After surviving a turbulent financial downturn and struggling to find growth opportunities in the aftermath, U.S. companies today are focused on building a new value-focused framework – one that balances quality and price. Finding balance between these two is essential for midsize companies, which now face increasing competitive pressures from larger peers, according to a report released today by American Express Company (NYSE: AXP), a global leader in corporate card issuance, and CFO Research.
The report, “A Valuable Turn for Finance,” includes results from a survey of 275 senior finance executives at U.S. companies with annual revenue between $4 million and $2 billion, the majority falling within the midsize category of $50 million and $1 billion. The survey found that 57 percent of midsize companies identify their strongest competitors as larger peers. Compared to midsize companies, these large competitors are able to deliver significant volumes of goods and services with thinner margins.
“There is now a heightened need for midsize companies to find new ways to compete with larger competitors whose size provides pricing advantages,” said Darryl Brown, President, Americas, Global Corporate Payments, American Express. “Customers demand competitive prices and sustained quality. This forces companies to extract greater value from suppliers, vendors and their own organizations through tight fiscal controls in order to drive growth.”
Competing on Value
In order to compete on value and price, financial executives are not only tasked with getting the most out of suppliers, vendors and their own organizations, but to do so largely with cash generated through operations. Survey findings reveal most respondents (81 percent) agree that cash from ongoing operations (rather than debt or equity financing) is likely to be a primary source of growth capital over the next two years. Given their often limited control over payment terms with larger suppliers, vendors and customers, midsize companies must look for every opportunity to extract greater value from their supply chain.
Some finance executives are adopting vendor-management tactics common among larger firms as they look for opportunities to reduce spending through lower-cost suppliers and vendors. As companies push supply networks to offer more value per dollar, financial executives surveyed are enforcing strict management internally too. Most respondents (82 percent) say their companies are likely to increase their focus on maintaining financial discipline over the next year.
Improving Financial Fundamentals
Outside of additional cutbacks, respondents say that improving payments efficiencies and addressing challenges in forecasting and compliance will be key to achieving an ongoing, value-focused discipline. This new value-driven mind-set is not without challenges, as 43 percent of respondents report lack of time, attention and resources as among the greatest obstacles to improving cost management at their companies, followed by organizational resistance (35 percent).
“Midsize companies’ overall business strategies in 2013, are progressively reflecting a value-oriented mind-set, despite a continued shortage of available credit and already strict budget controls,” continued Brown. “Financial leaders are tasked with extracting value at every point through improved performance internally and in their supply chain. These midsize companies plan to maintain (and in many cases, ramp up) spending over the next year as they apply greater scrutiny on the value level achieved in all transactions and clearer visibility into expenses.”
About the Survey
CFO Research surveyed 275 senior finance executives at companies across a wide range of industries in the United States. Company revenues ranged from $4 million to $2 billion. The survey program was completed in December 2012.
About American Express Global Corporate Payments
American Express Corporate Payment Solutions provides the Corporate Card, Corporate Purchasing Solutions, and other expense management services to midsize companies and large corporations worldwide. In the U.S., American Express is a leading issuer of commercial cards, serving more than 70 percent of the Fortune 500, as well as tens of thousands of midsize companies. For more information, visit www.americanexpress.com/corporate.
About American Express
American Express is a global services company, providing customers with access to products, insights and experiences that enrich lives and build business success. Learn more at americanexpress.com and connect with us on facebook.com/americanexpress, foursquare.com/americanexpress, linkedin.com/companies/american-express, twitter.com/americanexpress, and youtube.com/americanexpress.
Key links to products and services: charge and credit cards, business credit cards, travel services, gift cards, prepaid cards, merchant services, business travel, and corporate card.
About CFO Research
CFO Research is the sponsored research group of CFO Publishing LLC, which produces CFO magazine, CFO.com, and CFO Conferences. CFO Publishing, a portfolio company of Seguin Partners, is the leading business-to-business media brand focused on the information needs of senior finance executives. CFO Publishing has long-standing relationships with more than 500,000 finance executives.