Ulrik Sanders, Partner & Managing Director at BCG Copenhagen; Daniel Stelter, Senior Partner and Managing Director at BCG and Stephen Brugger, Executive Director at AmCham Denmark.

Kurt Bager, CEO at Netop, speaks with event speaker Daniel Stelter.

Daniel Stelter delivers pinpoint recommendations for companies to succeed in the slow growth economy.

By: AmCham Denmark (Apr 29, 2010)

What is the main reason the world is not repeating the great depression of the 1930’s? According to Daniel Stelter, the Boston Consulting Group Senior Partner and Managing Director, it all comes down to government stimulus. In the United States this stimulus has been in the neighborhood of $8.2 trillion, approximately half of U.S. GDP. Around the globe governments have enacted similar stimulus packages and by early 2010 many are proclaiming the recession over.

Stelter is not so convinced. (to download Stelter's presentation, click here.)

At an AmCham Denmark Executive Forum at the U.S. Embassy, Stelter told the group of executives that despite some positive signs – several economies officially out of recession, leading economic indicators pointing to recovery, stock markets rallying as some investors regain confidence and some banks reporting quarterly profits approaching pre-crisis levels – there is still reason to be concerned.

According to Stelter there still remain many threats to a sustained recovery. Most worrying is a potential drop in spending as consumers begin to focus on reducing debt. Stelter emphasized this point noting that U.S. consumption comprises 19% of world GDP. So the consumer tightening its belt is unquestionably to cause a ripple effect throughout the global economy.

And there are other threats including sustained unemployment and potential trade protectionism as trade rebalancing gets under way. Furthermore, the abundance of credit that has fueled the recovery so far is unsustainable. “Credit cannot grow forever faster than income,” says Stelter. With the exception of China, Brazil and India, the impact of rising debt in a slow economy will lower the growth rates in the majority of OECD countries to below pre-crisis levels.

So where does this leave us? Stelter says that companies must be aware of the following structural changes in the economy: a lower appetite for risk, increased importance of dividends, increased consumers' price sensitivity, and decreased consumption. These changes will increase competitive intensity in slow growing markets, put pressure on profits and costs, expose broken business models and hinder uncompetitive cost bases from getting rescued by growing with the market.

Based on companies that came out of the 1930’s, such as Chrysler, IBM, and Procter & Gamble, Stelter recommends companies pursue a number of strategies: focus on innovation, take advantage of public sector stimulus programs, unleash advertising and marketing power, take the fight to your competitors, invest in the future and employ game-changing strategies.

The slow growth economy isn’t necessarily bad news for companies says Stelter. “Those that take the initiative, respond defensively to the challenge and execute their strategies with single-minded determination can still expect to grow. For those companies, the Great Recession and its new realities present an once-in-a-lifetime opportunity."