The prolonged COVID-19 pandemic has created many challenges for businesses and the damage has not been equal across all sectors. Prevailing uncertainty – not just because of the virus but now also due to the devastating war in Eastern Europe – caused a lot of businesses to reshape, navigating with minimal visibility.
Developments in the pandemic meant that many struggled to keep up with lockdowns and the stop-start restrictions, experiencing a lack of customers, repeated or prolonged layoffs and ultimately a loss of profit. Depending on a company’s ability to operate remotely or work with new policies, certain sectors suffered. Travel and restaurant sectors peaked in 2019, but were hit hard by the pandemic. Other sectors, however, were able to thrive or use coronavirus to their advantage.
We decided to investigate what the coronavirus entailed for corporations. Alongside OP Financial, Finland’s largest financial services group, and the Nordic Institute of Business and Society (NIBS), a think tank was founded by professors at Aalto University. They conducted a unique survey, focusing on large Finnish corporations, the survey measured Finnish executives’ views on business and economic developments. A total of 189 people from 119 large corporations based or operating in Finland responded to the survey, particularly CEOs, CFOs and executive vice presidents.
In 2020, the results of Survey of Large Corporations demonstrated that companies had low expectations of growth and little appetite for investment. However, a clear turnaround occurred in 2021. The survey revealed that there has been a sharp growth in the share of companies seeking expansion. Large corporations have a strong desire to grow, despite the pandemic – they are no longer reaching for the panic button, but rather invest boldly in their futures.
The first impressive result they discovered was that the share of large Finnish corporations is currently at its highest in the eight-year period studied. In 2021, a third of such companies have said they will focus on expanding and developing their operations, this is a huge 15% points increase on the 19% in the depths of the pandemic last year. This rise reflects the economic recovery and brighter outlook for companies; they have had effective buffers in place and withstood the economic turmoil well. The data gathered for this survey is unique even on a global scale.
Where companies might have avoided risk streamlined production, and raised productivity at the expense of growth and expansion, they are now ready to make their next moves. Availability of financing for large corporations is also historically high, enabling them to turn their desire for expansion and investment into concrete economic growth.
One reason this might have occurred is that the share of growth-oriented large corporations has been between 19–24% in the past three years. Economic growth began to decline in 2019, reducing the number of companies aiming to expand. However, this actually helped to alleviate the toll taken by the pandemic, since companies had already prepared for a period of slow growth. Companies have also succeeded in agilely adapting their practices to changes in the business environment. This will make the transition to the post-pandemic ‘new normal’ a much smoother process.
Another important finding highlighted by the survey is that businesses are looking to increase production nationally. Production-wise, Finland is in the strongest position of the geographical areas covered by the survey, the euro zone as a whole comes second: around 36% of the respondents intend to increase production there. Areas of Europe outside the euro zone and the United Kingdom also show clear improvements on previous years, with 24% of respondents predicting increased production there.
As recently as 2020, only 13% were envisaging such growth. A full 18% of respondents believe that they will grow production in the United Kingdom, something that the country can be proud of, since only 3% of respondents expected to grow UK production a year ago. This reflects the pragmatism of large corporations; now that Brexit has finally happened and trade barriers have grown, local production is a more practical way of meeting demand in the island nation.
Companies also foresee much greater investment in sustainability, corporate responsibility (CR) is more clearly regarded as a strategic choice than when the survey began ten years ago. Executives now view CR as a provider of competitive edge rather than a cost.
This is a promising direction of development, since corporate responsibility will only grow in importance as a core element in leadership and business management. ESG reporting obligations have already grown significantly and the new EU taxonomy will define a framework for sustainable finance and investments. Demands for corporate responsibility are being made both within and outside companies; regulation is pressuring them to expedite their transition towards sustainability, even if many have already done much in this respect. This is the message given in the results of this survey and in the daily discussions with large corporations.
One significant finding is that the competition for talent has also increased amongst businesses. Nearly 86% of large corporations report strong competition in their sectors for skilled employees and experts.
This is because businesses have realised that they are not only in competitive markets for customers and capital, but also for sufficient talent of the highest calibre and for reputation. Awareness that sustainability concerns the entire value chain applies to subcontracting too. Growth expectations are mainly focused on the outside world, but there is also faith in Finland as a location for production and subcontractors.
In Finland, there has been record numbers of vacancies, which remain unfilled in some cases. This is partly due to friction caused by exceptionally fast employee turnover — adapting to this will take time. Unfortunately, difficulties in recruiting talent are also largely a long-term, structural problem which can only be relieved by investing in education and training, and easing the recruitment of international experts.
The responses suggest that competition will become even more intense among large corporations in 2022, not only in terms of people, but also in terms of what a company can offer. Respondents aim to increase their speed of reaction and launch new products and services, in particular. During the outbreak and spread of COVID-19, responding companies avoided making even the smallest price rises or cuts. Now, two thirds intend to raise prices more frequently than at any time during the prolonged, unpredictable pandemic. Fewer than before believe that price reductions will provide a competitive edge in the coming year.
The transition to the post-pandemic ‘new normal’ is highly likely to make large corporations even more important than before. Due to the polarised structure of our economy, they will continue to be the main drivers of growth and employment in Finland.
The survey results suggest that large corporations are set to grow their investments and personnel in Finland and abroad. Levels of business confidence also indicate that growth lies ahead, at the same time, moving into the new normal means a transition towards more sustainable and responsible business.
Interestingly, the aim to lighten structures is combined with dreams of growth on an even bigger scale. Responses to many of the question sets indicate a highly optimistic view of the markets. While clearly anticipating a return to normal, large Finnish companies are starting to compete for a place in the acceleration lane.
Overall, despite the pandemic bringing with it many problems, some companies have not faced an obstacle, but actually an opportunity to thrive. As research has demonstrated, the share of large Finnish corporations is currently at its highest, with many companies looking to expand and increase productivity. Now, if companies have any hope of surviving, they need to adapt to this new world, make changes to their companies in tune with the pandemic, and accept this as our new normal way of business.
This is an adapted version of an article that was published on AMBA’s website, written by Pekka Mattila; Professor of Practice at Aalto University School of Business. The article was written before the start of the war in Ukraine. The impact this war will have on any future economic developments in Finland and across Europe are therefore not accounted for in the argumentation provided by the writer.
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