Growth Strategies: Growing On Global Trends


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This is the 8th part of the undergraduate course in Growth Strategies: Growing on Global Trends. Read by Pavel Luksha

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Growth Strategies: Growing On Global Trends

  1. 1. GROWTH STRATEGIES Growing on Global Trends Pavel Olegovich Luksha [email_address]
  2. 2. ‘ Growth Platform’ company competencies global trends customer needs Growth Platform
  3. 3. How to analyze environment <ul><li>Multifactor analysis models, including: </li></ul><ul><li>PEST = Political, Economic, Social, Technological </li></ul><ul><li>STEEPLED = Social, Technological, Economic, Environmental, Political, Legal, Educational, Demographic </li></ul><ul><li>DEPICTS = Demographic, Economics, Politics, Infrastructure, Competition, Technology, Social </li></ul>
  4. 4. Trends that create growth Trends Economic Social / Cultural / Demographic Environmental Technological Global National Local
  5. 5. Some global economic trends Global trends Economic Globalization (trade & manufacturing) Economic & financial crisis Growing global middle class
  6. 6. IT Outsourcing: EPAM <ul><li>‘ Effective Programming for America’, created in early 1990s by former Soviet immigrants </li></ul><ul><li>A major offshore programming firm (no.1 in Eastern and Central Europe) facing rivalry mainly from India software houses </li></ul><ul><li>Employed available resource in Russia, Ukraine and Belarus </li></ul><ul><li>Expanded from the US to the UK and Germany as major client offices </li></ul>
  7. 7. Haier : budget solution from emerging markets <ul><li>Began as low-quality refrigerator producer in 1980 s, moved to intl partnerships (Liebherr Group and others) to gain competence </li></ul><ul><li>Serves Chinese / South-Asian lower-middle class with innovative consumer electronics adapted to consumer needs (e.g. machine to wash vegetables for rural regions) </li></ul><ul><li>Gained leadership position in China and expanded to SAE through 1990s. Expanded to the US / Europe in 200s with niche / lower mid-market products: </li></ul><ul><ul><li>26% of compact fridge market and 50% of wine cellar market in the US </li></ul></ul><ul><ul><li>access to major retailers ( Wal-Mart, BestBuy etc .): positioned for students and young families </li></ul></ul>
  8. 8. Glocalization <ul><li>Consumer electronics manufacturer Haier ( China ) </li></ul><ul><li>Hotel networks Shangri-La ( China ) and Taj ( India ) </li></ul><ul><li>Fastfood restaurant chains: Nandos ( South Africa ) , Jollibee Foods (Philippines ) </li></ul><ul><li>Automotive OEM: Tata Motors (India ) </li></ul>
  9. 9. Globalization in trade & manufacturing: who uses the trend <ul><li>Companies that structure global outsourcing of services (e.g. Indian software powerhouses and callcentres) </li></ul><ul><li>Companies that help find partners in emerging markets (e.g. China, South-Eastern Asia) </li></ul><ul><li>IT infrastructure companies providing integration solutions to global businesses </li></ul>
  10. 10. Global downturn: restructuring market <ul><li>Size of bad debt globally is highest ever. </li></ul><ul><li>Governments committed to recapitalize banking system by pour money through buying bad debts: USD 5 trillion are agreed by OECD. Actual buy-outs in the US alone can rise to USD 1 trillion. </li></ul><ul><li>Good time for Wall-street ‘hottest businesses’: Rothschild, Lazard, Blackstone, Alvarez & Marsal, Alix Partners, FTI etc. </li></ul>
  11. 11. Global economic & financial crisis <ul><li>Collector agencies and anti-collector agencies </li></ul><ul><li>Restructuring firms </li></ul><ul><li>Consultants (IT / business) that help strengthen management control </li></ul><ul><li>Cost-cutting solutions (from energy-saving to lawyers that support job-cutting) </li></ul><ul><li>Companies that focus on budget offerings </li></ul>
  12. 12. Some social / cultural / demographic trends Global trends Social / Cultural / Demographic Empowering women Urbanization in Asia Aging population Social movements
  13. 13. Women as consumers
  14. 14. Empowering women: who uses the trend? <ul><li>Companies that consider women increasingly important in traditional shopping: apparel, food, leisure, etc. </li></ul><ul><li>Companies that focus on women as a customer: fitness & health, cosmetics, luxury etc. </li></ul><ul><li>Companies that offer to working women (e.g. babysitting solutions) </li></ul><ul><li>Companies that advise in management and HR practices </li></ul>
  15. 15. The Body Shop: growing by promoting activist agenda <ul><li>Leading retailer selling cosmetics and bath products </li></ul><ul><li>Ad campaigns promotes ‘responsible’ values: animal right protection, environment protection, women empowerment etc. </li></ul><ul><li>Social activism: combated animal testing of major competitors </li></ul><ul><li>Rapidly grew 50% average p.a. over fifteen years in 1980-90s </li></ul>
  16. 16. Aging population: who uses the trend? <ul><li>Pension funds that offer retirement solutions </li></ul><ul><li>Companies that consider ‘retired rich’ as one of the core customer groups: developers of golf residences, tourist companies offering ‘round the world’ tours etc. </li></ul><ul><li>Age-specific solutions: e.g. residences with medical care services (incl. care for Alzheimer disease) </li></ul>
  17. 17. The group project Business betting on global trends: is this a successful strategy?
  18. 18. Some global environmental trends Global trends Environmental Resource exhaustion Pollution & environ- mental hazards Sustainable industries
  19. 19. Pollution & environmental hazards: clean energy <ul><li>Exploration on different kind of energy </li></ul><ul><ul><li>wind energy, geothermal energy, … </li></ul></ul><ul><ul><li>solar energy is ultimate solution (solar panels so far not sufficiently efficient) </li></ul></ul><ul><li>Companies try to join bandwagon: </li></ul><ul><ul><li>windpower market growing 30% p.a. </li></ul></ul><ul><ul><li>major electric equipment producers include clean energy generators in their portfolio (e.g. GE) </li></ul></ul><ul><ul><li>IT companies: opportunities for ‘new energy’ </li></ul></ul><ul><ul><li>financial market: responsible investment etc. </li></ul></ul>
  20. 20. Socially responsible investment <ul><li>Between 1995 and 2005 , SRI assets in the US grew by 2 60 % to 2 .3 trillion USD. EU market has reached 1 trillion USD. </li></ul><ul><li>One of ten dollars in professional management is SRI. </li></ul><ul><li>Over 60% of largest international banks offer products related to sustainable development. </li></ul>
  21. 21. Pollution and environmental hazard concerns: who can use this trend? <ul><li>Alternative energy: generation & equipment </li></ul><ul><li>Energy saving solutions </li></ul><ul><li>Environmental engineering companies </li></ul><ul><li>Industry design & construction </li></ul><ul><li>Finance (products for responsible investors) </li></ul>
  22. 22. Exhaustion of resources: market for water
  23. 23. Sustainable industries: organic food <ul><li>Organic farming, responsible / sustainable farming etc. </li></ul><ul><li>Due to lack of pesticides & fertilizers, yield lower by 20% (reflected also in price) </li></ul><ul><li>Fastest growing food market segment in the US and world, growth 20% p.a. (vs conventional food sales 2-3% p.a.) </li></ul><ul><li>Current share is 9-12% of food market in developed countries </li></ul>
  24. 24. Some global technological trends Global trends Technological Internet & IT Biotech & medicine Energy & transportation
  25. 25. Internet: transformations in media and education <ul><li>Media and entertainment </li></ul><ul><ul><li>blogging & newspaper death </li></ul></ul><ul><ul><li>online TV in YouTube format </li></ul></ul><ul><ul><li>online entertainment : MMORG (e.g . World of Warcraft), virtual worlds ( e.g . SecondLife) </li></ul></ul><ul><li>Education & info business </li></ul><ul><ul><li>Wikipedia vs. Britannica </li></ul></ul><ul><ul><li>standard solutions </li></ul></ul><ul><ul><li>IT: soft-on-demand </li></ul></ul>
  26. 26. Robotics <ul><li>Caterpillar expects to develop largely autonomous heavy robot machines before 2020 </li></ul><ul><li>In Japan, robots are already used as hospital couriers and porters. Fully functional robots that care for elderly should be developed by 2013-17. </li></ul><ul><li>Range of robots for household use should appear in the market by 2015-17. </li></ul><ul><li>Military application: there were more unmanned flights in the US in 2008 than manned flights [e.g. Boston Dynamics] </li></ul>
  27. 27. Energy & transportation: electric cars <ul><li>Tesla Motors: venture by Google founders to produce fully-electric cars. Tesla Roadster is 1c/km energy cost, goes to 100 kmph in less than 4 seconds. Plans for budget models under 30K USD. </li></ul><ul><li>Israel plans to convert to fully electrical (country small enough to ignore limitation of 300 km max driving before recharging) </li></ul>
  28. 28. Importance of biotech: PerkinElmer to Applera <ul><li>PerkinElmer : leadership in spectrometry and gas chromatography (makers of Hubble) that faced stalling sales and losses in early 1990s </li></ul><ul><li>‘ Orphan child’: Applera - AB company that had solutions for DNA structure analysis </li></ul><ul><li>Began involved in Human Genome project and became the major producer of DNA sequencing equipment </li></ul><ul><li>Used HG research to launch genetically-based drug division Celera </li></ul><ul><li>Applera grew by 7-10% p.a. to USD 2 Bln. Original PerkinElmer business was sold in 2006. </li></ul>
  29. 29. Transformation of medicine <ul><li>New processes: improved control over events in the hospital, digitalized document flow and greater patient’s access to data </li></ul><ul><li>Learning from emerging countries (e.g. India) </li></ul><ul><li>New solutions: gene-based medicine (personalized treatment) [e.g. Amgen], nanomedicine [e.g. Zyvex] </li></ul><ul><li>Problem: medicine is the only sector in the US where prices were growing despite intense technological improvement </li></ul>
  30. 30. Growing on future trends <ul><li>Vision and courage </li></ul><ul><li>The major way of growing into future </li></ul><ul><li>Many trends of the past have not been realized (‘manure catastrophe’) </li></ul><ul><li>Crisis will ‘recharge’ industries (experience from previous depressions) </li></ul>