Forces shaping the business environment

Executives around the world see innovation and the free flow of information as the primary drivers of an accelerating pace of change in the global business environment. At the same time, executives continue to confront familiar and powerful forces that bear the unmistakable signature of an emerging global market—plentiful, cheap, and mobile capital; expanded access to talent and labor pools; and a reduction in trade barriers.

The survey findings paint a picture of an increasingly competitive business world, characterized by great opportunity and risk. But while executives appear to have opportunities at the front of their minds, they may be underrating some of the equally great risks involved.¹

The respondents cited a broad range of factors that they see as contributing most to the accelerating pace of change. Of these, innovation in products, services, and business models as well as the greater ease of obtaining information and developing knowledge figure most prominently, with 41 percent of the responses (Exhibit 1).

Against the backdrop of accelerating change, 85 percent of respondents describe the business environment in which their companies operate as "more competitive" (45 percent) or "much more competitive" (40 percent) than it was five years ago. The intensity is increasing for small as well as big companies, and in all industries. Executives report notable differences, however. Judging by the responses, telecommunications is the toughest industry: more than six in ten of its representatives see it as much more competitive. At the other end of the scale is the business services industry: just over three in ten of its representatives say their industry is much more competitive, and marginally less than half view it as more competitive.

While the executives clearly agree that competitive intensity is increasing within their industries, they have differing takes on which factor contributes most to this development (Exhibit 2). Close to 25 percent single out the improved capabilities of their competitors—as measured by knowledge and talented employees, for instance—and almost as many note a growing number of low-cost competitors.

Opinions about the competitive challenges differ by industry (Exhibit 3). More than one-third of heavy-industry representatives, as opposed to just one in ten in financial services, single out low-cost competitors as the most important factor. Telecom executives are almost twice as likely as respondents from other industries to be concerned about innovative market entrants. Managers in health care view regulatory changes as the most important factor behind growing competition in their industry.