Difference between revisions of "Scenario 1 - Empire with Walls"
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- | It is 2010 and the world is still battling to recover from the global recession. Most western economies are battling several financial challenges that are occurring simultaneously; deficits, trade imbalances, rising unemployment, company fold-ups and bail outs. At the same time emerging economies like Brazil, China and India are expanding with previous year growth for China at almost 10%. With the suspected likelihood of a second global recession, developed countries establish new regulations, some out of desperation with globalization taking a back seat. Governments intervene in society to provide bailouts for companies, implement tighter financial regulations to prevent another recession and take greater roles in other areas that used to be less government interventionist i.e. the U.S. exercising greater control on health care reforms is being viewed by many as more socialist that capitalist. | ||
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The new opportunities on the African continent and the effect of the financial crisis on companies influence a change in approach on innovation; innovation is now approached from a cost perspective with investment based on expected profit and several cost-cutting measures are put in place. The continuous decline of lack of financial assets by companies also influence this change in approach because new investment opportunities in Africa and research programs on the development of new ideas requires funding which most companies do not have. Raising funds from external forces do not work as banks are still not loan friendly, and consumers have become spendthrift and with society gradually evolving to a saving culture. | |||
The increase in activities like exploration, manufacturing, production, refining and construction leads to a rise in pollution levels round the world, especially in regions where regulation is lax like Asia and Africa. Regulatory authorities in the West enact stricter measures on emerging markets to comply with carbon emissions regulation, with penalties to be applied on exports from those countries through increased import tariffs. Although the concern is genuine, the approach is viewed by some as an opportunity to ensure survival and competitiveness for Western corporations. | |||
The eastern companies discover a loophole in the new carbon emission regulation and exploit it. Apparently, the regulation only covers companies that export to the West not companies that produce, manufacture and sell in other market economies. To bypass this, the companies set up joint ventures in these markets, subsidiaries and partnership with local entities and continue with their investment and expansion activities. The strategy allows them to establish operations in such markets faster and with less bureaucratic challenges, allowing them to easily utilize on existing supply chain/distribution channels without spending to create new ones. With a reputation for offering affordable pricing, consumers in these markets gradually shift loyalty from the traditional Western providers, to the emerging players. Ghana, Uganda, Sudan, Rwanda, Kenya, Nigeria and South Africa are amongst the many countries experiencing massive investment and growth opportunities influenced by companies like Bharti Airtel, Tata, Godrej group, CNPC and Industrial & Commercial Bank of China. These economies begin to benefit from the inflow of investment through employment and increased productivity and thus begins a burgeoning middle class and upper middle class. As these benefits continue, governments in these markets implement strict financial laws to ensure economic sustainability for their country but the growing needs (basic) of the populace means environmental regulation is still lax. | |||
The new players are expanding into territories where entry rules are less stringent and lax environmental regulations and copyright laws allow in certain sectors i.e. technology. | |||
The expansion drive of the new players across regions involves recruitment of staff of different nationalities and cultural backgrounds, offering the companies a mix of creative talent and skills. They are able to tap into a new pool of cost- | |||
Even though the global economy is relatively stable, companies in the West are still struggling somewhat in business due to several factors; the advancement in living standards means an increase in life expectancy and a declining work force, reduced spending and decreasing tax revenues. People are becoming more like the Japanese and saving more because the last recession was one too many and there is an erosion of trust in their respective governments. The financial recession also gave fuel to the cries from people for sustainable ways of doing business to ensure history does not repeat itself and increased awareness on environmental protection, things that can only be driven by innovation and creativity. There is far more concern about where goods and products are manufactured and the requirements of low emissions stamps on products. This breeds a change in the demographic perception of the customer beyond traditional metrics like age, sex, location etc. It has become more about lifestyle, influences and it seems to begin a change to consumer power. | |||
There are 2 new Sheriffs in town; China (the 2nd largest economy) and India (who are on the way to becoming the 3rd largest economy). They have taken the world by storm and have become major power brokers on the both economically and politically. Their corporations rival the Western traditionalists and half of the Fortune 500-listed emerging companies are from both countries alone. They have established themselves on strategic locations around the globe particularly in developing regions like Africa, Asia and South America. The penetration strategy is a bundle of low cost and customized innovation specific to the societal challenges in these operating environments. They do not present pre-conditions to doing business and do not interfere with domestic politics although their actions influence local policy decisions. They bring a lot of technical expertise, knowledge and skills which is acquired overtime by the local workforce through employment opportunities, training programmes and trade-free zone management established by these companies, thus establishing a transfer of knowledge process. The continent benefits from economic and infrastructural development and skill growth. However, this success has also becomes a threat; the invasion of the deputies. | |||
Rising emissions and environmental pollution become by-results of the torrential economic activity and development, and has caught the attention of the International community. Consumer groups and environmentalists put pressure on International regulators and Western government to clamp down on countries violating emissions compliance. The influence of these groups have increased in the last decade, as there is more awareness and concern over their source and increased clamour for companies to take absolute responsibility for the end-to-end supply chain process. International regulators implement measures to force compliance from these regions from the new Multinationals to local businesses that are and have established business relationships with the developed countries. The policies range from penalties and fines levied on the government aid and donor packages to high tariff and outright ban on products exported from these regions. Though not very effective in the first decade especially on Chinese companies, the threats of IP violation by smaller but fast emerging entities force China to make a re-think and corporate more in environmental control. | |||
The International pressures placed on the governments in developing countries to curb emissions levels and the threat of fines, disruptive tariffs and outright bans on exports leads to local demonstrations supporting the calls. The environmental degradation suffered in these countries has given rise to local demonstrations by environmentalists and consumer groups established through an International network, to raise public awareness on these issues. The old GATT agreement for IP compliance is being reviewed to amend loopholes previously explored by its members. The government is under pressure and begin to design strict local laws for companies to abide by in terms of environmental protection. Countries who are quick to respond are those still dependent on International aid whose with high debt balances with the develop countries. | |||
The regional organizations form a stronger consolidated pressure force for compliance by the concerned governments and companies. The local governments start to give in and enact policies to force carbon emission levels and IP protection, applicable to both local and international businesses. Only the strongest of the new deputies survive under his new policy regime, some through political support and others through a strong financial base that allows them attract some of the smart people in the bigger companies. Their plan is to build a small multitude of brilliant minds that will leverage on the creativity and experience they bring, to someday blindside the large corporations by launching a form of disruptive technology that will not only gain market share, but threaten the existing status quo. | |||
The period of consolidation leaves the Western hemisphere with few global empires/big brands that have vertically integrated their operations, empires resulting from acquisitions, mergers and the collapse of non-performing corporations. They have become financial stable, extremely wealthy with a vast range of assets and can begin to influence issues at the level they used to before the global meltdown. The smart acquisition strategy has left them with an international pool of brilliant minds and untapped ideas through which they can begin to power the innovation drive and regain lost market share. Towards the end of 2025, an embryonic level of collaboration between these companies on innovation and sustainability slowly begins to occur; there is now a sense of the need for high level partnerships and Government (s) support in areas of tax breaks for companies who re-focus on innovation aggressively and strict implementation of IP policies worldwide to ensure competitive advantage. | |||
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