Business Challenges during and after the crisis

Merthan KaleliE&D Lead, Microsoft

Bilgi Üniversitesi . Santralistanbul22.12.2009

2

2006 and 2007 were the best years for economic growth and corporate sales/earnings growth since 1945

They will surely be repeated again…

…but most likely when we are all dead.

• How did the world end up in such a mess? – Mix greed and stupidity with fraud, corruption and

inadequate regulations, and you destroy three big engines of demand: confidence, trust and financing

• Four critical points to understand how we got here1. Unsustainable economic super-cycle built on easy money

going into reverse – the reversal was a predictable outcome2. Rebalancing of global economy – another predictable

outcome3. Unregulated and fraudulent financial institutions lending,

hiding and reselling debt – a largely unpredictable outcome4. Usage of bought instruments such as collateral to borrow,

lend, fraudulently hide and repackage – largely invisible and therefore a largely unpredictable outcome

• Another Great Depression?

Global Crisis . Q4 FY09

Economical Downturn . Turkey Q4 FY09

• Consumer Confidence• Investor Confidence• Unemployment• Criticizing the government• Deeper recession and slower bounce back• Turkey is vulnerable• No emerging market can recover without a

recovery happening first in the US and Western Europe

Consumer Confidence . Lowest since Jan’04

• New Market & Globals• Deep Discounts• Over Stock• Cash is the king!• Goal : Not to lose market share & customers• Prevent further market erosion• Currency & %18 VAT offerings

Retail Ecosystem . Turkey Q4 FY09

• The impact of the recession—the decline in revenue for Q4 and for FY09

• Control – Costs, Market Share, Customer Satisfaction

• Positioned to make FY10 a great year for MS

Microsoft . Big Picture

• Revise Planning & Forecasting• Seasonal Adjustments

– Currency Fix, Lower stock turnover, No new orders, Payment turns, Returns

• Revise Spending & Cost Reduction• Marketing

– More consumer Ads., Merchandising, Offerings, Assortment & Shelf Space

• Focus on top performing stores– Re-Forecast – Channel Breakdown

• Benchmarking– Internally & Externally

• Focus on Customer Satisfaction

What’s our story? . Microsoft Retail . Turkey

• Recessionomics– Look at previous downturns, and stay calm

• Weighed down– The recession has left a fiscal burden that many

countries will struggle to shed

• The great stabilisation– The recession was less calamitous than many feared.

Its aftermath will be more dangerous than many expect.

– America will recover, but too weakly for comfort

• Reshaping the post-crisis world– How the world can avoid slipping back into crisis?

The World Economy . Economical Climate

• This is not a typical emerging market crisis where affected markets bounce back very quickly

• Past bounce-backs were fast due to good global liquidity and growth outside of the affected markets

• Globally, the recession will look like a deep and long U with a slow recovery most likely in the post-crisis era

• The restoration of confidence in the developed world should start emerging some time in 2010 (best case late 2009)

• However, positive impact on business might not be felt until 2011, especially in emerging markets

• Growth as of 2011 onwards will be slower than boom years of 2006 and 2007

The World Economy . When will demand return?

It's not good enough that we do our best; sometimes we have to do what's required.

Winston Churchill

• Invest in the right opportunities and technologies

• Drive end user excitement

• Embrace the cloud across all of our businesses

• Win market share

• Focus on employee excellence

What’s next? . One Microsoft

Source: EIU April 7, 2009

Economic Outlook . 2009 & 2010 GDP Growth Picture

Source: IMF World Economic Outlook, Consensus Economics, Inc., EIU

WW GDP Growth Forecast . 2007 – 2012

Source: Q2 & Q3 2008 Worldwide Black Books; IDC Downside Scenario Model

WW IT Spending

Worldwide GDP Forecast

WW IT Spending . 2007 - 2012

$1-3 Trillion For

Bank BailoutsTax CutsSmart GridSMB IncentivesHealth CareInfrastructureBroadbandAuto ManufacturersGreen Building

An Economic Unknown . Freeing Up Spend on IT

WW ICT Spending Growth

Source: Q4 2008 Worldwide Black Book, IDC Estimates

WW ICT Spending (B)

$250 Billion over 4 Years

The Potential Impact of Stimulus Plans . 2009 -2012

What do your clients feel about the economy?

( 1% ) We have reached bottom( 51% ) We still have a long way down to go( 14% ) Things are starting to look up( 33% ) They are not sure, they ask us

Poll #4 . IDC Q3 2009

What have you heard from clients in the last quarter about their order rates?

Apr 09 Jan 09 Oct 08 ( 4% ) ( 7% ) ( 50% ) Have not talked to them( 4% ) ( 4% ) ( 17% ) No crisis-related change( 43% ) ( 38% ) ( 23% ) A minor drop in orders( 45% ) ( 49% ) ( 10% ) A significant drop in orders( 5% ) ( 1% ) ( 1% ) An increase in orders

Poll #5 . IDC Q3 2009

What’s The New Normal for Microsoft Retail in Turkey?

What’s The New Normal . 2010

• Be Proactive• Maintain long-term strategy against multinational and local competitors • Focus on Long Term Gain• Focus on Building Market Share• Acquire Channel : Distributors/Partners/Consumers• Retail Execution is the KEY!

• The Microsoft Factor• Crisis can provide opportunity!• The world wants you to fail

• Preparing for the worst : The Crisis Plan• Scenarios and how to handle• Crisis Communication; PR, Internal/External (Customers & Partners)

Thank you

Contact Information

Please send your comments to:merthankaleli@hotmail.com