Looking beyond the obvious

Globalization and new opportunities for growth

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Case studies

Click to read how leading sectors are tackling growth in a globalized world.


  • Automotive: Driving toward a granular approach

    The automotive industry is embarking on a new wave of geographical expansion.

    For the past few years, carmakers have faced significant challenges in developed markets and have targeted their investment at the BRIC economies, especially the huge consumer markets of India and China.

    These will remain critically important over the next decade, but automotive companies recognize that they cannot become too dependent on them. Growth across the BRICs is slowing and the market has become extremely competitive. The operating environments in these economies are also challenging.

    As a result, what we see today is a much greater emphasis on non-BRIC rapid-growth markets. A key reason for this relates to demographic change and economic growth. Many of these countries are undergoing a very rapid rate of urbanization. In Africa, for example, we see the growth of mega-cities, such as Lagos, Cairo and Kinshasa.

    This is creating an emerging and fast-growing middle class, with citizens who see car ownership, or sometimes car sharing, as an important component of their new lifestyle. Automotive companies are looking very closely at these markets and playing an active role in helping cities think about urban mobility.

    Automotive companies have learned that when investing in any large rapid-growth market, they need to take a granular approach. In China, for example, the needs of customers in the major cities of the Eastern Seaboard may be very different from those of the population in the interior. As a result, automotive companies often segment these markets, targeting luxury cars at the bigger coastal cities, and smaller, value models at the second-tier or third-tier cities.

    Companies that invest in rapid-growth markets often use partnerships and alliances, both as a means to obtain the license to operate and to build on-the-ground knowledge. Local partners have a deep understanding of customer needs and know how these are evolving.

    This can be extremely valuable so companies don’t make the very expensive mistake of setting up a factory in a new market only to find that the models they build do not meet the needs of customers. Many automotive companies have valuable learned lessons from their experience of investing in BRIC countries.

  • Oil & Gas: Redrawing the global energy map

    The next few years will see a complete transformation in the global oil and gas markets.

    The discovery, development and exploitation of the huge reserves of shale gas in the US will reshape the energy map. The International Energy Agency (IEA) expects that by 2020, the US will claim Saudi Arabia’s current position as the world’s largest oil producer. The IEA forecasts that a decade after that, North America will be a net oil exporter.

    So what will this mean for the global economy and business? One clear implication is that natural gas prices in the US will be much lower than in Asia. Countries across Asia know that to grow their economy, they need to have a source of energy to run factories, plants and infrastructure. They are therefore doing all they can to make the necessary investments.

    Cheap energy in the US will change the calculation that companies make when considering where to locate energy-intensive activities like manufacturing. There is a growing advantage for companies to locate these facilities in the US because of the low price of natural gas there, compared to the relatively high price in Asia. That major shift will make US manufacturing more competitive than it has been for decades.

    Within the next decade, we are likely to see a substantial number of coal-fired plants in the US retired and replaced by natural gas-fired plants. With its distinct price advantages, we also expect to see an increasing use of natural gas as a transportation fuel, displacing some gasoline and diesel fuel.

    Vehicle manufacturers are expanding the production of natural gas powered trucks and automobiles and gradually building out the refuelling infrastructure. Heavy trucks, buses and local commercial fleets are driving natural gas’s penetration into the vehicle fleet, but we expect the personal vehicle market to start to show strong growth over the next decade.

    At some point, the US will also start to export natural gas to other parts of the world. It is very difficult to rationalize not doing that when prices are so much higher in Asia and even Europe. There will be barriers, of course. Natural gas is still not a global commodity, like oil, because the infrastructure is not nearly as developed.

    Although it will take time, the incentives are there to make this happen. Additionally, while there have been some political issues raised with regard to US energy exports, we would expect those issues to be successfully resolved, given the expected net economic benefits.

  • Technology: Understanding the four transformational forces of technology

    The next decade will see disruption as agile, tech-savvy firms displace more traditional ones.

    Technology has long been one of the fundamental drivers of globalization, but in the years ahead, its role will become even more important. Underlying this trend are four transformational forces that are having a profound impact on how businesses operate and engage with their customers and how other communities/networks engage with each other.

    1. Mobile is creating an entirely different relationship between employers and their workforce, and gives companies the opportunity to interact with customers in new and powerful ways.

    2. Social media also enables companies to build new relationships with customers. Businesses can understand how customers perceive their brands, products and services, and engage in two-way conversations that can help to pave the way for refinements or innovations.

    3. Big data. By analyzing data from social media and many other sources, companies can better understand where they should invest their capital and resources and how they should customize their offering to suit customers.

    4. The cloud allows companies to access storage and many other powerful computing resources without the need to invest in infrastructure/application software, giving them the flexibility to scale up or down depending on their needs.

    These four transformational forces are powerful enablers of globalization. However, they also have the potential to change the competitive landscape dramatically and at an unprecedented speed. We have already seen entire industries, such as retail or the media, disrupted by new competitors leveraging technology.

    The scale of these opportunities and challenges emphasizes the importance for business leaders to understand these four transformational forces. Technology is a fundamental competitive force that should be at the heart of C-suite and boardroom discussions. If companies are not thinking about these transformational forces, then there is a good chance that their competitors are.

    The lesson of the past few decades is that disruption happens quickly. If companies do not keep pace with technology, they will put their business models at risk.


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