Frontier Strategy Group recently held its annual Latin America Senior Executive Roundtable in Miami, Florida. The day-long event hosted over 30 Heads of Latin America and was focused on “Delivering Outperformance in a Slowing Region.”
In the morning sessions, executives in attendance were exposed to Frontier Strategy Group’s (FSG) latest thinking on where the region’s macroeconomic and business environments are headed over the next eighteen months, followed by a moderated discussion on the key steps that Latin America executives are taking to preserve top- and bottom-line growth in the region.
In the afternoon, attendees participated in a conversation around the challenges of working with distributors in Latin America, and FSG introduced best practices for enhancing distributor performance and managing channel transitions. Below are several key takeaways from the day’s sessions:
Key takeaway #1: Latin America’s economic performance has entered into a “new normal”
- Looking across the internal and external drivers of economic growth in Latin America, it is clear that the region is unlikely to recover to a more robust growth trajectory over the next few years. Indeed, FSG is forecasting that Latin America will manage just .51 percent GDP growth in 2015, and a modest improvement over that in 2016.
- Given that governments and consumers are only just now adjusting their behavior to reflect the implications of the region’s new normal, there is likely further downside risk to the region’s economic performance moving forward as government and consumer spending correct over the medium term.
- However, despite Latin America’s anemic growth environment, executives in the room were optimistic about the region’s long-term future and cautioned against short-term thinking in markets like Brazil.
Key takeaway #2: Latin America’s economic center of gravity is shifting northward
- While the Pacific Alliance markets remain best positioned to weather Latin America’s economic slowdown, it is clear that the fortunes of Latin American countries that are more manufacturing-oriented, and who are more tied to US economic growth, will lead the region in growth over the coming years.
- This view was supported by the expectations of executives who participated in the event, 50 percent of whom stated that Mexico was the market that presented the biggest growth opportunity for their business over the next 12 to 24 months. The next-highest ranked market was Colombia, which 18 percent of respondents listed as their top opportunity.
Key takeaway #3: Executives are adjusting their approach to Latin America in response to the slowdown
- Based on the day’s discussions, it is clear that executives are taking steps across three areas to support top and bottom-line growth in response to the region’s economic slowdown:
- Customer diversification: 54 percent of executives reported that adjustments to their commercial strategies offered the greatest “low hanging fruit” when it came to boosting their Latin America earnings, with many executives stating that they were actively seeking to tap into new customer segments and geographies to sustain growth.
- Value proposition: Many executives shared that they were looking at rolling out new products and services, as well as adjusting pricing, in an effort to craft a more appealing value proposition for customers.
- Localization: 33 percent of executives reported that they had adjusted their operations in response to the slowdown, with many citing shifting sourcing and production, as well as M&A, as ways in which they had sought to localize their businesses in region.
Key takeaway #4: Distribution performance optimization is a major opportunity for improvement
- Many executives reported significant opportunities for improving the performance of their channel partners in Latin America, which represent 54 percent of regional revenues on average.
- Surprisingly, only 9 percent of executives in the room reported that they would like to see greater margin concessions from their distributors. Instead the vast majority of participants (74 percent) reported that they would prefer to see distributors improve their selling and service sophistication.
- Overall, multinationals have significant opportunities to improve their distributors’ performance by deploying quarterly scorecards that blend commercial outcomes and capabilities into one weighted average score.
For more information on FSG’s executive events for Latin America and global emerging markets, FSG clients can contact their Client Relationship Director. Not a client? Visit our website or email us to learn more.