IMD Professor Stéphane Garelli  has provided us with valuable food for thought, by creating a “Competitiveness Roadmap 2009-50”, available from the IMD world competitiveness yearbook website, listing 50 global issues and trends, plotted in X,Y space, where X is the time horizon, up to 2050, and Y is the impact, from LOW to HIGH*.     

Below: A few of the 50 trends, chosen for their potential for generating innovative business ideas:

1. US budget deficit reaches abysmal proportions – The US budget deficit in 2009 is expected to attain a staggering $1750 billion. This represents a deterioration of some $2000bn since President Clinton left the White House 10 years ago and posted a surplus of $236 billion.

2. The recession is worldwide – The OECD countries expect a contraction of their economies by 4.3% in 2009. Such a deep recession also affects the emerging economies: the past decade of growth was not sufficient to create a large buffer of internal demand to compensate for the drop in exports.

3. Unemployment becomes massive – 25 million people lose their jobs in the OECD region and the average jobless rate hits 10%. Globally, the International Labor Organization articulates a fi gure of 50 million additional unemployed.

4. Interest rates are at a record low – While in the US rates approach zero, the rest of the world also experiences their lowest rates in decades. Deflation is feared, forcing central banks to introduce new policies such as quantitative easing.

6. High volatility of currencies – The currency markets experience considerable volatility. The dollar remains more unstable than the Euro. The latter, however, has been weakened by its exposure to the difficulties of Central European economies. Denmark, Sweden, the Baltic States and maybe Iceland consider joining the Euro… The Pound continues to decline.

7. Global debt explodes – The US national debt now surpasses $11.2 trillion and increases by $3.7 billion a day! Budget deficits in most advanced nations are going to exceed 5% of the GDP. In 2009, the borrowing requirements of the US will be $2500 billion and $1000 billion for Europe. Central Europe is said to have some $1300 billion of debt towards foreign banks. Who is going to pay for this debt? For the first time, governments worry that some bond issues may not be subscribed.

8. Protectionism on the rise – In industrial nations, public opinion and governments are increasingly sensitive to the loss of economic power to emerging nations and the destruction of jobs at home. Possible protectionist measures focus on “buy national” incentives, environmental protection, corporate governance, social protection and intellectual property.

9. New regulations for world financial markets – A fundamental overhaul of the regulatory environment takes place with the objective of laying down new rules for the supervision of financial activities and to consolidate competences among various institutions. Globally, the Basel Committee on Banking Supervision and the Financial Stability Forum
are responsible for defi ning new standards and practices. Implementation remains at a national level.

12. Emerging powers stack up currency reserves – Emerging powers are accumulating foreign currency reserves at impressive rates: Number one is China with $2005 billion, followed by Japan $1031 billion, Russia $435 billion, Taiwan $292 billion, India $254 billion, Brazil $208 billion and Korea $201 billion. As a consequence, money is not necessarily flowing back to the US or Europe, as in the past.

13. The South goes shopping – Sovereign funds become major players in world finance and acquire more industrial companies from the West. They also become a major source of financing for infrastructure projects and for the development of local companies in their own countries. Global brands from China, India, the Gulf region and Russia hit international markets – it is not a cozy world anymore!

14. The recession ends at different times – Recessions come in four shapes: V- a steep but short slowdown, W – or so called double-dip, U – a longer weakening of the economy and L – a prolonged decline. The US expects a U, Europe fears an L, just as Japan, China and the emerging economies count on a V.

15. Household savings on the rise – For the first time in decades, households are more cautious about their spending and re-connect to the notion of “saving for rainy days”. In industrialized nations, the willingness to spend more is targeted to technological innovation, clean-tech or inelastic expenditure such as food, health or wellness. In emerging economies, the attitude toward spending is more moderate and dependent on increased purchasing power.

22. New attractiveness for the Gulf region and Africa – There are $800bn of infrastructure projects under completion in the Gulf region while Africa is becoming attractive again thanks to energy and commodity investments. More than 800 Chinese companies operate in Africa. The population of Africa will reach 1.9bn in 2050!

24. More managers needed everywhere – More managers are required in emerging powers. India, China, Russia, Brazil and the Gulf region increasingly focus on management and the creation of business schools, beyond science and engineering education. Strategy, fi nance and marketing skills are now priorities for ensuring the continuous expansion of local enterprises in a global environment.

29. Labor cost differences shrink – The difference in labor costs around the world is drastically reduced as nations develop. A range from 1 to 20 today is reduced to 1 to 5 as purchasing power around the world converges.

30. Productivity is harmonized worldwide – Productivity is harmonized around world operations as companies become truly global and widely diffuse the same technology and processes throughout the markets where their assets are located. The value chain is managed at the global level. The nationality of companies matters less and less.

31. Corporate taxes converge – Nations, which have competed fiercely in lowering their tax rates to attract enterprises, are developing an international consensus that establishes common and agreed-upon practices for the taxation of companies, no matter where they operate. The bandwidth of corporate tax rates is signifi cantly reduced.

35. From collective to individual value systems – The value system of society in Asia gradually evolves from one based on collective values (such as hard work and national pride) to one based on individual values (such as work-life balance), much closer to the US and European value systems.

36. A new business model for the poor – A new business model emerges for the very poor of the world (such as in Africa or the Indian subcontinent). Products are manufactured and sold at a fraction of the price charged elsewhere, and with minimal functionalities. Examples: the $10 phone, $100 PC or $2500 motor vehicle (e.g. Tata in India) and of course micro-credit.

41. In Western industrial nations, some people reject mobility – Although communications and travel are more pervasive, a part of the population rejects excessive mobility and rediscovers the attractiveness of a local environment. Younger professionals reject promotions or relocation of responsibilities when they are too disruptive to their private lives. Congestion in cities, airports and most transportation systems takes away the attractiveness of mobility.

46. Low demography hits Europe, Japan and Russia – The low demography in Europe, Japan and Russia takes its toll on the dynamism of the economy. In 2050, Europe will count 628 million people, having shrunk by more than 100 million in 50 years. Could more lenient immigration policies compensate for this decline, especially for skilled
labor?

47. Life expectancy increases, expenses also – Life expectancy increases dramatically to well over 85 years old in many industrialized nations. The burden on the health system becomes greater, also due to the early systematic screening of the population for illnesses.

48. Atomization of the value system in the West – The value system in Western societies becomes “atomized”. A common purpose in the population is replaced by a multilayer society where many different value systems cohabit, each of them appealing to a specifi c part of the population.

49. Climate change affects economic resources – Climate change forces the re-allocation of economic resources. Food and water become scarcer in some regions, while new crops become available in more northerly regions. The prices of basic commodities are totally altered. The “environment cost” becomes part of the economic scenario, and is thus included in statistics such as the GDP.

50. Pandemic risks occur more frequently – As the world becomes more open, transport more pervasive and logistics more efficient, epidemics spill more easily from one continent to another. Pandemics are permanently monitored by international organizations, and companies tighten up their health and safety procedures.

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*Stéphane Garelli, “The Competitiveness Roadmap, 2009-50”, IMD, Lausanne, 2009.

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