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GCC firms growing despite challenging business climate

DUBAI, December 17, 2015

Senior business leaders in the Gulf Cooperation Council (GCC) are optimistic about the economic outlook despite historically low oil prices and anticipated governmnt spending cuts that coul contribute to tougher market conditions next year, according to a study.
 
The 'Navigating in the Changing Dynamics in the GCC Region Survey 2015' study conducted by Heidrick & Struggles, a premier professional services firm serving the leadership needs of top organisations around the globe, said that close to 40 per cent of respondents said that their company sales have increased more than 10 per cent. 
 
The growth drivers primarily have been government-sponsored spending ahead of Expo 2020 Dubai, as well as infrastructure construction resulting from the target to double retail space in the Emirate by 2020. However, among the respondents, 21 per cent of companies reported a decline in sales.
 
Steve Mullinjer, regional leader, APAC at Heidrick & Struggles, said: "Despite the volatility and uncertainty in the GCC business environment, many regional business leaders are confident in their ability to deliver sustainable value. 
 
"It is remarkable that in the face of these challenges, senior leaders are reporting business growth for 2015 and predicting further growth for 2016."
 
"Our research shows that to deliver value in an uncertain environment, business leaders need to focus on evidence-based decision-making to drive the development of their business strategy," Mullinjer continued. 
 
"This represents a 'new normal', where visionary leaders determine a strategy based on the feedback and evidence gathered from different levels of employees within an organisation, and then drive the strategy across the organisation through alignment and engagement."
 
Business conditions are getting tougher, but opportunity is available. Nearly nine in ten respondents agreed that the business environment in the region has become more volatile over the last 18 months and more challenging than in 2014. 
 
Reduced customer spending (34.6 per cent), more intense market competition (33.6 per cent), talent recruitment (31.6 per cent) and the need for increased productivity (31.6 per cent) are the four biggest challenges participants say they are facing. 
 
The reduced oil price (79.2 per cent), government spending cuts (51.4 per cent) and wider regional conflicts (38.6 per cent) were cited as some of the factors that may contribute to tougher market conditions and could indicate a similar business environment outlook for next year. 
 
Michael Morcos, managing partner of Heidrick & Struggles Middle East and North Africa Practice, said: "This has been a turbulent year and business dynamics have been changing rapidly in the region.
 
"Many businesses have been impacted by issues such as the significant reduction in the oil price, growing regional conflicts, increases in labor costs, and stronger market competition. 
 
"This has resulted in business leaders becoming more agile, and has encouraged them to think differently about senior team deployment so they can respond effectively to the changing dynamics."
 
The leaders have maintained optimistic outlook as government-led initiatives continue Companies in general have a neutral-to-positive outlook on economic conditions over the next three years (neutral 37.6 per cent; positive 42.5 per cent), said the study.
 
In fact, up to 70 per cent of respondents are expecting sales to increase. 
 
Government-led initiatives are the key factors that contribute to the positive outlook, including the developing infrastructure (39.5 per cent), the GCC's robust economic growth forecasts (37.2 per cent), spending ahead of Expo 2020 Dubai (37.2 per cent), as well as confidence in the GCC political leadership (32.5 per cent), especially for respondents in conglomerates and the Industrial and Consumer sectors. 
 
The majority of business growth in the next three years is expected to come from the Middle East, as 25.7 per cent and 16.8 per cent of respondents said that growth will come from within the GCC region and Iran, respectively. 
 
Businesses in the GCC will continue to invest and hire compared to last year, more than half of the respondents had increased their investments in the GCC so far in 2015. 
 
Of these, 23.7 per cent are aiming to expand their business in other geographies and 17.8 per cent are looking for M&A opportunities, with around three per cent considering closing their offices within or outside the GCC. 
 
In addition, more than half of the respondents said they will increase their headcount in 2016, while 26 per cent said they have no plans to add to the headcount. 
 
"Business leaders in the GCC have continued to deliver value despite the uncertain and volatile environment. As we move toward 2016, governments will play a critical role in driving business confidence and additional growth in the region," Morcos added. - TradeArabia News Service



Tags: Outlook | GCC | economic |

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