Peruvian companies face challenges and adjustments amid economic crisis.

In recent years, the business environment in the country has been affected by volatility and uncertainty generated by external factors to companies such as the pandemic, the deceleration of GDP growth, high inflation levels, political crisis, social protests, El Niño phenomenon, or global conflicts. These elements have led to an economic stagnation, loss of purchasing power, and an increase in poverty in the country. In this context, Peruvian companies have been forced to rethink their strategies to achieve growth above the market, gain market share, and maintain competitiveness. A report from Apoyo Consultoría reveals the changes that companies are implementing in response to a new, more complex and challenging business environment. According to the analysis conducted by Rodrigo Jimenez, senior associate at the consultancy, shared exclusively with Gestión, Peru has been experiencing nearly five years of negative investment confidence levels, which directly impacts the growth of the national economy. The country's credit rating downgrade by S&P earlier this year and the decline in the country's mining investment attractiveness index to 59 out of 86 reflect the current situation faced by Peruvian companies. Faced with this adverse scenario, companies have had to adjust their strategies to compete more effectively in an increasingly challenging environment. According to observations made by Apoyo Consultoría in the past twelve months, three distinct changes stand out in the strategies of companies. Firstly, there is an emphasis on adjusting the strategy to develop a value proposition that caters to value segments. Secondly, the evaluation of inorganic growth is highlighted as a way to consolidate market presence. And thirdly, the pursuit of geographic diversification and internationalization of businesses is mentioned as a strategy to reduce risk and market concentration in the local market. Peruvian companies have focused on adjusting their value proposition to compete in mass market segments, seeking differentiation not only in price but also through the introduction of new formats, efficiency development, and cost reduction. Additionally, inorganic growth has gained strength as a strategy to grow in a complicated financial environment, taking advantage of more reasonable valuations and favorable regulations in mergers and acquisitions. Geographic diversification and internationalization of businesses have also become important strategies to reduce risk levels and tap into larger, more stable, and competitive markets in other countries. Examples such as the acquisition of a cement plant in California by Unacem group or the purchase of the largest dental insurer in Mexico by Auna reflect this trend. The lower demand, higher financial costs, and high inflation levels have impacted the profitability of companies, leading them to prioritize cash flow and liquidity to ensure the continuity of their operations. Strategies such as refinancing of financial debt, optimization of cash conversion cycle, and efficiency search have become fundamental in this new environment. In this sense, companies are focused on establishing a culture of continuous improvement and efficiency to optimize their profitability, variableize fixed costs, improve processes, reduce personnel expenses, and evaluate new investments more rigorously. The focus on digital channels, as seen in the case of banks, is a clear example of this trend towards efficiency and resource optimization. To adapt to these changes, shareholders and directors have adjusted their expectations regarding expected returns, leading to a reduction in the timeframe of strategic plans and a greater focus on short-term results. Three-year plans have become the current trend, replacing the five-year plans prior to the pandemic, with quarterly and annual reviews to ensure the alignment of the strategy with environmental changes. In conclusion, Peruvian companies are facing a challenging and changing business environment, which has prompted a series of adjustments and changes in their strategies to adapt to the new economic and political reality. The ability of companies to innovate, diversify, internationalize, and improve efficiency will be key to surviving and growing in a highly competitive and volatile environment.