David Lancefield, Robert Vaughan and Richard Boxshall use their global perspective for PWC to illustrate how preparing for the inevitable interactions between global forces can help you stay ahead of competition.
Through the use of relatable case studies and in depth analysis Lancefield, Vaughan and Boxshall have identified a mega-trends framework that can help any private- or public sector leader think more clearly about complex external trends, and help develop a more ordered, prudent, and proactive strategy for facing them.
McDonald’s was one of the first Western companies to play an active role in the world’s emerging markets. It opened a franchise in Brazil in 1979, followed by Russia and China in 1990, and India in 1996. Knowing how tastes in food vary from one region to the next, the company carefully analysed each locale and adapted its menus accordingly. For example, in Muslim countries its meals are certified halal (permissible under Islamic law); in India, the Golden Arches serve no beef or pork; and in Brazil, McDonald’s serves banana-flavoured pies.
The restaurant chain was particularly successful in the fastest-growing emerging market, China, where the menu is similar to the U.S. version, except that Chinese customers prefer chicken thighs to breasts. McDonald’s marketing in China revolves around its image as a quintessential American brand. Many Chinese people visit McDonald’s for the same reason Westerners sometimes patronise Chinese restaurants: for the taste of a faraway culture.
In 2004, when many Western companies were evaluating their entry into the Chinese market, McDonald’s then global marketing officer, Larry Light, called the country “our number one growth opportunity.” The brand acquired so much cachet that some people held weddings in the restaurants. The company also introduced American-style birthday parties, an innovative move in a country where birthday celebrations were not previously common. This strategy paid dividends: By 2014, the company had well over 2,000 restaurants in China, more than 10 times as many as its main rival, Burger King.
What made McDonald’s persevere in China, and why did its U.S.-centric marketing approach succeed? Because its leaders were early to recognise an opportunity in the interplay between two global mega-trends. The first was the shift in economic power toward Asia. In 2000, less than 2% of global middle-class consumption occurred in China and India. By 2013, that proportion had reached almost 10%, and it is predicted to multiply several times by the middle of this century.
The second mega-trend involved cultural transformation stemming from demographic change. The prevalence of smaller families under China’s one-child-per-family policy, which has been in place since 1979, has led to a stronger emphasis on children’s well being.
Together, these two trends suggested that a huge number of Chinese citizens would gain a noteworthy (albeit small by Western standards) increase in their discretionary income. With relatively few children to spend it on, and more opportunities to learn about cultures outside China, they would aspire to the lifestyle of their traditionally more affluent Western counterparts. Well-known Western brands would suddenly be an attainable status symbol.
In 2004, many Western fast-food brands were struggling in their home countries, where they faced highly competitive markets and shifting public food preferences. So McDonald’s seized the Chinese market. The chain put in place subtle variations to its basic menu, such as locally popular sauces, and adopted a few tailored innovations, such as take-out windows for drinks, and of course the McWeddings. The chain also kept adjusting its offerings to reflect the responses it observed from its customers. In this way, the company gained a substantial foothold in the vital China market.
With a clear idea of the interactions among large-scale trends and how they will play out during the coming years, your company could gain a similarly strong advantage.
Business operates today in a world of accelerating change. In the United States, it took 76 years half the population to own a telephone. The smartphone achieved the same penetration in less than a decade. It took France 100 years to double the share of its over-60 population within the labour force, from 7 to 14% China, India, and Brazil will make the same leap in less than 30 years. Due to the whirlwind pace of global forces, a phenomenal amount of value can be created or destroyed more quickly today than at any other point in history. (See “How to Lead in Ambiguous Times,” by Ian Bremmer.)
In 2013, to shed light on changes in the global economy, PwC initiated a research project on mega-trends and their implications for business and government leaders. A mega-trend is a large-scale pattern or movement that has a major, long-lasting impact on business and society. (See “A Brief History of Megatrend Thinking”.) Their goals were to tap into people’s natural curiosity about external factors, to broaden and deepen the resulting conversation; and to translate the general understanding of mega-trends into a more practical framework that companies could use to seek opportunities and reduce risks.
Below, are the basic building blocks and historical patterns active in the world today that have left their mark on all aspects of the world’s economic and social fabric;
- Demographic and social change: the combination of greater life expectancy, declining birth-rates in many parts of the world, and unprecedented rates of human migration, accompanied by a gradual increase in the status of women and greater ethnic and social diversity within most countries.
- Shifts in global economic power: in particular, the much-noted expansion of prosperity in emerging economies at faster rates than in the industrialised world, leading to momentous changes in consumption patterns and a rebalancing of international relations.
- Rapid urbanisation: the massive expansion of cities around the world, through a combination of migration and childbirth, with major implications for infrastructure, land use, traffic, employment, quality of life, and culture.
- Climate change and resource scarcity: the rapidly increasing demand for energy, food, and water, in a finite world with limited natural resources and even more limited capacity for carbon dioxide and a wide variety of other effluents.
- Technological breakthroughs: the transformation of business and everyday life through the development and use of new kinds of digitally enabled innovations in fields such as biotechnology, nanotechnology, fabrication (including 3D printing), cloud computing, and the Internet of Things.
Each mega-trend has already happened to some extent. The aging of Western populations, the migration of economic activity toward Asia, the explosive growth of cities around the world, the depletion of forests and fisheries, and the continued march forward of high technology are already part of our experience. This means that they are also destined to interact. They will not just coincide; they will collide, with disruptive or transformative changes rippling out into nearly every industry around the world.
By looking proactively for collisions that will affect your industry, you can anticipate challenges and opportunities coming down the road, most of which are unseen by your competitors. You can use the collisions as starting points for rethinking your strategies. You can develop scenarios for how the collisions might affect you; think about the parts of your business that will be most affected; or consider how your fiercest competitors would react to the collisions. And then change your priorities accordingly.
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