The Gap Between the Corporate 'Haves' and 'Have-Nots' Is Widening Dramatically in the Global Economic Crisis, According

NEW YORK, NY, Apr 07 (MARKET WIRE) --
The global economic crisis -- and the failure of many companies to tackle
it in a fast and effective way -- is giving companies already dominant in
their industry the chance to stretch their lead over their competitors,
according to a paper published today by The Boston Consulting Group (BCG).

In "Collateral Damage, Part 6: Underestimating the Crisis," which is based
on a survey of 439 companies with sales of at least $1 billion from seven
of the world's leading economies, BCG found that top companies -- those
ranked first in their industry -- have been growing revenues and
profitability throughout the downturn. By contrast, those companies ranked
outside the top three have been heavily affected by the economic crisis
and have suffered declines in revenues and profitability.

BCG found that the contrasting fortunes of the "haves" and "have-nots" are
no accident. The chief executives running top companies have recognized
the seriousness of the crisis and have been deploying some of the tactics
more commonly used by companies undergoing turnaround transformations. The
leaders of their weaker rivals, however, have taken an overly optimistic
view of their prospects -- and if some are finally starting to take
action, it is too little, too late.

David Rhodes, global leader of the firm's Financial Institutions practice
and a coauthor of the report, said, "Although market leaders have been
less affected by the downturn so far, they are doing more to tackle the
worst effects of the crisis -- both for short-term protection and to
benefit in the long term. In contrast, middle-of-the-market players are
now running the risk of losing even more ground: they have been more
severely affected, yet they are doing less to counter the downturn."

In the survey, conducted in March, BCG found the following:

-- 55 percent of market leaders grew revenues in 2008, compared with 40
percent for the second and third players in a market and only 22 percent
of companies outside the top three

-- 58 percent of market leaders increased profitability in 2008, with less
than a third seeing declining profits, compared with only 21 percent of
companies outside the top three seeing improvements

The optimism of many companies -- despite the calamitous impact of the
economic downturn on the world economy -- suggests that their CEOs are
struggling to come to terms with what BCG has elsewhere called the "new
realities" of the world in crisis. (See Part 5 of the "Collateral Damage"
series, "Confronting the New Realities of a World in Crisis.")

More than 60 percent of companies thought that the International Monetary
Fund had overstated the seriousness of the crisis in its January forecast
of global GDP. When the IMF subsequently revised its forecast downward in
March -- projecting the first global economic contraction since World War
II -- these companies were even more badly out of line.

In another sign of corporate misjudgment, more than two-thirds described
as "satisfactory" or "very satisfactory" the speed of their company's
reaction, the quality of their action plan, and the capability of both
senior and middle management to address the economic challenges
effectively.

In addition to misreading the signals from the wider economy, a high
proportion of top executives insist that the prospects of their own
company are better than those of their competitors:

-- While nearly two-thirds said that the profitability of their industry
as a whole would decline, more than 40 percent forecast higher
profitability for their own companies

-- While more than 70 percent predicted increased price sensitivity in
their customer population, more than one-third admitted that they were
budgeting for increased selling prices; only a third expected their own
prices to decline

-- Some 55 percent expected their company to emerge stronger from the
crisis; only 15 percent expected to emerge weaker

Daniel Stelter, global leader of BCG's Corporate Development practice and
the other coauthor of the report, said, "We find it astonishing that
companies are still underestimating the size and scope of the economic
crisis. They are generally too optimistic about their own performance and
believe that they have taken sufficient steps to respond to the crisis.
Consequently, although taking action, companies have not adopted adequate
measures either to protect themselves from the worst effects of the
downturn or to prepare for the upturn."

Market Leaders' Secrets: Ten Actions for Beating the Downturn

In the BCG survey, market-leading companies identified the following
actions as key to their success:

-- Undertaking more frequent reviews of their budgets and plans, typically
every quarter

-- Tracking the external environment -- both macroeconomic and industry
indicators -- with far greater seriousness

-- Preparing for the downturn by acting early to reduce operating costs
and overhead while optimizing working capital -- even though they have
typically been less affected than their lower-ranked rivals

-- Aggressively acting to protect cash by reducing working-capital
requirements, postponing capital expenditures, and paying down debt

-- Variabilizing fixed costs and reducing breakeven levels by reevaluating
outsourcing and opportunities to increase shared services

-- Cutting costs more decisively by reducing production capacity and more
aggressively laying off employees

-- Actively exiting underperforming businesses and divesting assets

-- To a greater degree than other companies in the survey, trying to
secure future growth by investing in R&D and innovation

-- Protecting and growing their existing revenue base by increasing
marketing expenditures and focusing on key accounts

-- De-averaging the actions they are taking by simultaneously cutting
costs or capacity or increasing expenditures or capacity in different
parts of their portfolios, depending on potential, as well as
opportunistically seeking attractive acquisition opportunities while not
shying away from difficult decisions about underperforming businesses

BCG's Collateral Damage Series

Based on its long history of helping companies survive and thrive during
global economic downturns, BCG created its "Collateral Damage" series,
which explains the background to the current troubles, analyzes the impact
of government actions around the world, explores likely economic
scenarios, and examines the challenges facing companies outside the
financial sector. The series provides a big-picture analysis of the
crisis as it has evolved in different regions, countries, and sectors. It
also offers senior executives practical guidance for protecting their
companies from the worst of the crisis and for preparing them for
economic recovery. Current titles in the series include the following:

-- "Collateral Damage, Part 1: What the Crisis in the Credit Markets Means
for Everyone Else"

-- "Collateral Damage, Part 2: Taking Robust Action in the Face of the
Growing Crisis"

-- "Collateral Damage, Part 3: Asia, Advantage, and Action"

-- "Collateral Damage, Part 4: Preparing for a Tough Year Ahead: The
Outlook, the Crisis in Perspective, and Lessons from the Early Movers"

-- "Collateral Damage, Part 5: Confronting the New Realities of a World in
Crisis"

To receive a copy of the latest paper or arrange an interview with one of
the authors, please contact Alexandra Corriveau at +1 212 446 3261 or
corriveau.alexandra@bcg.com.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm
and the world's leading advisor on business strategy. We partner with
clients in all sectors and regions to identify their highest-value
opportunities, address their most critical challenges, and transform their
businesses. Our customized approach combines deep insight into the
dynamics of companies and markets with close collaboration at all levels
of the client organization. This ensures that our clients achieve
sustainable competitive advantage, build more capable organizations, and
secure lasting results. Founded in 1963, BCG is a private company with 66
offices in 38 countries. For more information, please visit www.bcg.com.

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