Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Adapting to the Global Trends (Part 1)

           A fringe benefit of being a Visiting Professor in one of the world’s leading business schools, the IESE Business School in Barcelona, Spain, is to have as colleagues some of the most research-oriented business professors anywhere.  In my last visit to the school, I picked up a recent publication of Adrian Done, a IESE professor in decision sciences and research associate with the Advanced Institute of Management Research in the UK.  The book is entitled “Global Trends:  Facing Up to a Changing World.”  Any decision maker, whether in business or government, must read the book if he wants to be ready for and adapt to the most important changes in the economic, political and physical environments in the next twenty years or so.  As Dr. Jordi Canals, Dean of the IESE Business School, wrote on the back cover of the book:  “Fasten your seat belts—there’s turbulence ahead!  Societies, businesses and senior managers are facing enormous challenges.  This insightful book analyses them and thoughtfully assesses the threats and opportunities that are likely to emerge.  Having armed us with increased awareness, Adrian Done offers a pragmatic approach to navigating the uncertainty and pulls no punches in encouraging us to broaden our thinking and to act with rigor and purpose.”

          Without being a spoiler, I would like to briefly summarize the global trends as a teaser to the readers so that they will be motivated to read the book that is published by Palgrave Macmillan (www.palgrave.com).  I am especially addressing the CEOs of big and small enterprises as well as government officials at all levels, especially at the Local Government Units, calling the attention especially of all those planning to run for some elected position or another in 2016.  It is of utmost importance for them to know the role of a responsible State in partnering with the private sector in meeting the threats and opportunities that will emerge as a result of these trends.

          Dr. Adrian Done (Ph.D. London Business School) outlines twelve global trends that will continue well into the 21st century.  We may be encouraged by the prognostication of the Hong Kong Shanghai Bank that the Philippine GDP will be the sixteenth largest in the world by 2050.  That doesn’t mean, however, that we will be spared some of the worst consequences of the global threats if we do not prepare for them and apply the appropriate solutions.  Dr. Done has some very practical advice on how to go about looking for the solutions.  But, first, the trends:

          1.  The repercussions of the recent Great Recession are not going to disappear in the short term.  IMF Director Christine Legarde already has referred to the “new mediocre.”  Advanced countries, especially in Europe, will continue to suffer from high levels of debt and experience very low GDP growth and high rates of employment for many years to come.  In the words of Dr. Done:  “Twitchy investors, austerity measures and labor market reforms will herald a new post crisis economic era.”

          2.  Geopolitical power will continue shifting away from the former G-7 (especially Europe, USA, and Japan) and towards the emerging markets such as the BRIC (Brazil, Russia India and China) and the Next Eleven (N-11) which includes the VIP (Vietnam, Indonesia and the Philippines) countries in the emerging ASEAN Economic Community.  The twenty first century is already being referred to as the Asian Century in which there will be three economic powers competing for dominance:  China, India and the ASEAN Economic Community.  Dr. Done remarks:  “The 20th-century status quo will certainly change.  Whether the transition to a new world order is a smooth one depends upon the behaviour of all the actors involved.”

          3.  Technology will continue to develop, leading to more “creative destruction.”  As has happened to analogue technology that has been replaced by digitalization, old ways of doing things will be challenged by disruptive technologies that will come out with newer and better products:  “Individuals, companies and even societies that aren’t proactive will get left behind.  Our grandchildren will be doing things we could only dream about, just as we are doing things our grandparents dreamed of.”

          4.  Climate change will be inevitable with the world continuing to warm up.  The following applies with greater force to the Philippines after our Yolanda experience:  “Extreme weather events are likely to become more common, with far-reaching global impacts…In general, human beings will have no option but to rise to the challenges posed and adapt as best they can, while attempting to counter the underlying drivers behind the rising mercury.”  During the height of Typhoon Ruby in early December 2014, the Mayors of Iloilo City and Cebu City told me how impressed they were with the discipline shown by potential victims of strong winds and storm surges in obeying  the instructions of local officials, in comparison with the chaos during the Yolanda storm.  Gradually, Filipinos are learning to behave more like the Japanese in times of crisis.

          5.  The worsening problem of water scarcity will adversely affect food security for the foreseeable decades, especially as nonrenewable ground water is used up or polluted.  In fact, many forecasts about the future indicate that the water and food shortages will replace the energy crisis as the most important threat to the global economy in the coming years:  “With increasing production pressures, more mouths to feed, increasing vulnerability of fewer crop varieties, and emerging health problems the world food chain is likely to change substantially.”  It will be China that will face this challenge most severely, creating opportunities to improve agribusiness productivity in the agricultural economies of Southeast Asia, such as Thailand, Indonesia, the Philippines and Vietnam.  China will be a big market for high-value crops such as fruits, vegetable, livestock, and fisheries, not to mention the growing domestic markets of the ASEAN Economic Community.

          6.  The importance of investing in human capital through sound education will continue to increase.  The most important solution to mass poverty in such countries as the Philippines, Indonesia, Vietnam, Myanmar and other Asian countries is investing in quality public education at the elementary level.  As Dr. Done wrote:  “Without significant effort the link between poor education and poverty will not be broken—either in developed or developing nations.”  For those who have already reached middle-income status, the only way to escape the so-called “middle income trap” is the increase in resources devoted to quality university education, especially in engineering and the sciences.  The model of these countries aspiring to the status of an advanced economy is South Korea, one of the few who escaped the middle income trap in the last century.

          7.  The population of the world will continue to increase and then stabilize around 2050:  “Average ages will rise across the globe as people live longer.  With low birth rates, developed nations are likely to suffer too few young workers to sustain ever increasing ‘support ratios’ of the elderly and current pension schemes.  Conversely, developing counties are likely to have an excess of young people without sufficient economic opportunities.  Thus migration pressures are likely to increase. The obvious consequences of such worldwide demographic trends are the long-term sustainability of the remittances from Overseas Filipino Workers, the potential for medical tourism in the Philippines, and the growing importance of business process and knowledge processing outsourcing to the Philippine economy. (To be continued)