GLOBAL TOPICS@RB: The new normality is volatility
Scenarios for the global manufacturing industry and beyond
"In emerging markets, the new normality is volatility. We cannot look more than three years ahead in these countries." This recent quote from Siegfried Gänsslen, CEO of Hansgrohe, a leading German sanitary and fitting company, points to a somewhat unsettling new reality in many of the world's most important markets.
Signs of more volatility are everywhere
Over the last five years, for instance, the Shanghai Composite moved between 1,500 and 6,000 points, and EGX, Egypt's leading share price index, swung between 12,000 and 5,000 points. During this same period, oil prices fluctuated from USD 40 to 140 a barrel – a range exceeding 250%. Other commodities, such as raw materials from emerging markets and the developing world, show equally large price swings. And of course today's political uncertainties and unrest also make the world more volatile for business.
Changes in the macro environment outside of a company's industry, such as political, social, ecological, economic or technological developments, play a decisive role in the success of its business model. Managers find it increasingly difficult to anticipate how changes and trends could impact their business. Traditional foreign investment planning cycles of ten years or more are no longer feasible. Plans must be reviewed and revised at much shorter intervals.
Signs of more volatility are everywhere
Over the last five years, for instance, the Shanghai Composite moved between 1,500 and 6,000 points, and EGX, Egypt's leading share price index, swung between 12,000 and 5,000 points. During this same period, oil prices fluctuated from USD 40 to 140 a barrel – a range exceeding 250%. Other commodities, such as raw materials from emerging markets and the developing world, show equally large price swings. And of course today's political uncertainties and unrest also make the world more volatile for business.
Changes in the macro environment outside of a company's industry, such as political, social, ecological, economic or technological developments, play a decisive role in the success of its business model. Managers find it increasingly difficult to anticipate how changes and trends could impact their business. Traditional foreign investment planning cycles of ten years or more are no longer feasible. Plans must be reviewed and revised at much shorter intervals.
Scenarios for the global manufacturing industry and beyond
Together with Leipzig Graduate School of Management (HHL), Roland Berger has devised a method designed to help companies anticipate important changes early on. It helps discern even barely perceptible trends that become visible only in the long term, and factors that go unnoticed as companies focus too much on themselves. The key market trends identified are then incorporated into scenarios for the future.
A new GLOBAL TOPICS brochure in the "8 Billion Opportunities" series looks at how this method works based on scenarios for the global manufacturing industry. "We show how business in emerging markets may play out for companies from developed nations," explains Bernd Brunke, Partner and co-author of the study. "We're doing so by using four scenarios, or extreme visions of the future, which we have named "Antagonistic Age", "Polarized World", "Squandering Society" and "Green Capitalism". But we're not just describing the worlds these companies will be operating in; for each scenario, we've also developed strategies for success for companies seeking to tackle emerging markets."
According to Brunke, the scenario approach is equally valid for companies from other industries intending to position their global business successfully in emerging and developing markets.
Best practice: The Siemens example
The brochure also provides a shining example of how to derive strategy from megatrends: Siemens, the largest Europe-based electronics and electrical engineering company, who has set up a dedicated department for sustainable urban development. By tracking and analyzing broad long-term trends, such as population change and urbanization, Siemens became a global pioneer in sustainable urban development, especially in emerging and developing countries. Siemens also bet on higher emerging market demand for cheap and easy to use SMART products: Simple, Maintenance-friendly, Affordable, Reliable and Timely to market. These development principles are applied in designing products pitched to the needs of newly industrializing and developing countries.
Finding business opportunities in an uncertain future is a tough challenge. But the scenario planning approach designed by HHL Leipzig and Roland Berger helps strategic planners and decision makers identify the most relevant future scenarios in specific industries and regions.
Together with Leipzig Graduate School of Management (HHL), Roland Berger has devised a method designed to help companies anticipate important changes early on. It helps discern even barely perceptible trends that become visible only in the long term, and factors that go unnoticed as companies focus too much on themselves. The key market trends identified are then incorporated into scenarios for the future.
A new GLOBAL TOPICS brochure in the "8 Billion Opportunities" series looks at how this method works based on scenarios for the global manufacturing industry. "We show how business in emerging markets may play out for companies from developed nations," explains Bernd Brunke, Partner and co-author of the study. "We're doing so by using four scenarios, or extreme visions of the future, which we have named "Antagonistic Age", "Polarized World", "Squandering Society" and "Green Capitalism". But we're not just describing the worlds these companies will be operating in; for each scenario, we've also developed strategies for success for companies seeking to tackle emerging markets."
According to Brunke, the scenario approach is equally valid for companies from other industries intending to position their global business successfully in emerging and developing markets.
Best practice: The Siemens example
The brochure also provides a shining example of how to derive strategy from megatrends: Siemens, the largest Europe-based electronics and electrical engineering company, who has set up a dedicated department for sustainable urban development. By tracking and analyzing broad long-term trends, such as population change and urbanization, Siemens became a global pioneer in sustainable urban development, especially in emerging and developing countries. Siemens also bet on higher emerging market demand for cheap and easy to use SMART products: Simple, Maintenance-friendly, Affordable, Reliable and Timely to market. These development principles are applied in designing products pitched to the needs of newly industrializing and developing countries.
Finding business opportunities in an uncertain future is a tough challenge. But the scenario planning approach designed by HHL Leipzig and Roland Berger helps strategic planners and decision makers identify the most relevant future scenarios in specific industries and regions.
