Six key developments are shaping the business world, according to new report Tracking global trends from Ernst & Young. The report, which looks at broad long-term developments, also identifies the three underlying drivers that have helped establish and perpetuate each trend. John Murphy, Global Markets Managing Partner, comments: “Global economies are now so tightly interconnected that companies, governments and industries are beginning to interact in ways we could not have imagined just a few years ago.” Emerging markets increase their global power Estimates show that 70% of world growth over the next few years will come from emerging markets, with China and India accounting for 40% of that growth. The International Monetary Fund forecasts that the total GDP of emerging markets could overtake that of the developed economies as early as 2014. As emerging markets gain in stature, new companies are taking centre stage. The rise of these emerging market leaders will constitute one of the fastest-growing global trends of this decade. Murphy comments: “Economic expansion in rapidly developing economies is forcing companies from developed markets to reassess their business models. Emerging markets will provide opportunities for significant revenue growth as well as a source of talent, true innovation and ground-breaking approaches to business. Just as important, these markets are also creating new global challengers.” Cleantech becomes a competitive advantage The cleantech-enabled transformation to a low-carbon, resource-efficient economy may be the next industrial revolution. As this transformation accelerates, global corporations are increasingly realizing that they must understand the impact of cleantech on their industries and develop strategic plans to adapt to this change. Investment in cleantech surged 30% in 2010 over the previous year, to US$243 billion. Global banking sees recovery through transformation Three years after the financial crisis began, the global financial system remains in flux. Regulatory clarity is nearing but many issues remain unresolved. It is clear that G20 initiatives, as well as the Dodd-Frank Act in the US, will require increased regulatory oversight. Not surprisingly, large financial institutions cite regulatory uncertainty as the biggest challenge they face. Governments enhance ties with private sector As a result of the global recession, many governments are trying to further their national interests through diverse vehicles and activities, including state-owned corporations, sovereign wealth funds (SWF), industrial planning and regulation. Although SWF assets fell in value after the recession, they are set to grow again. The total assets of SWFs are expected to climb from roughly US$3.5 trillion in 2010 to US$8 trillion by 2015. State-owned enterprises (SOEs) are becoming larger and more globally competitive. 62% of Indian companies on the 2010 Fortune Global 500 list are SOEs and 46 Chinese SOEs (excluding Taiwan-based companies) are on the 2010 list, up from 34 in 2009. Three of China’s state-owned energy giants are in the top 10. Rapid technology innovation creates a smart, mobile world In spite of the digital revolution of the past 25 years, consumers still want more powerful devices and applications, while businesses seek more cost-effective technology to cope with increasingly complex challenges. Satisfying these demands will lead to explosive growth in data and analytics, to new competition in almost every field and to the disruption and realignment of many industries. Demographic shifts transform the global workforce Despite a growing population, the availability of skilled workers is actually shrinking. This is no longer happening just in developed economies such as Japan and Italy. Now some emerging markets, such as China and Russia, are also feeling a demographic pinch. The data suggests this is only the beginning. A “demographic divide” will soon arise between countries with younger skilled workers and those that face an aging and shrinking workforce. The war for talent will become increasingly acute in certain sectors, especially areas requiring high skill levels and more education. Three underlying factors Ernst & Young believes that these global trends are interconnected by three key drivers of change: - Demographic shifts - Reshaped global power structure - Disruptive innovation. Murphy concludes: “We’re clearly seeing increased complexity in economic and social environments, with companies and economies finding that they have to adapt to increasingly interlocking systems. Corporates need to be aware of these trends and be prepared to respond rapidly.” Download the full report at Ernst & Young (PDF 7MB)