Tough competition ahead for Indian businesses: Ernst & Young

MUMBAI:: Despite a fair recovery in the global economy, businesses worldwide, including in India, will have to go through a tough phase as the environment gets more challenging, according to a report by Ernst & Young.

The study titled 'Competing for Growth' that involved 1,400 senior executives globally, states that the next two years would be a challenging period for the business firms.

About 95 per cent of the Indian respondents state that there will be more focused on growth besides being varied and volatile in the next two years as compared to the crisis period, according to the study.

India is said to remain the third most volatile market at 69 per cent after Japan (74 per cent) as margins will be under pressure due to price erosion and increasing labour costs. Brazil is said to be the most volatile market.

Emerging markets expect competitiveness to increase the most, as companies from developed markets enter and local players intensify their focus, the study added.

About 50 per cent of the Indian respondents cite existing players from emerging markets and 38 per cent cite new players from developed markets as most prominent factors driving increased market competitiveness over the past two years.

"With over 8.5 per cent GDP growth, India continues to offer enormous potential but also gets more competitive, particularly on building market share, accessing talent and other input costs," Ernst & Young's Partner and National Leader, Farokh Balsara said in a release here today.

He also said that in order to remain competitive, businesses are increasingly considering options like more effective use of partnerships and transformation initiatives to make them more agile in responding to change, focusing on building the brand and reputation and driving service/product innovation.

Globally, 60 per cent of respondents cite developed markets as the likely source of profitable growth, while the emerging markets growth will be more competitive given the focus of both local companies and companies from Western markets.

However, 59 per cent of Indian respondents believe that India as a market will continue to drive future growth, while 38 per cent believe it to be Asia Pacific countries (excluding India and China). Thirty per cent cite US or Canada as key markets driving growth and 13 per cent voted for China.

Innovation would play a critical role for the companies to survive amid heavily competitive market, the study added.