Now is the time to invest for growth

Brave business decisions made now could reap major dividends as New Zealand companies and the world economy slowly emerge from the long-term effects of the Global Financial Crisis.

Tim Keenan, Partner and National Director, Privately Held Business, for Grant Thornton New Zealand, said that the Global Financial Crisis naturally selected the strong from the weak, but the time was now right for the smart companies to invest for growth and take the opportunity to snatch market share from competitors.

“Having emerged from three to four years of cost cutting and keeping tight control of expenditure it takes courage to loosen the purse strings and become more aggressive with marketing, hiring staff and upgrading plant and machinery.

“However, the time is now right for companies to get a leap on their competitors with most business indicators starting to head in the right direction. Spurred on by the estimated $40 billion rebuild of Christchurch, housing and infrastructure catch-up spending in Auckland and a New Zealand-wide rural economy that is being buoyed by a worldwide demand for our agricultural products,” he said.

The Australian economic indicators are not strong and New Zealand businesses need to be wary of Australian businesses looking to cross the Tasman and compete in our domestic market for new customers. This is incentive enough for New Zealand businesses to consider smart investment for taking advantage of the growth opportunities that will present themselves in the near future.

It is darkest before the dawn, and that is where the New Zealand economy sits.

“The New Zealand economy expanded by a relatively healthy 3.2% in 2012 and is expected to grow by 2.8% this year and average 3.1% a year from 2014 to 2017. This level of sustained growth will put other pressures on businesses. 

“Already there are clear indications that skilled staff are in high demand and getting harder to find. Getting in now and securing quality staff, even if the capacity is not quite there yet, is a smart move for progressive companies looking to grow strongly in the future.

“The strong dollar is not favoured by exporters, but companies looking to buy new machinery or upgrade existing equipment, will find that now is a great time to invest with the New Zealand dollar trading at very strong levels.

“The economic hangover continues to impact larger economies in Europe and United States which helps as overseas demand for machinery and equipment remains tepid and manufacturers abroad are keen to offer sharp prices to keep stock moving,” he said.

Investment in marketing and advertising is traditionally one of the first things to be cut when a company is in a declining market, yet this is often the area that should be left untouched.

“When companies pull back on their advertising and marketing, three things can occur: 

1 They leave a void in the marketplace for competitors to snatch vital market share; 

2 Customers lose sight of their brand; and

3 Customers lose confidence in their brand. 

 

“The New Zealand economy looks in for a good ride over the next five years as evidenced by confidence levels running at a three-year high. With the likelihood of the re-emergence of the US economy and the gradual rise of parts of Europe, the future for New Zealand companies is bright. 

“Firms with the confidence to be the ‘early bird’ and position now for the future will get a march on their competitors and an increased share of their domestic market,” Tim Keenan said.