but only 15% thought it wouldincrease transparency. 12% of businessesindicated they would alter the way theystructure leases in the future with a further 24% citing other impacts.

Awareness of the change is greatest in theUS (69%), Mexico (68%) and Chile (63%), andis lowest in mainland China (5%), Denmark(8%) and Turkey (14%). Amongst those awareof the change, support is strongest in LatinAmerica (74%) and ASEAN 68%), and weakestin North America (32%). Businesses in theBRIC economies (59%) are much moresupportive than their counterparts in the G7 (36%).

Lease accounting (Q3)More than half of businesses globally (54%) arenot aware of, and are therefore unprepared for,one the most significant global accountingchanges in the past decade – moving all butshort term leases onto the balance sheet. Withthe IASB and FASB3 set to re-expose their latestproposals early next year, Grant Thorntonstresses the need for businesses to assess theimpact of the potential changes and for investorsto consider whether the new model will deliverthe transparency they are rightly calling for.

FIGURE 28: LOW AWARENESS OF AND SUPPORT FOR LEASE ACCOUNTING CHANGESPERCENTAGE OF BUSINESSES AWARE OF/SUPPORTING UPCOMING CHANGES

North America G7 Latin America ASEAN Global EU Nordic APAC (excl. Japan) BRIC

Awareness Support


67

5345

6874

62 5936

32 3648 48

42 3830

22 20

4545

3 International Accounting Standards Board, Financial Accounting StandardsBoard


The results also indicate that globally,advertising is the most common reasoncompanies use social media (53%), followed by communicating with customers (51%) and recruitment (43%). Advertising is the most common use in the EU (64%), whereasrecruitment came top in North America (63%).Meanwhile, communication with customersemerges as the key practice in Latin America(72%) and ASEAN (65%).

Finally, despite the rapid proliferation ofnew media, newspapers remain the preferredsource of information for business ownersthemselves. Globally, four in five read anewspaper (79%) at least three times a week. Inaddition, hard copy newspapers are still thepreferred source of news for business leadersglobally (39%), followed by desk-based internet(26%). Taken together, electronic and hard-copynewspapers are preferred by 51% of businessleaders, compared to 35% who prefer eitherdesk-based or mobile internet.

Social media (Q3)Research into how businesses use social mediasuggests that emerging markets have stolen amarch on their western counterparts. The IBRreveals that 43% of businesses globally usesocial media in some capacity. However, thisrises to 53% in Latin America and 50% in theBRIC economies. In mature markets the figuresare much lower, at 40% in the G7 and just 35%in Europe. Meanwhile, more than threequarters (78%) of Latin American businessesplan to increase their use of social media,compared to two thirds (66%) in the EU andjust over half (55%) across the G7.

The results are a wake-up call to business leaders reluctant to embrace digitalopportunities, who could lose out in an e-commerce market expected to be worth $1.4tnby 2015. Use of the internet among the widerpopulation in the emerging markets still lagsbehind Europe and North America, but thesheer size of those populations represents a hugemarket and therefore an enormous opportunity.In China for example, there are 485 millioninternet users, which is only 36% of the currentpopulation. In India less than 10% of thepopulation access the internet.

FIGURE 29: BUSINESS USE OF SOCIAL MEDIAPERCENTAGE OF BUSINESSES

Latin America BRIC North America APAC ASEAN Global G7 Nordic EU

Currently use Planning to increase use


78

64 60

75

6155

7266

50 4753

47 45 43 40 39 35

56


Methodology

The surveyThe Grant Thornton InternationalBusiness Report (IBR) provides insightinto the views and expectations ofmedium to large privately heldbusinesses (PHBs) from all over theworld. Launched in 1992 in nineEuropean countries, the survey nowinterviews 2,875 business leaders in 40 economies every quarter andupwards of 11,500 every year.

SampleThe target respondents are chairmen,chief executive officers, managingdirectors or other senior executives(title dependent on what is mostappropriate for the individual country)spread primarily across four industries:manufacturing (25%), services (25%),retail (15%) and construction (10%),with the remaining 25% drawn fromacross all industries.

The types of businesses targeted byIBR are defined as medium to largeprivately held businesses. Thedefinition of a medium to largebusiness is determined by governmentdescriptions in terms of revenue ornumber of employees, for example amedium to large sized business in theEU would typically have 50-499employees. As IBR moves into its 20th year in 2012, the survey has beenexpanded to encompass listed as well as privately-held businesses.

Data collectionThe research is carried out primarily bytelephone interview lastingapproximately 15 minutes with theexception of Japan (postal), Philippinesand Armenia (face to face), mainlandChina and India (mixture of face-to-face and telephone) where culturaldifferences dictate a tailored approach.Telephone interviews enable GrantThornton to conduct a precise numberof interviews and to be certain that themost appropriate individuals areinterviewed.

Data collection is managed byGrant Thornton’s core research partner– Experian. Questionnaires aretranslated into local languages witheach participating country having theoption to ask a small number ofcountry specific questions in additionto the core questionnaire. The data inthis report are drawn from interviewswith more than 13,000 businessesglobally, conducted betweenNovember 2010 and September 2011.Responses are weighted by economyGDP figures sourced from the IMF‘World Economic Outlook’ database.


FIGURE 30: COUNTRY GROUPING METHODOLOGY

Economy grouping Number of respondents* Economies included in IBR

Asia-Pacific (APAC) 3,960 Australia, Hong Kong, India, Japan, China (mainland), Malaysia, New Zealand,

Philippines, Singapore, Taiwan, Thailand, Vietnam

Asia Pacific excl. Japan 3,466 (as above but excluding Japan)

Association of Southeast 1,178 Malaysia, Philippines, Singapore, Thailand, Vietnam

Asian Nations (ASEAN)

BRIC 1,674 Brazil, Russia, India, China (mainland)

European Union (EU) 4,876 Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands,

Poland, Spain, Sweden, United Kingdom

Eurozone 2,754 Belgium, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Spain

G7 3,487 Canada, France, Germany, Italy, Japan, United Kingdom, United States

Latin America 967 Argentina, Brazil, Chile, Mexico

Nordic 1,405 Denmark, Finland, Sweden

North America 1,185 Canada, United States

PIGS 952 Ireland, Greece, Spain

Other 1,946 Armenia, Botswana, Georgia, South Africa, Switzerland, Turkey, United Arab Emirates

Global 13,185 All countries

*Please note that some countries are present in more than one country grouping

IBR participants


To find out more about IBR or to obtain copies of reports and summaries please visit www.internationalbusinessreport.comor contact Dominic King ([email protected])

IBR contacts ArgentinaGrant ThorntonArnaldo HasencleverT +54 11 4105 0000E [email protected]

ArmeniaGrant Thornton AmyotGurgen HakobyanT +374 (0) 10 276 569E [email protected]

AustraliaGrant ThorntonTony MarkwellT +61 (0) 7 3222 0200E [email protected]

BelgiumGrant ThorntonJohan HaeltermanT +32 (0) 477 61 80 87E [email protected]

BotswanaGrant ThorntonJay RameshT +267 395 2313E [email protected]

BrazilGrant ThorntonJobelino Locateli T +55 11 3886 4800E [email protected]

CanadaGrant Thornton Bill Brushett T +1 416 366 0100E [email protected]

Raymond Chabot Grant ThorntonBenoit EganT +1 514 393 4816E [email protected]

ChileSurlatina AuditoresAlfonso IbáñezT +56 (2) 269 1737E [email protected]

China (mainland)Grant Thornton ChinaXu HuaT +86 10 85 66 59 78E [email protected]

DenmarkGrant Thornton DenmarkJørgen Anker NielsenT +45 33 45 42 12E [email protected]

FinlandGrant ThorntonJoakim RehnT +358 (0) 9 512 3330E [email protected]

FranceGrant ThorntonJean-Jacques PichonT +33 3 81 88 39 87 E [email protected]

GeorgiaGrant Thornton LLCNelson PetrosyanT +374 10 27 65 69E [email protected]

GermanyGrant ThorntonKlaus-Guenter KleinT +49 211 9524 140E [email protected]

GreeceGrant ThorntonVassilis KazasT +30 210 72 80 020E [email protected]

Hong KongGrant ThorntonDaniel LinT +852 3987 1200E [email protected]

IndiaGrant ThorntonVishesh Chandiok T +91 11 4278 7070E [email protected]

IrelandGrant ThorntonPatrick BurkeT +353 (0)1 6805 650E [email protected]

ItalyGrant Thornton Bernoni & PartnersGiuseppe BernoniT +39 02 76008751E [email protected]

JapanGrant ThorntonHiroyuki HamamuraT +81 3 5770 8855E [email protected]

MalaysiaSJ Grant ThorntonDato’ Narendra JasaniT +60 (0) 3 2692 4022E [email protected]

MexicoSalles, Sáinz-Grant Thornton S.C.Héctor Pérez T +52 55 5424 6500E [email protected]

NetherlandsGrant ThorntonFrank PonsioenT +31 (0) 172 42 38 70E [email protected]

New ZealandGrant ThorntonPeter SherwinT +64 4 385 2126E [email protected]

PhilippinesPunongbayan & AraulloRaul TomasT +63 2 887 9484E [email protected]

PolandGrant Thornton FrąckowiakTomasz WroblewskiT +48 (61) 8509 200E [email protected]

RussiaGrant ThorntonIvan SapronovT +7 495 258 9990E [email protected]

SingaporeFoo Kon Tan Grant ThorntonAw Eng HaiT +65 6331 2308E [email protected]

South AfricaGrant ThorntonLeonard BrehmT +27 11 322 4500E [email protected]

SpainGrant ThorntonJosé María FernándezT +34 91 576 39 99E [email protected]

SwedenGrant ThorntonPeter BodinT +46 (0) 8 563 070 00E [email protected]

SwitzerlandGrant Thornton AGCarlo Marelli T +41 (0)43 960 71 28E [email protected]

TaiwanGrant ThorntonJay LoT +886 (0) 2 2758 2688E [email protected]

ThailandGrant ThorntonIan PascoeT +66 (0)22 05 8100E [email protected]

TurkeyGrant ThorntonAykut HalitT +90 (0) 212 373 0000E [email protected]

United Arab EmiratesGrant ThorntonHisham Farouk T +971 4 2688070E [email protected]

United KingdomGrant ThorntonScott BarnesT +44 (0)20 7728 2428E [email protected]

United States of AmericaGrant ThorntonJ. Michael McGuireT +1 312 856 0200E [email protected]

VietnamGrant Thornton VietnamKen AtkinsonT +84 8 3910 9100E [email protected]

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© 2011 Grant Thornton International Ltd. All rights reserved.References in this publication to “Grant Thornton”, “we” and “our” refer to either Grant Thornton InternationalLtd, a global organisation of member firms, or one or more of the individual member firms of the globalorganisation, each of which is a separate legal entity and has no liability for each other’s acts or omissions.Grant Thornton International Ltd, a UK private company limited by guarantee, does not provide services toclients. Services are delivered independently by the member firms. Grant Thornton International Ltd and themember firms are not a worldwide partnership.

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GT IBR 2011 - The global economy in 2012

Business

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