No comment A comparison between French and Chinese leaders at the end of 2009.

Commodity prices: the worst is yet to come Although there is a relief that commodity and oil prices have moved back to "normal, a new take-off in these prices is likely in a few years if emerging economies, especially China, continue to grow strongly. It is even likelier if more mature economies grow sluggishly. The steep surges in commodities in 2006 and 2007 were followed by very sharp drops in 2008, which coincided with the beginning of the contraction in the global economy and general destocking, particularly in China. And yet, this (undesirable) correlation masks two very different trends: the investment cycle in mining and the unstoppable rise in crude oil prices.

Celsius vs. Euro Global warming is inevitable. At least that is the prevailing scientific view today. Putting aside the current undeniable uncertainties on the precise nature and extent of the impact, the consensus view among experts and political leaders is that global warming will lead to rising sea levels and harmful climatic upheavals, given the extreme difficulty in adapting current farming practices, modifying infrastructures and relocating populations. So there are two battles: 1) to attempt to mitigate the negative impacts of these future upheavals (some of which, by the way, will be positive); and 2) to try to tackle the problem at the source by combating the causes of global warming (beyond the actions that have already been taken).

The strategic trough Leading western companies are faced with a paradox. Although their strategies are probably aimed in the right direction, they are not producing results fast enough: growth is slow, and their value is scarcely increasing. In most cases, they have achieved concentration in their European or North American markets, and their market share is large enough to produce significant cash flow. They have invested in emerging markets, where they have already achieved strong or growing positions. The problem is that these positions still represent only a small percentage of their global business portfolio. For many of them, emerging markets still represent a low volume, and hence even lower value.

Economic upturn: time to revisit your growth model? Now that the economy is emerging from recession the focus will once again be on growth. A strong growth model will once show itself to be the main source of value creation. However, tomorrow’s growth models will not necessarily be the same as yesterday’s. The emergence from a recession is a good time to revisit historical growth models and to either adjust them or leave them as they are.

The return of strategy In the coming years, global growth is likely to be as strong as it has been previously. However, it will not be in the same industries and geographic areas as currently. Before and after the current economic downturn (and that of 2001-2002), the companies with the highest TSR are still the same. They are the ones that are positioned in industries and/or geographic areas undergoing significant growth, or they have strategies and business models that enable their strong growth in mature industries, and they have the competitive edge and profitability that finances their growth.

How will groups exit the recession? The current crisis reminds us that cycles are an integral part of the market economy. This is the 14th recession since 1945, and certainly one of the most severe. The global economy has nonetheless grown at an annual average rate of 4% (excluding inflation). Which groups have the mix of activities and competitive positions that they need to survive and grow through increasingly volatile economic cycles?

Published in La Jaune et la Rouge, October 2009

Should you lower your prices? Lowering prices to defend market share and utilise capacity is a natural reflex during a recession. But is this really a good strategy? Is it worth defending market share at all costs? How low can prices be slashed the prices to prevent situations of excess capacity? Only one intelligent pricing policy exists for any given strategy and capacity level, based on the value and positioning of a company’s product or services, the competitive environment, and customers’ price sensitivity. A well-designed, differentiated pricing policy is key during a recession, along with managing costs and investments.

Cost restructuring versus business portfolio restructuring What are the key decisions that will give successful companies an edge over their competitors by 2012? Classical cost restructuring (slashing overheads, optimizing procurement, improving industrial productivity, reducing indirect costs…) is a normal response to a normal crisis. When facing a recession, such restructuring is nonsense as it rapidly reaches its limits. The only issue at stake throughout the crisis is growth and its financing.

Growing through crises The western economy has undergone 14 crises since 1950, i.e. an average of one crisis every four years. This did not stop it growing 7.5% per annum over a half century (including inflation). It is therefore difficult to achieve long-term growth without being prepared to resist transitory slowdown or even use them to one’s advantage. One thing is certain, one or two years after crisis, markets will be better or different! Will a company’s position in its market be strengthened or weakened?

A return to the post-war boom Just for a moment, let’s look beyond the current and inevitably transient crisis. After all, we have the next best thing to the post-war boom to look forward to. Strong growth, higher spending power for wage earners, infrastructure expansion, household appliances, a modern and growing retailing network, growth in financial services and favourable demographics going forward… but all of these good things are happening in China!

Bursting bubble or cycle turnaround: a necessary choice The theme of growth, or rather its slowdown, is more than ever the focus of all discussions. Are we in the presence of a speculative bubble that is bursting? Or is it just a one-off economic glitch? Are we experiencing a much deeper trend reversal? The appropriate conduct is not the same for each case. It is necessary to take a closer look. Agendas were full during the period of euphoria. They will be even more so during the downward phase of the cycle. Even though we are entering turbulence, it is not the time to take a passive stance until the return of better days.

Have large firms forgotten how to grow? Growth is essential to deliver a strong return to shareholders. It requires a clear strategy. Investments must be focused on growing activities and business models adapted to new geographic markets. The portfolio must be regularly recalibrated towards growing markets. Besides the question of which strategic choices to pursue, western companies in addition face cultural and managerial challenges. During the past several years, management teams have dedicated their time to improving profitability and may have lost sight of how to deal with the high levels of growth experienced in emerging countries.

Published in La Tribune, January 2008

Three Rules for growth Most the major European corporations are not growing- and this is because they have taken the decision not to. There are, however, 3 very simple rules to follow in order to grow, and grow profitably. Growth is primarily a strategic decision to be taken at the very highest level, and these 3 rules show how easy it is to understand why so few European corporations grow faster than the average rate of the economy.

Published in Challenge, January 2008

All growths are not equal Companies that wish to create value for their shareholders must show profitable growth that is far greater than average economic growth. But certain types of growth are more profitable than others. The active management of the business and geographical portfolio is an essential element of growth and therefore of value creation.

Published in La Jaune et La Rouge, November 2007

Private Equity funds: the rebirth of capitalism? Everything seems to be going wrong for Private Equity funds at the moment. But are they really all that bad? Private Equity funds are both the instigators and the engine of change. They are portfolio companies that purchase firms in order to turn them around or boost their growth while maintaining strong profitability. In this respect, they are contributing to the (albeit weak) growth of the European economies in which they operate.

Published in ACQ, November 2007

Growing in China For the last 10 years, China has experienced annual growth of over 10%. This growth allows the development of Chinese players which, in terms of volumes and price, results in an increase in competition on European markets. These players represent a short- and medium-term threat. However, China is no longer simply a location to expand production to. It is also the market of the future and therefore an opportunity for profitable growth. Today, the question is no longer “Should we enter the Chinese market?” but rather “When should we enter the Chinese market?”

Published in la Revue des Mines, September 2007

The stakes of globalisation for food-processing companies European food-processing companies are growing at a slow rate in Europe. Simultaneously, emerging countries are undergoing profound changes in their food consumption patterns, leading to rapid growth in these markets. A food-processing company must develop its model beyond its borders or risk weakening its overall position. But there are obstacles to this strategy, either at supply level or in terms of the economics of this development.

Published in ESCP–EAP magazine, March 2007

A sustainable scenario In a scenario of sustained world economic growth, driven by the emerging countries, energy prices could double, the impact of which would be manifold. Some industries, such as oil and gas, could profit directly from this trend, however the pressure on household discretionary spending is likely to impact negatively many sectors such as telecoms and media, hotels and food services, leisure, …In order to survive, companies will have to radically change their offer and their positioning in the value chain.

Published in Centrale magazine, March 2007

Long term growth is essential The only sustainable way to create value over a long-term period is long-term profitable growth. There are three ways to achieve such growth: Developing on the fastest growing segments of a profitable market, replicating a successful business model on new segments (geographies, products, clients) or managing a long term portfolio of activities financing fast growing activities with very profitable ones.

Published in Colloque ENA – X – HEC, March 2007

All businesses are not equal Over a long period, certain businesses earn more for their shareholders than others. Growth and competitive structure account for the differences between different businesses’ values. Businesses that are growing and are "well" structured earn more for their shareholders, even after taking into account the cost of capital. To create value for shareholders, the choice of businesses is as important as a good strategy or the quality of the operational management.

Published in La Jaune et la Rouge, January 2007

Utilities: How to have your value continually confiscated ?European utilities operators have little growth potential but a high potential for profitability gain. Unfortunately for them, prices are regulated and tariffs are lowered in proportion to profitability increase: better to be a client than a shareholder.

Published in La Revue des Mines, September 2006

Value Waves At a specific industry level, constant growth and profitability is an illusion. Value is evolving in waves through industries, segments and geographies. That is why diversified companies exist. Conglomerate management teams must then focus on surfing the best value waves and have implemented efficient and persistent strategies on each wave they have taken. To reconcile the two is not easy.

Published in Centrale magazine, September 2006

Is it still worth investing in R&D? R&D is generally considered as a shield against competitors from low cost countries. Sadly, this is not the case. R&D is only valuable as a component of a strategy, which must be analyzed and precisely defined as such, and made coherent with the other levers and investments of the company, beyond the simple optimization of its organization and internal processes.

Published in La Jaune et la Rouge, June 2006

European Energy industry manoeuvres: when winning means losing European energy operators are being pushed to consider large acquisitions in Europe as their only way to create value. Their cost reduction potential is very low and European market growth and extension opportunities outside Europe are limited. But what is the real value creation potential of such operations?

Published in Centrale magazine, June 2006

Three Ways and means to relocate production Chinese competition and competitiveness has extended to all manufactured products, even value added ones. Facing this pressure, European and American manufacturers cannot just close their production facilities and purchase from their Chinese competitors. There are three sophisticated strategies to relocate production, each one corresponding to a specific business model and positioning.

Published in ESCP-EAP magazine, May 2006

The Fourth dimension For the past 30 years, strategic analysis has explained structural profit through three key concepts: competitive advantage, differentiation and growth. A fourth dimension has now arisen: localization. The geographic mix of production facilities, coupled with the geographic mix of sales, is the deciding factor of growth and profitability for globalized industries.

Published in Colloque HEC-X-ENA, March 2006

Commodity prices do not preclude profit Commodities are often seen as high volume, low margin products for which price differentiation is limited. However, there are ways to make a commodity business profitable, by having a global understanding of the individual elements and how to combine them, so as to make the most from each situation and every client.

December 2005

Europe in a squeeze European companies are currently under attack on two fronts: on one side margins are being eroded, under pressure from Asian competitors; on the other, costs, in particular raw materials and labour restructuring costs, are rising. Margins are falling, and with them the means to invest in innovation and differentiation. In order to counterattack, timing is the critical factor.

Published in La Jaune et la Rouge, November 2005

You need to define your priorities Today, interest rates and costs of capital are at historical lows. Most large groups have restructured their operations and increased their profitability well above the cost of capital: the priority is now growth.

September 2005

Single brands or portfolios: how can you optimise brands? Brands are amongst the main assets for certain companies. Too often, they are only managed with an eye on the past. However, a successful brand strategy can lead to growth and increased profitability by coordinating the number of brands, their positioning, their business model and their operational components.

May 2005

Electricity trading: from gentleman’s agreement to global optimisation Electricity trading has experienced fundamental changes over the last ten years. Today, trading occupies a key role in electricity companies, following the example of oil giants. Only the traders in a company know the totality of production costs, expected final prices, the price-volume curve by client segment, competitive positioning on the market, etc. Trading started taking over the management of power stations in the 90s and is now moving towards having sole responsibility for an electricity company’s turnover and margin.

Published in Energy News, May 2005

Creating value: strategy vs. economy The performance of Western stock exchanges over the last 15 years can be fully explained by economic growth and reduced interest rates. Some companies have considerably exceeded the average thanks to either fundamental re-positioning strategies or active portfolio management strategies, even in the least buoyant sectors. Classic leadership strategies have only created value for well-structured businesses in high growth sectors.

Published in Colloque X – HEC – ENA, March 2005

Will the core market disappear? Core market brands and distribution formats have constituted the majority of market growth in developed countries over the last 30 years. Their continued success is currently being brought into question by the rise of low-end and high-end competitors. Price boundaries are being stretched out, selections are becoming broader and more complex, and the value of global brands is being eroded. What are the possible levers to combat these structural changes?

Published in LSA, January 2005

What is the value and durability of distribution concepts in the clothing industry? The success of the large retailers in clothing relies on a clear positioning with a differentiating value proposal and an economic model that is coherent with this positioning. Their durability depends fundamentally on three structural variables: the age segment, the style and the level of integration within the distribution.

Published in ESCP-EAP magazine, December 2004

It is not only necessary to manage costs, but value as well well Cost reductions have constituted an important lever for increasing competitiveness for a number of years. However, this lever is generally short-lived. Three other more differentiating axes exist, and yet are not systematically used by companies: prices, discretionary costs and investments.

November 2004

Survival strategies in a low-cost world The emergence of low-cost players is nothing new. The phenomenon has existed in the civil aviation sector in the US for over 30 years. It has also appeared over the ensuing years in mass distribution (hypermarkets, and more recently hard-discounters), in mutual insurance companies, telecommunications, mail services, hotels, financial services and, very recently, in high-speed trains.
Ultimately, only one or two low-cost players survive in a given market. However, in the short-to-medium term, significant value destruction can occur across an entire industry. In order to survive in a low-cost world, it is essential for established players to leverage the right strategic tools – namely, pricing, lobbying and restructuring.

November 2004

Competitive regulations and the decline of consumer prices The aim of competitive regulation is simultaneously to promote economic efficiency and to lower prices for the end consumer. However, these two objectives are not automatically linked, and authorities regulating competition have to operate in a complex manner between two poles each as undesirable as the other: a fragmented industry which does not allow for long term investments and a monopoly rendered inefficient due to lack of competition. Ideally they should enforce an oligopolistic situation with a limited number of players, in the framework of a rationalised industry where costs and prices are low, and where the competition provokes the pursuit of these reductions in costs and prices. The problem is then to avoid such an oligopoly turning into a cartel!

Published in la Jaune et la Rouge, October 2004

The real impacts of the development of CCG Numerous CCG power stations have been or will be built in Europe, and will substantially increase demand for gas. Gas prices for CCG will increase as a result, but without bringing with them a revolution. The real revolution is the smoothing out of cost differentials between producers on the supply curve, which critically lowers the profitability of production. Independent producers, not integrated downstream, are thus becoming much less attractive to investors. After extolling regulatory break-up ten years ago, has the hour of re-integration now arrived?

Published in la Revue des Centraliens, April 2004

Germany falls into a trap The “German machine” is damaged, but it allowed this country to become the third largest economic power in the world, fifty years after the Second World War disaster. There are a lot of explanations : absence of new technology development, relocation of traditional industries, cost of Eastern Germany’s integration…However, these causes are also consequences and do not explain the German “case”.

Published in Colloque X-HEC-ENA, March 2004

Should a luxury leather goods brand diversify into ready-to-wear ? Expanding into ready-to-wear sector provides a strong exposure and offers growth opportunities. However, there is also a number or risks. Trying to apply the leather goods model to ready-to-wear is a risky business because these sectors do not follow the same economic patterns. There are four possible strategies.

Published in le Journal du Textile, January 2004

China : some figures Chinese GDP has grown by 9,6% per year for 10 years and by 8,3% for the 5 past years. The Chinese economy will be equal to the European economy in 2040, but the standards of living and salary costs will become equal only in 2070. For a corporation, China is not only the place to develop its facilities, but it is also the market of the future.

December 2003

Pricing strategy for industry followers Since they have no cost advantage, industry followers have few pricing options. Effective strategies usually involve re-segmenting the industry, which allows an industry follower to individualize costs and/or value and to set prices significantly lower or higher than average on specific segments.

Published in La Jaune et la Rouge, October 2003

Deregulating electricity in Europe: splitting up the commercial value chain is not a sustainable model over the long-term The splitting up of production and supply, and the creation of wholesale markets between them, will fail to allow new entrants into former electricity monopolies. Trading is not a valuable activity per se. Wholesale prices are structurally set too low for production to be profitable.

Published in Energy News, September 2003

How best to optimize advertising expenditure? Advertising budgets are often fixed completely intuitively. Yet "industry standards" for advertising expenditure can be defined for any given positioning, channel, country and market share. Deeper analyses can even help determine the best allocation of advertising expenditure.

July 2003

A simple tale He arrived at the head of the group at the bottom of the cycle. He introduced new managing tools and results grew. Then, the cycle turned downward and results collapsed again. What could have and should have he done differently ?

July 2003

The real beneficiaries of Wifi Public Wireless Fidelity networks (or Wireless LANs) are all the rage in the telecoms sector these days. But what are the real economics of these offerings? Do they stand to coexist with or cannibalize future 3G services? How will they impact the results of incumbent mobile telephony operators ? Who will ultimately benefit?

Published in la Jaune et la Rouge, May 2003

Prices - the other lever for improving the bottom line In each industry, prices vary greatly between segments and between clients within each segment, even for products that appear very similar. A rational and systematic optimization can add up to 10 percentage points to a company's gross margin! It requires a selective adjustment of prices taking into account competitors, customers and costs.

Published in Colloque X-HEC-ENA, April 2003

Daily press in France, from craftsmen to industrials ? The daily press financial performance in France is poor in comparison to the other European countries. The actual profitability, the downsizing of the number of readers, the evolution of the competitive environment and the advertising market and new potential linked with new technology should induce the restructuring process. There are opportunities for players who know s how to become industrials.

March 2003

Speculative Bubbles Crashes in the Telecoms, Media and Technology (TMT) sector have made for dramatic headlines of late. Bubbles have occurred throughout history, yet managers and investors continue to make the same errors. For some major bubbles, we identify a trigger event, as well as the conditions for and the process leading to a market crash.

Published in la Tribune, December 2002

Creating value in chemicals Most chemical companies display low margins and slow growth. The main culprits are business cycles, excess capacity, industry relocation, lack of visibility and margin migration. Remedies are more tactical than strategic; they involve better management of customer, product, capacity and margin mixes.

Conference to ECMSA (The European Chemical Marketing and Strategy Association), November 2002

Pricing strategy for industry leaders There are very few pricing options for industry leaders. The choice between these options depends on the structure of their industry.

Published in la Jaune et la Rouge, November 2002

Shareholders are not customers According to a recent theory, companies can increase their market value by segmenting shareholders and adapting to their risk profiles. This is doomed to failure as companies' valuation and stock quotes are based upon much deeper roots. It only risks adding more confusion, eventually turning into higher stock volatility.

October 2002

What's a P/E ratio worth? P/E ratios are not that simple. Many unrealistic valuations stem from a misunderstanding of their underlying structure.

Published in l'Expansion Management Review, September 2002

Does management control help in taking the right decisions? The tools of management control have experienced major improvements over the course of the last ten years. Nevertheless, they are not always used advisedly. If they are necessary for following operational performance, they cannot be used for taking strategic decisions. For that, ad hoc, economic, strategic or financial analyses are inevitable.

Published in ENA Alumni review, June 2002

Business ratios-showing the way ahead? Despite the recent sophistication in financial controlling tools, these still lead to many common shortcomings. Thus, strategic decisions should only be based on customized analyzes.

May 2002

The deregulation of the electricity market in Continental Europe: An elusive reality Deregulation is not yet a reality in Continental Europe's main electricity markets. But for governments to press ahead for positive reforms, major obstacles must be overcome.

Published in Energy News, May 2002

Why the distribution strategy of major luxury brands has reached a dead end All the players in the luxury industry are trying to own their distribution network. But the cost induced is growing faster than the anticipated benefits. Five options can help find new profitable business models.

Published in le Journal du Textile, March 2002

Is Zidane financially worth more than 69m euros? Zidane's record transfer to Real Madrid is an astute move. But what happens on the field is not as important as financial calculations behind.

Published in l'Expansion Management Review, March 2002

What are the perspectives for the luxury industry's players: consolidate or be consolidated Five major evolutions drive the luxury industry's current wave of mergers & acquisitions. As they increase capital intensity, size becomes critical.

Published in Colloque X-HEC-ENA, May 2001

Why process industries do not create value Process industries cannot, on average, create any value. Traditional strategies are worthless because these industries do not work in the same way as others. Six types of strategy can yet help create value in these sectors.

Published in La Jaune et La Rouge, March 2001

Creating value in the football industry Football is emerging as an industry in its own right, attracting investors and able to create value. The challenge for the clubs is thus to look beyond sport itself, investing to ensure regular revenue growth over time.

Published in Le Figaro, January 2001

Long-term growth Simply improving your bottom line through rationalization and cost cutting is only a temporary measure. Growth is fundamental to create long-term value. Yet it requires drastic and controversial choices.

Published in La Jaune et La Rouge, October 2000

Strategy stages a come back In the 80s and 90s, senior executives of large international corporations were focused on restructuring for short-term profit improvement. Today, they seek to create or maintain profitable growth: allocation of resources and strategic choices have become critical.

Published in La Jaune et La Rouge, October 1999

Economic Value Added - drawing the line EVA is a simple but often misapplied yardstick, more useful in operational management than in strategic decision-making.

Published in Le Figaro, July 1999

M&A: What's the point? It is now commonly observed that most mergers and acquisitions do not create any value. But that is not the problem. As organic growth, they must only be considered as tools, serving strategies.

Published in l'Expansion Management, June 1999