The challenges facing Swiss companies at present are very complex and, in some cases, are sector-specific too. On the one hand, we have saturated markets combined with a major erosion of margins in the Western world, which is causing the focus to switch to growth markets. In parallel with this, we are facing an uncertain climate in the economy as a whole, with the fear of sharp setbacks and a recession in global markets. In Europe, the current debt problems are only serving to heighten this uncertainty. Tied in with these problems is the strong Swiss franc, which is making Swiss exports more expensive and hampering sales to foreign markets. These sales difficulties are in turn impacting negatively on companies’ income statements, leading to greater pressure to optimize costs, especially staff costs. However, investment in human resources should be made if we want to be able to retain employees with the high level of training required to remain both innovative and competitive.
Yes. Firstly, in terms of production, companies need to be able to adapt to the increased levels of market volatility while remaining flexible. Supply chain management also needs to be improved in order to cushion highly volatile raw materials prices. Secondly, there is a further challenge posed by the greater complexity of business relationships across the board in terms of globalization, IT and security; for the financial industry in particular, this is reflected in ever-increasing regulatory requirements such as FATCA, SST, Basel III, AIFMD, etc.
In the constant increase in regulatory requirements, such as FATCA, the Dodd-Frank Act, SST, Basel III, MiFID, AIFMD, etc. These regulations are making international financial business more complex and are forcing companies to adapt their business models. At the same time, the demands being placed on companies in terms of transparency, internal compliance, risk management and business processes, such as IT and security systems, are also increasing. In parallel, banks and insurance companies are facing cost pressure and an erosion of their margins. This is prompting them to become more cost-efficient and to exploit economies of scale.
The greatest challenges here are the saturated Western markets, together with an increased pressure on margins (fueled in part by the public sector). Although growth markets are expected to be profitable, unlike in the past these now need to be approached with a more long-term view in mind. The same applies to securing access to raw materials. The imminent reductions in income resulting from the expiry of patents on blockbuster drugs could create a further risk spiral. Slumps in revenue are increasing the pressure on costs, which could lead to a reduction in R&D spending and, in the longer term, to a loss of competitiveness. The growing emergence of generic drug providers is exacerbating this trend.
As already mentioned, the main problem facing manufacturing is the capacity of export products to remain competitive despite the strong franc. Retaining staff with a sufficiently high level of qualifications under cost pressure is a further difficulty, as is supply chain management optimization and the safeguarding of our strength in innovation.
One of the major challenges facing the energy sector in the future will be the diversification of the portfolio with regard to different production methods and the range of energy products. For smaller market players, there is also a pressure of consolidation. The question facing major providers is whether to form alliances, including with foreign companies if necessary. In terms of potential alliances or mergers, the difficulty will be in finding suitable targets.
Banks, insurance companies and other financial service providers need to counter falling margins through consistent cost management and cost cuts. Other measures would be transforming traditional business models into transparent models, such as fully compliant banking, for instance, or implementing a clean money strategy. In this regard, the sale of ancillary business lines or M&A transactions in order to achieve critical market size can also help, as can an increased presence in the growth markets of Asia and South America.
Chemicals and pharmaceuticals companies can expand in growth markets by forming local strategic alliances and engaging in M&A activities. They can strengthen their position by adapting their product strategy in line with the cost requirements in these markets. Clearly prioritizing their R&D portfolio and focusing on certain priority research areas can also help. Here, it is a good idea to concentrate on niche products or regions in which generic products are not yet competitive.
The same applies to the manufacturing industry. In order to remain competitive and to reduce currency risks, it is helpful to assess alternative production sites where the wage and production costs are lower. Optimizing supply chain management and adapting production to increasing market volatilities can be vital factors in helping to achieve these measures. Active M&A strategies in foreign markets and better use of economies of scale are further ways to increase competitiveness.
Interview: Simone Glarner, Marketing & Communications