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Home > Business > Special


10 global trends to watch in 2006

January 18, 2006

Global economy and the corporate world's landscape could see a paradigm shift this year, according to an article in the latest issue of The McKinsey Quarterly, which has identified ten trends that will have a major impact on business worldwide.

The authors of the article -- Ian Davis, worldwide managing director of McKinsey & Company, and Elizabeth Stephenson, consultant at McKinsey's San Francisco office -- say that long-term change can be safely predicted by analysing and identifying trends. The duo has identified three broad categories which will impact the global economy and the way the world does business, namely,

  • Macroeconomic factors,
  • Environmental and social issues, and
  • Business and industry developments.

The major macroeconomic trends that will have a big influence on the global economy, according to The McKinsey Quarterly

1. The article says that although the United States will continue to 'account for the largest share of absolute economic growth' over the next 20 years, major hubs of economic activity worldwide will shift dramatically. Manufacturing and IT services sectors too will witness major shifts. And this trend will not be limited across nations, but will also happen within regions. The authors say that the Asian economy will boom during the next two decades and account for more than 30 per cent of world GDP, like Europe.

2. The second major trend concerns the ageing population in the Western countries which will demand a more productive, efficient and creative public sector so as to be able to support the enormous burden of pension and healthcare without increasing taxes to unmanageable proportions. Also, some developing nations too will have to take a decision on what social services should be offered to its citizens.

3. The authors predict that the consumer landscape too will undergo a major change and will 'expand significantly' with the entry of a billion new buyers in the global markets within the next 10 years. The article says that this huge mass of consumers will also have a higher purchasing power and better awareness of products, triggering off major shifts in the global economy.

Social and environmental trends

The four social and environmental trends that are likely to impact the business world area:

4. The global technological revolution, connectivity, communications will change the way people live, interact and behave. And the spread of the Internet, mobile phones and other technological innovations have shrunk the world so much that geographical boundaries have lost any meaning for social and economic organisations. Thus any change in technology will impact the economy too.

5. People movement and shifting of talent across the globe will be much more pronounced than ever before, predicts the McKinsey article. With skilled workers from the developing world shifting to the developed world in hordes to fulfill the insatiable demand will thus have a major effect on nations and companies.

6. The authors predict that big businesses may come under the lens as the society becomes more aware and demanding in terms of investor and shareholder protection, stricter rules to curb scams, better environmental protection, social welfare, et cetera. As big business grows bigger, so will the aversion to it, thus putting it under tremendous pressure to don a human face on the intellectual, social, and economic fronts.

7. The strain on global environment will increase due to the rise in demand for natural resources. With the economic engine in emerging markets chugging along merrily, the demand for oil, water, coal and a whole lot of other natural resources will explode. This could lead to the emergence of new innovative technologies, use of resources and regulations that 'will be central to creating a world that can both drive robust economic growth and sustain environmental demands,' predict the authors.

The authors have also identified three business and industry trends, which will drive change at the company level.

8. The article says that with the emergence of new technologies, new industry structures, and changing market regulations, nontraditional business models have begun to flourish. 'Corporate borders are becoming blurrier as interlinked ecosystems of suppliers, producers, and customers emerge,' say the authors. They predict that companies using efficiencies gained by new structural possibilities will win the game.

9. Company managements will have to employ better and more sophisticated tools to run their organisations, transforming management into science from an art. The 'gut feel management' style will not suffice in the new era and managements will have to be on their toes to triumph.

10. The McKinsey article says that newer models of 'knowledge production, access, distribution, and ownership are emerging' and organisations will have to acquire the skills to use the new knowledge to their advantage.


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