Our research shows that the emerging economies’ share of Fortune Global 500 companies will probably jump to more than 45 percent by 2025, up from just 5 percent in 2000. That’s because while three-quarters of the world’s 8,000 companies with annual revenue of $1 billion or more are today based in developed economies, we forecast that an additional 7,000 could reach that size in little more than a decade—and 70 percent of them will most likely come from emerging markets. To put this dramatic shift in the balance of global corporate power in perspective, remember that many of the world’s largest companies have maintained their current status for generations: more than 40 percent of the 150 Western European companies in last year’s Fortune Global 500 had been founded before 1900. … The rebalancing of the global business landscape will probably be even faster and more dramatic than the shift of economic growth to emerging regions. Large companies matter, and not just for their ability to create jobs and generate higher incomes; they are also forces for increased productivity, innovation, standard setting, and the dissemination of skills and technology. Their geographic shift will have profound implications for the nature of competition, including not only the race for resources and talent but also, more broadly, the emerging markets’ efforts to reach the next level of economic development and prosperity.
It may be tempting to view recent declines in commodity prices as the end of the resource “supercycle”—the period of sharp price rises and heightened volatility since the turn of the 21st century. Yet rumors of the supercycle’s death are greatly exaggerated. Despite recent falls, commodity prices are still near their levels of early to mid-2008, just before the global financial crisis hit. (To track the movements in commodity prices over time, see the interactive, “MGI’s Commodity Price Index—an interactive tool.”) At a time when the world economy remains below full power, this phenomenon is striking, and a sign that the supercycle is alive and well. … We believe that resource markets will be shaped in coming years by a race between emerging-market demand and the resulting need to increase supply from a more challenging geology and the twin forces of supply-side innovation and resource productivity. Innovations such as the use of 3-D and 4-D seismic technologies for energy exploration can improve access to resources. Productivity gains can reduce the wastage of food and water and make buildings more energy efficient. The question is whether technology and resource productivity can improve fast enough to counter the impact of emerging-market demand and a more challenging geology. … The race is on.
1. The changing resource landscape
2. Energy: The race between technology and geology
3. Metals: The looming supply challenge
4. Agriculture: Falling yield growth hits prices
Our central finding is that the hype may actually understate the full potential—but that capturing it will require an understanding of where real value can be created and a successful effort to address a set of systems issues, including interoperability. ... To get a broader view of the IoT’s potential benefits and challenges across the global economy, we analyzed more than 150 use cases, ranging from people whose devices monitor health and wellness to manufacturers that utilize sensors to optimize the maintenance of equipment and protect the safety of workers. Our bottom-up analysis for the applications we size estimates that the IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value—including the consumer surplus—would be equivalent to about 11 percent of the world economy ... Achieving this kind of impact would require certain conditions to be in place, notably overcoming the technical, organizational, and regulatory hurdles. In particular, companies that use IoT technology will play a critical role in developing the right systems and processes to maximize its value. ... The digitization of machines, vehicles, and other elements of the physical world is a powerful idea. Even at this early stage, the IoT is starting to have a real impact by changing how goods are made and distributed, how products are serviced and refined, and how doctors and patients manage health and wellness. But capturing the full potential of IoT applications will require innovation in technologies and business models, as well as investment in new capabilities and talent. With policy actions to encourage interoperability, ensure security, and protect privacy and property rights, the Internet of Things can begin to reach its full potential—especially if leaders truly embrace data-driven decision making.
From 1980 to 2013, vast markets opened around the world while corporate-tax rates, borrowing costs, and the price of labor, equipment, and technology all fell. The net profits posted by the world’s largest companies more than tripled in real terms from $2 trillion in 1980 to $7.2 trillion by 2013,1 pushing corporate profits as a share of global GDP from 7.6 percent to almost 10 percent. Today, companies from advanced economies still earn more than two-thirds of global profits, and Western firms are the world’s most profitable. Multinationals have benefited from rising consumption and industrial investment, the availability of low-cost labor, and more globalized supply chains. ... But there are indications of a very significant change in the nature of global competition and the economic environment. While global revenue could increase by some 40 percent, reaching $185 trillion by 2025, profit growth is coming under pressure. This could cause the real-growth rate for the corporate-profit pool to fall from around 5 percent to 1 percent, practically the same share as in 1980, before the boom began. ... Profits are shifting from heavy industry to idea-intensive sectors that revolve around R&D, brands, software, and algorithms. Sectors such as finance, information technology, media, and pharmaceuticals—which have the highest margins—are developing a winner-take-all dynamic, with a wide gap between the most profitable companies and everyone else. Meanwhile, margins are being squeezed in capital-intensive industries, where operational efficiency has become critical. ... As profit growth slows, there will be more companies fighting for a smaller slice of the pie, and incumbent industry leaders cannot focus simply on defending their market niche.
Until the turn of this century, population growth generated more than half of all global consumption. But between 2015 and 2030, three-quarters of global consumption growth will be driven by individuals spending more. This shift has profound implications for companies. What’s now important are emerging demographics: the latest report from the McKinsey Global Institute (MGI) finds that nine groups will generate three-quarters of global urban consumption growth to 2030, and just three of these will generate half of consumption growth and have the power to reshape global consumer markets over the next 15 years.
1. The retiring and elderly in developed economies
2. China’s working-age population
3. North America’s working-age population
Tracking consumer attitudes and behavior is not sufficient if companies are going to capture key consumer markets. They need to understand the core drivers of consumption such as income and age, characteristics such as ethnic mix and education, and the timing of key decisions such as getting married, having children, and buying a house.