Engine Room Survey 2021

Engine Room businesses demonstrated resilience amid COVID-19 and are prepared to lead the post-pandemic recovery.

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It was a year like no other. In 2020, New Zealand private businesses faced  significant challenges created by the impact of the global pandemic. Amidst the uncertainty and rapidly changing business environment there have been significant growth opportunities for some businesses, while others have been ravaged by border closures, reduced demand and continued supply chain issues driving a two speed recovery, split predominantly by industry and business model. The sentiment among the vast majority of businesses surveyed at the end of 2020, was that experiences from this pandemic will allow them to return stronger and better equipped to deal with future challenges and build back opportunities.

 

New Zealand’s Engine Room includes NZ companies with a turnover between $5-$200M who make up 39%, the largest share of NZ businesses.

*Stats NZ Annual Enterprise Survey 2019 Financial Year provisional.

In our Engine Room Survey, clear themes emerged from the challenges outlined by respondents. There has been an acceleration and prioritisation of existing changes that COVID-19 forced leaders to address. The top challenges for setting a strong foundation for recovery and sustainable growth are:

%
Sales growth
%
talent and capability
%
supply chain
To reflect how Engine Room businesses responded and adapted to changing external factors and the path forward, our report looks at the survey findings through the following three lenses:

Setting the right foundation for future success

Looking inwards is about factors within the organisation's control. It looks at challenges businesses are facing with their operating model, internal efficiencies, capabilities, digitisation and supply chain.

The underlying challenges:

  • 86% agree that their organisation has become more resilient due to COVID-19
  • 24% believe sales growth is one of their top three challenges facing the business
  • 12% believe talent and capability is one of their top three challenges facing the business
  • 11% believe supply chain is one of their top three challenges facing the business

Scenario based strategy for uncertain times

Looking outwards is about factors outside of the organisation’s control. It considers environmental factors such as economic conditions, competitor activities, consumer behaviour and technology trends.

The underlying challenges:

  • 52% have experienced decreased annual revenue due to COVID in 2020
  • 81% of businesses expect business performance to improve in 2021
  • 62% believe the overall economic environment for the business will improve in 2021
  • 42% believe contactless experiences and digital marketing are the most impactful long term changes from COVID-19

Staying competitive, driving innovation and preserving our natural environment

Looking forwards is about looking at how businesses will respond and perform in the next period. This includes recognising changes that will endure from the pandemic,
and devising strategies to increase the chances of commercial success in the years to come.

The underlying challenges:

  • 84% believe they need to operate with a greater digital footprint
  • 75% believe they need to invest in advertising and brand-building activity
  • 65% plan to invest in adapting business operations to the world of digital first
  • 65% expect to invest in cyber security and data privacy
  • 52% plan to change their long-term investment decisions to include more sustainable practices

Facing into the border challenges 

There is a high degree of optimism among New Zealand small businesses for their own performance in the coming year. However, significant uncertainty still remains when planning ahead.  The impacts of COVID-19 are being felt by businesses we surveyed in similar areas that we have seen in previous years but with added challenges and complexity. A common driver of these challenges is the border closures restricting the movement of goods and people.

Sales growth

Businesses with customers overseas are coming to grips with doing business and selling from afar. Businesses have been pleasantly surprised at the effectiveness of working from home and team communication. External facing business that involves negotiating with customers and finding new customers is a different challenge without face to face meetings. Some businesses are still opting to travel overseas to participate in business critical activities and acknowledge the isolation period when returning to New Zealand is part of the cost of doing business in the current environment. Others are leveraging partnerships and support provided by organisations such as NZTE.

Talent and capability

The areas that border closures have impacted businesses reflect the talent shortage of certain skilled labour in New Zealand, particularly in the tech sector. The job market appears buoyant domestically for a number of jobs, but there are still skill shortages in areas that we usually import talent from countries that lead innovation and have the right experience.

Supply chain

As an island nation and with the pandemic still affecting significant trading partners, New Zealand continues to be impacted by a range of supply chain issues that are filtering through the system. This is also a big driver of additional cost for businesses that are impacting profitability and raising pricing questions.

What the Government could do

The Government needs to help take some of the guesswork out of knowing when borders will open and could do this by communicating a framework and conditions under which we can rejoin the rest of the world.

What business can do

In the midst of uncertain operating conditions, scenario based strategy and cash flow forecasting is a way to put business leaders back in the driver's seat.

Contact us

Anand Reddy

Anand Reddy

Partner, Private Business Leader, PwC New Zealand

Tel: +64 27 592 1394

Andrew Jamieson

Andrew Jamieson

Partner, Sustainability, Climate & Nature, PwC New Zealand

Tel: +64 21 711 641

Andrew Abercrombie

Andrew Abercrombie

Director, PwC New Zealand

Tel: +64 22 013 6081

Isabel Monk

Isabel Monk

Manager, PwC New Zealand

Tel: +64 21 860 349

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