JWT Bangkok Antenna

LEON GETTLER

October 21, 2009

Some examples: Apple, a computer company, has moved into telephony and music with the iPhone, iPod and iTunes, the search engine Google has entered the telecommunications market with Google Voice and the Google Android platform.

On the local front, the supermarkets Woolworths and Coles are making incursions into transport with petrol discounts, while Australia Post plans to set up an insurance company. New competitive threats, therefore, are emerging from unexpected places.
2) China and India:
These are the two fastest-growing major economies. Indeed, while the rest of the world has been gripped by the threat of economic and financial disaster and zero growth, India is growing at 5% and China at around 7% – and that’s the low point before their rebound.

China is becoming a centrifugal force by pulling investment in and positioning itself as the world’s workshop. India on the other hand is a centripetal force, elbowing its way into knowledge intensive industries such as IT and contact centres and turning itself into the world’s back office.

These forces will transform industries, such as the automotive sector, investment patterns and the shape of the global economy.

3) End of low inflation:
Don’t be fooled by the recent downward pressure on prices. They are on the way up and we seem to be headed for a period of hyper-inflation, reminiscent of the 1920s in Germany when you could paper the walls with money.

The current German finance minister Peer Steinbrueck has warned governments around the world that they will need to have policies to stop hyper inflation when the financial crisis has passed.

Because the US and British Governments will struggle to manage their massive public debt, there will be a flight from those currencies and that could generate worldwide inflation.

4) Plummeting communications and technology costs:
The barriers to entry are falling. Lower costs, combined with deregulation, are opening the way for new low-cost companies and business models from Amazon to Google, from eBay to Skype. This will present challenges to incumbents, while opening new industries and opportunities.

5) Ageing:
The developed world is getting older fast. According to the Australian Bureau of Statistics, the median age of Australia’s population is projected to increase from 35.9 years in 2002, to between 47.9 years and 50.5 years in 2101. Fertility rates are low.

Similarly, fertility rates for many European countries such Italy, Belgium France and Spain are well below the levels required to keep populations stable.

China, which represents one fifth of the world’s population, is expected to get old before getting rich. All this has massive implications for pension schemes, health care and work force management.

6) Water:
Most countries have a water allocation problem. Only a small proportion of Australia’s water is consumed by households.

About three-quarters goes to agriculture, particularly rice, sugar, cotton and dairy products. Governments will need to spend billions, or create private-public partnerships, develop recycling systems, build desalination plants, lay pipelines to reduce evaporation, or tap aquifers beneath big cities that would provide an indefinite supply and take pressure off dams.

Australia’s problems are eclipsed by those in China, where water shortages are exacerbated by worsening pollution.  Industries most at risk as water becomes the new oil include high-tech companies, such as those using huge quantities of water to make silicon chips; power generators using large amounts of water for cooling; and agriculture, which uses 70% of global freshwater.

7) Climate change:
The climate crisis will have an impact on business in several ways.  These include higher costs for energy, water, raw materials and waste, insurance, and monitoring, rules requiring businesses to use less resources, consumer preferences for environmentally friendly products and services, pressure from institutions and shareholders and the imposition of mandatory supply chain sustainability criteria.

As close observers of local politics will know, perhaps the most significant impact will come from increased government regulation, not least the introduction of emission trading schemes.

Digitisation:
The digitisation of just about all products and services will threaten businesses that rely on their intellectual property for their profit.

The music, newspapers, cinema, pharmaceuticals and fashion industries are among those struggling to adapt in order to survive where ideas will “demand to be free”.

9) Energy:
The rise of China and India has resulted in increased demand for energy. In particular, China, which just over a decade ago was a net exporter of oil, now imports 5.4 million barrels a day.

It surpassed Japan as the world’s biggest importer of oil in 2005, and is projected to consume Saudi Arabia’s entire annual production by 2012. The Organisation for Economic Co-operation and Development is projecting that energy consumption will quadruple by 2050.

At the same time, however, output from the world’s oil fields is declining at a faster rate than expected and will require massive investment. Bet, in other words, that oil prices are mostly going one way.

10) US debt:
The crisis with US debt has no simple solution and its ramifications for the global economy are immense. The US budget deficit for the most recent year stands at a massive $US1.42 trillion ($A1.55 trillion), accounting for about 10% of US GDP, the highest level since World War II.

Find out more at http://www.smh.com.au/business/clevel/25-forces-transforming-the-world-20091021-h7qr.html