FSG recently hosted its annual Latin America Executive Roundtable Event in Miami for regional executives from a variety of industries. The event focused on building resilience against market turmoil with deep-dives on best practices in market monitoring and course correction, talent management for sustainable outperformance, and optimizing pricing strategy in emerging markets. Below are the key takeaways from these discussions:
Build resilience by adding flexibility and agility to the decision-making process
83% of executives believe it will be as hard or harder to tap into corporate resources for Latin America in 2017 compared to 2016, which highlights the importance of understanding and making the case for markets given the distinct realities in LATAM. Executives can draw on FSG’s LATAM Resilience Index to prioritize markets in the region and vet opportunities based on market size, growth, and risk aversion. Thanks to this tool, we can understand how the most and least resilient LATAM economies compare to one another:
- Markets such as Mexico, Peru, Colombia, and Chile will continue to constitute the most stable environment for steady growth
- Brazil’s resilience is undermined given political uncertainty and expected turmoil that should last until the 2018 elections
- Argentina’s weaker resilience is largely due to social unrest, high inflation, and uncertainty surrounding the likelihood of success of President Macri’s corrective economic measures
- Venezuela will continue to suffer significant headwinds and disorder through the end of Maduro’s term. It is likely that the country will default on its debt within the next year, which could increase social unrest, further drag down demand, and worsen FX and price controls
Among the many worldwide events that could disrupt the resilience of LATAM markets in the coming years, executives should be prepared for further depreciation of LATAM currencies as the US Fed increases interest rates and domestic demand becomes constrained. In fact, 66% of executives named Brazil as the market where DSO deteriorated the most in 2015, and it is likely that rising interest rates and dollar-denominated debt will continue to put pressure on borrowing costs for local customers and partners.
Deepen strategic capabilities to ensure alignment and invest in building resilience
Every executive shared that, on some level, his or her company needed to adapt to the slowdown in LATAM. Executives can leverage FSG’s Market Monitoring Process to develop a fully-formed course from market monitoring to risk tracking to course correcting, which can help deepen strategic capabilities to ensure alignment and investment in building resilience. Operating in emerging markets requires constant tracking of leading indicators, identifying and diagnosing risks, and changing course when necessary; yet, 79% of executives take an ad-hoc approach to reacting to unexpected market changes and facilitating course correction to mitigate impact.
Organizations need to ensure they (i) track leading indicators, (ii) consistently manage these indicators in dashboards, (iii) incorporate assumptions into business reviews, and track and pressure test these assumptions, and (iv) have a structured and feasible approach to course correction that can be effectively implemented. Organizations that succeed in high alignment and resilience are more likely to exceed expectations for profitability and market share.
Sustainable outperformance depends largely on effective talent management
Surprisingly, although 39% of executives believe a great GM ideally spends 31-50% of his or her time on non-emergency talent management, 56% of executives currently spend less than 20% of their time on this endeavor. Executives should leverage FSG’s Management Excellence Methodology to understand how to organize their workforce to successfully execute regional and country strategies, as well as FSG’s 12 Staff Competencies centered on leadership, coordination, and analytical/creative proficiencies to facilitate successful workforce planning.
Strategic and commercial success depends, in large part, on having the right plan and the right people with the right capabilities, and executives need to 1) ensure talent management gets the attention it deserves and that team capabilities match strategic imperatives; 2) craft a compelling employee value proposition where team member loyalty is built through a framework process around company culture and differentiated incentives; and 3) avoid staff overstretch by promoting a high-focus culture where employees are assessed for their ability to focus, and key person burnout is reduced.
Optimizing pricing strategy amidst rising volatility
It is important for executives to build flexibility and processes into pricing decisions in order to adapt to rising volatility, particularly seeing that 72% of executives have lost flexibility to pass FX depreciation on to distributors and/or consumers over the last 18 months. Although there is no one-size-fits-all pricing strategy for MNCs (68% of FSG clients consider reference pricing the most effective strategy) nor do all companies face the same challenges when it comes to adjusting prices, executives should align their organizations to address pricing decisions in a structured and flexible way, always remaining consistent with strategic imperatives. For 2017 in LATAM, 64% of executives will be more focused on protecting margins and gaining market share. FSG offers a 3-step process for executives to bear in mind when making pricing decisions:
- Create a flexible pricing process that empowers local teams. Change pricing more frequently, but based on pre-defined market conditions, and encourage input from local teams when making these decisions. Also, provide flexibility in aligning channel incentives with pricing strategies
- Develop a tailored pricing strategy framework by first defining strategic imperatives, then setting the pricing strategy. While it may be important to cut costs to increase pricing flexibility, continue to invest in order to grow tomorrow
- Select the right tactics to support pricing framework and consider alternative strategies that add value and prevent constantly changing pricing
FSG clients can contact their account manager for a full copy of the presentations.
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