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Think long term to survive the crisis, says Fuller

By Zhang Ran (China Daily)
Updated: 2009-05-23 08:42

Companies must be careful not to undermine their long-term potential when trying to save themselves from the financial instabilities caused by the economic recession, said Joe Fuller, CEO, Monitor Group, a leading corporate strategy consulting firm.

"The easiest way to damage your company is to only act on short-term purposes, and assume that in the future, the past strategy will work," the head of the Boston-based firm said in an interview with China Daily in Beijing.

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The firm, which has offices in Shanghai and Beijing, is busy helping companies in life science, health care, and consumption sectors survive the recession and achieve long-term goals.

"We are lucky that we are less severely hurt in the financial turmoil as only a few of our clients are from the financial sector," Fuller said. "On the other hand, unlike McKinsey, which already has a relatively stable market share in China, we are a rising star in the consulting business in China. This helps us in our growth."

Fuller said due to the economic crisis companies have been forced to cut costs, improve organizational efficiency, cut back investment programs, and divest marginal and non-core businesses.

"While it is clear that securing short-term financial stability should be a priority in these challenging times, companies may be passing on unique opportunities and in some cases harming their long-term competitive position due to the excessive short-term focus," he said. "Senior managers must focus on supporting investment to get long-term achievements."

"China did post very optimistic figures in the first quarter, indicating an economic recovery. The recovery has been aided by huge money supply, which helps investment in the short term, but in the long run, the country has to stimulate its domestic consumption in order to maintain the economy in a healthy way. At the company level, Chinese companies must have a clear strategy to improve their value added ability in order to explore the domestic market," said Fuller.

"That is to say, companies in the downturn must be very careful not to undermine their long-term potential to add more value by cost cutting," he said.

Monitor is strong in the healthcare and consumption sector. Fuller and his partner, Edgar Hotard, chairman of Monitor Group (China), are currently pursuing opportunities in China's healthcare sector, which is expected to get a fair amount of investment after the government announced a detailed 850-billion-yuan medical care system reform plan in April.

"Two or three sectors will benefit from the package, such as small molecules, particularly generic drugs, and have a significant growth. We already see companies in that sector consolidating and looking to acquire additional drugs under their portfolio," said Hotard.

"For longer term, biotechnology will continue to develop. Government has funded this area for six to eight years and it is time to see the benefits of such a focus," he noted.

Another sector that will benefit from the reform, according to Hotard, is the drug distribution business.

"China's drug distribution system is very fragmental and inefficient. For example, the three top drug distributors probably control 75 percent of the market in the US, while in China, the top three occupy less than 10 percent of the market," said Hotard.

He added that new hospitals, both public and private, and all the hospital related equipment providers would also benefit from the reform.