Fragmentation & consolidation

Fragmentation & consolidation

In 2009, we published the Bernard Paradox: large organisations consolidate because they must, yet at the same time their markets fragment because they can. What we postulated back then is now an everyday reality:

  • Consolidation continues because financial markets apply upward pressure on indicators like operating margin, and publicly traded companies as well as PE-held ones increase overheads at their peril;
  • Yet at the same time, fragmentation continues because smaller manufacturers and importers can now effectively compete in focused areas across the four dimensions of consumer, channel, category and geography, as “Minimum Efficient Scale” for them to achieve locally competitive cost levels continues to go down. Equally, retailers, distributors and wholesalers are now able to control their operations more effectively, as bandwidth and processing speed are allowing them to act on insights from increased volumes of (transactional) data in next-to real time.

As a consequence, headcount per million EUR revenue is now on average half that of 2004 for the multinational consumer goods companies we surveyed (1), yet at the same time there are more than twice as many businesses entering the market place each year (2).

Back then, our own Paradox became our raison d’être: since 2009, we have provided our clients with the tools and processes to beat the fragmentation trap, updating and redesigning them ahead of the curve, as hardware and software innovation allowed.

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