Bain & Company Surveys Fortune 500 Companies On Economic Turbulence.

BOSTON--(BUSINESS WIRE)--March 9, 1999--

Over 90% agree that a clear strategy is needed to weather

the storm -- though less than 15% admit to being fully prepared.

Bain & Company, a global strategy consulting firm, today released a white paper, entitled Winning in Turbulence, discussing the findings of a survey of nearly a hundred Fortune 500 executives on their attitudes toward economic turbulence. The survey involved a series of one-on-one interviews with senior executives held over a three-month period.

The results of the Bain study indicate that nearly 90% of executives interviewed predict a slowdown of the US economy and nearly three quarters expect Asia and/or South America to negatively impact their 1999 performance. Of the senior executives surveyed, 50% believed that planning for turbulence is a top priority. While over half the companies have assigned someone to the task, less than 15% feel fully prepared.

"The discrepancy between the number of executives recognizing the need for planning ahead of turbulence and the number of top managers feeling fully prepared for it is not surprising given the fact that today's economic conditions are incredibly volatile and often completely unpredictable," commented Darrell Rigby, a Director at Bain & Company, who spearheaded the survey.

"The current economic climate is full of seemingly contradictory trends: lay-offs are up but unemployment is down; consumer confidence is high but business confidence is low; inflation is down but wage rates are up; disposable income is on the rise, but personal savings are hitting record lows. With this new economic environment, it's very hard for companies and executives to confidently address today's turbulence with yesterday's textbooks," Mr. Rigby added.

According to the Bain survey, 75% of respondents believe that economic volatility creates a valuable window of opportunity to gain a strategic advantage within their industry. Furthermore, while 88% expect an economic slowdown, close to 80% believe that their company is better prepared to weather the turbulence than their competitors.

Mr. Rigby cautions: "While managers are very confident about their own ability to capture the advantages that turbulence provides, unfounded optimism can be dangerous. Everyone thinks that future turbulence will be tough - but tough for someone else. Of the executives surveyed 73% fear that `managers have a false sense of security after seven years of economic prosperity.' This coupled with the admitted lack of company preparedness for the economic turmoil, means that a lot of companies are in for a very bumpy ride.'"

When analyzing the track record of the companies, whose executives participated in the survey, it is clear that the level of confidence is not backed up by their own past performance. Less than half of the companies expressing such confidence actually outperformed their industry during the last recession of 1990-91. Their sense of security may stem from the fact that few have yet been turbulence-tested during the past 95 months of uninterrupted growth -- the longest peacetime expansion in U.S. history. Only 35% of Fortune 500 CEOs were in their current position during the last recession.

Bain's analysis of 377 companies that weathered past recessions found that economic turbulence creates both heroes and casualties, and that those emerging successful were companies that:

1. Focused first on strengthening their core business 2. Had a well-defined strategy and contingency plans 3. Acted quickly without overreacting, making frequent and timely

adjustments 4. Distilled and disseminated wisdom from experience -- not just

their own experience, but that of employees, major competitors,

and smaller companies unburdened of tradition.

Mr. Rigby stated: "There is no one-size-fits-all answer to surviving in turbulence. What is important is being prepared for the volatility and finding ways to take advantage of it. Companies in a weak financial position should start exploring ways to refill their tank- divesting non-core assets, restructuring their balance sheet and seeking alliances with strong partners. For companies in strong financial positions, this is a time to evaluate investment opportunities: cherry picking assets, acquiring weaker competitors and pricing to gain share. Companies that are prepared will capture a disproportionate share of their industry's growth and profits."

Background: Survey details and results

-- 88% of executives surveyed expect real GDP growth in the U.S. to

fall from its annual rate of almost 4% over the last three years

to less than 2% in 1999. -- 85% believe that Asia's economy will affect their company's

performance this year - with almost 60% expecting Asia to perform

at or below 1998 levels. -- Expectations for Latin America are even lower. About 74% say that

Latin America will impact their company's 1999 performance and

80% expect the region to be at or below 1998 levels. -- Only 22% of respondents are "Not really worried about economic

turbulence in 1999," while 61% disagree or strongly disagree with 

this statement. -- 49% said that "Planning how to succeed in a turbulent economy is

one of our company's top priorities." 53% of those interviewed

have already appointed someone within the company to lead

preparations. -- Survey respondents also expressed a positive side to economic

turbulence. 74% believe that "recessions create a valuable window

of opportunity to gain strategic advantage." -- 79% claim that their company is better positioned to handle

economic turbulence than other companies in their industry. It is

clear that a number of executives are in for a disappointment.

Bain & Company is one of the world's leading global strategy consulting firms, serving clients across six continents. Founded in 1973, Bain has worked with over 1,500 major multinational and other corporations from every economic sector, in every region of the world, to improve and help sustain bottom-line results. Quantum leaps in performance are a frequent outcome of the customized, creative and often breakthrough strategies Bain develops for its clients. The company has 25 offices worldwide.