From Breakdown to Breakthrough - Invest Europe · 10/03/2011 · geneva, 10 march 2011 stephane...

STEPHANE GARELLIGENEVA, 10 MARCH 2011

STEPHANE GARELLIPROFESSOR AT IMD AND AT THE UNIVERSITY OF LAUSANNE, SWITZERLAND,

DIRECTOR WORLD COMPETITIVENESS CENTER

A COMPETITIVENESS OUTLOOK FOR 2011, AND BEYOND

FROM BREAKDOWN TO BREAKTHROUGH…

GENEVA10 MARCH

2011

L

http://www.aarstiderne.com/upload/2001120413421001-copyright.jpg


MARK TWAIN, 1835 - 1910

IN THE REAL WORLD,

IN THE RIGHT PLACE,

AT THE RIGHT TIME!

THE RIGHT THING

NEVER HAPPENS


AN INCREDIBLE DECADE…

20012011


15 SEPTEMBER 200824 OCTOBER 1907

J.P. MORGAN& OTHER BANKERS

H.PAULSONTREASURY

AND THE « GREAT RECESSION »…TWO DEFINING MOMENTS


THE NEW WORLD

ENTERPRISECAPITALISM

STATECAPITALISM

ECONOMICNATIONALISM

SHAREHOLDERSVALUE


A WORLD OF STATE CAPITALISM?...

OUR ECONOMY GROWS

AT NIGHT…

WHEN THE GOVERNMENT

IS SLEEPING!AN INDIAN SAYING


A CRISIS IN FOUR ACTS

FINANCIALCRISIS

SHARES

SAVINGS

VALUE DESTROYED

V- $50’000bnLOANS HOUSES

FORSALE

GDP DESTROYED

ECONOMICCRISIS

WORLD GDPWORLD

ECONOMY

V - 5%

ACT I ACT II ACT III

SOCIALCRISIS

WORLD GDPWORLD

EMPLOYMENT

JOBS DESTROYED

V- 50 MILLION

ACT IVMONETARY CRISIS?


DO WE RISKA DOUBLE

DIP?


Q4Q3

THE WORLD ECONOMYANNUAL % CHANGE (12 month period)

5.5

2.9

2

4.5

5RUSSIA

POLAND

HUNGARY

CZECH. REP

TURKEY

8.6

6.7

7.0

3.6

4.6

0.6VENEZUELA

MEXICO

COLOMBIA

CHILE

BRAZIL

ARGENTINA

2.71.8

1.54

2.71.3

2.40.6

7.33

1.72EURO AREA

UKCH

SWEDENSPAIN

NLITALY

AUSTRIA

GERMANYFRANCE

BELGIUM

DENMARK

9.86.2

8.26.9

4.83.8

124.8

6.93.8

2.72.2JAPAN

AUSTRALIA

THAILAND

TAIWAN

KOREA

SINGAPORESOUTH AFRICA

MALAYSIA

INDONESIAINDIA

HONG KONG

CHINA

Q42.8%

NOSE DIVINGOR

LEVELLING-OFF?(compared to previous quarter)

-1.1%

- 0.5%

+1.4%

+1.2%

+1.5%

+ 5.1%

3.2%


THE WORLD ECONOMIC WEATHER MAP

STORMY

IMPROVING

HEAT WAVE

UNCERTAIN

OVERCAST

IMPROVING

WINDY

OVERCAST

NOT IN SYNCANYMORE


WHERE ARE THE

BREAKING POINTS?


DEBT…

SMALL US BANKS

7’000 $1bn

SOVEREIGN DEBT

GREECE SPAIN PORTUGAL

2’300bn EUROS

IRELAND


THE SOCIAL COST

20.2%

7.4% 8.2%

3.5%

5.1%5.3%

42.9%

20.7%

18.5%

40%

20%

10%

2007 2010

25.%


3%

5%

10%

2%

INFLATION ON THE RADAR SCREEN…


INFLATION: THE BIG TEMPTATION…

REDUCE THE VALUE OF DEBT

BOOSTCONSUMPTION

“TAXATIONWITHOUT

LEGISLATION”

MILTON FRIEDMAN1912 -2006

FORCE CURRENCY CHANGES


AREWE

BANKRUPT?


THE COST OF THE CRISIS

$7,200bn$7,200bnRECAPITALIZATION, GUARANTEES, TOXIC ASSETS, etc.

27% OF GDP 27% OF GDP


ONE BILLION DOLLARS HERE,

ONE BILLION DOLLARS THERE

RONALD REAGAN, 1911 - 2004

SOON OR LATER,WE SHALL BE TALKING

ABOUT MONEY!


1999

+$236bn

2009

- $1,845bn

2010

-$1,560bn

-$4 BILLION A DAY!2010

US BUDGET DEFICITS: THE LEGACY….

SOURCE: CONGRESSATIONAL BUDGET OFFICE


-8.9%

A WORLD OF SINNERSBUDGET DEFICITS AS A % OF GDP

Source: OECD

-5.7%

-10.1%

-9.1%

-6.2%

-7.4%

-14.3%

-4.8%-7.8%

-5.5%

-5.3%-2.7%

-5.1%


GEORGES W. BUSH1946 -

THERE IS A LOTOF NUMBERS

IN IT…

CLEARLYIT MUST BEA BUDGET!


UP AND AWAY…

78%

2007

106%

2010

G20DEBT as a % of GDP

+ $9,000bn


THE PREVAILING SYSTEM:


HENNY YOUNGMAN1906 -1998

THINGS COULD BE WORSE…

I COULD BEONE OF

MY CREDITORS!”


WHERECAN GOVERNMENTS

FINDMONEY?


A SYSTEM WHEREBY

A PERSON WHO CAN NOT PAY

CREDITWORTHINESS?

GETS ANOTHER

PERSON WHO CAN NOT PAY

TO GUARANTEETHAT HE CAN PAY!

CHARLES DICKENS1812 - 1870

GOVERNMENT THAT

IT

A BANK THATA GOVERNMENT THAT


$908bn $877bn

FUELING THE US DEBT…

$1’600bn


HOW TO FIND MONEY?

PRINT

BORROW

SELL

OR


THOMAS JEFFERSON1743 - 1826

A GOVERNMENT

BIG ENOUGHTO GIVE YOU EVERYTHING

YOU WANT

IS STRONG ENOUGHTO TAKE

EVERYTHINGYOU HAVE


July 1981 – November 1982July 1990 – March 1991March 2001 – November 2001December 2007 – July 2009

14 months8 months8 months

19 months

RECESSIONS

EVERY 9- 10 YEARS…

(32 Recessions since 1854)

THE NEXT BIG ONE?

2018 -2020?


THE DEEPER

REVOLUTION


A CURRENCIES WAR?

2010

1.38

0.90

2002

US$ vs EURO

1977 2010

20%

80%WORLD CURRENCY HOLDINGS

1989

60%

30%

1.56 0.012

0.1491.04


$6’200bn

A FLOCK OF MONEY…

FOREIGN CURRENCY RESERVES

WHERE WILL IT LAND?

EMERGING MARKETS


WHO IS HAVING THE MONEY?Foreign currency reserves

Euro 520bn

EURO TREASURY BONDSUS TREASURY BONDS

$908bn

$2648bn $1051bn

$372bn $289bn$294bn $279bn$476bn $463bn

http://images.google.ch/imgres?imgurl=http://www.amnet.co.jp/i_pal/china.gif&imgrefurl=http://www.amnet.co.jp/i_pal/cir.html&h=200&w=300&sz=2&tbnid=8KIAPzAWRScJ:&tbnh=74&tbnw=111&start=10&prev=/images?q=CHINA+FLAG&hl=fr&lr=

http://images.google.ch/imgres?imgurl=http://www.globosapiens.net/subapp_countries/app_data/flags/fullsize/japan-flag.gif&imgrefurl=http://www.globosapiens.net/country/japan-flag.html&h=299&w=447&sz=3&tbnid=kJLUQBXT5ccJ:&tbnh=82&tbnw=122&start=2&prev=/images?q=JAPAN+FLAG&hl=fr&lr=

http://images.google.ch/imgres?imgurl=http://www.fbch.com/missions/Asia/Taiwan/TaiwanFlag.gif&imgrefurl=http://www.fbch.com/missions/Asia/Taiwan/Missions_TaiwanMain.html&h=217&w=325&sz=4&tbnid=kda0CZYZJ9QJ:&tbnh=76&tbnw=113&start=4&prev=/images?q=TAIWANFLAG&hl=fr&lr=

http://www.wongfleming.com/skorea.gif

http://images.google.ch/imgres?imgurl=http://www.world-gazetteer.com/fl/fl_in.gif&imgrefurl=http://www.world-gazetteer.com/f/f_in.htm&h=360&w=600&sz=3&tbnid=gTOzHqUvD4sJ:&tbnh=79&tbnw=131&start=4&prev=/images?q=flag+india&hl=fr&lr=


A NEW SOUTH – SOUTH BLOCK….

56% CHINESE EXPORTS = EMERGING ECONOMIES

SIZE

PROJECTSRAW

MATERIALS

MONEY

BRANDS

HI TECH


NEW PRIORITIES FOR MONEY

INDUSTRIAL ASSETS

EVERYWHERE

FINANCIAL ASSETS

GOVERNMENT BONDS

LOCAL COMPANIES

AT HOME

INFRASTRUCTURE

LOCAL AND REGIONAL

$700bnin the

Gulf Region

700Chinese corp.

In Africa

21 out 22Chinese top corp.

state financed

http://www.crwflags.com/fotw/images/u/us.gif

http://images.google.ch/imgres?imgurl=www.southampton.gov.uk/buseuro/images/euroflag.gif&imgrefurl=http://www.southampton.gov.uk/buseuro/europe/eurpoint.htm&h=186&w=277&prev=/images?q=flag+europe&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8


EMERGING GLOBAL BRANDS…

EMERGING ECONOMIES

http://images.google.ch/imgres?imgurl=http://www.businessworldindia.com/sep01/images/images01903/coverstory/n22_logo.jpg&imgrefurl=http://www.businessworldindia.com/sep01/cover_no22.asp&h=214&w=200&sz=8&tbnid=CVYDP6GSLE8J:&tbnh=100&tbnw=94&start=4&prev=/images?q=wipro+logo&hl=fr&lr=

http://images.google.ch/imgres?imgurl=http://home.att.net/~dgeusz/BioconX_Images/BioconX_Logo.gif&imgrefurl=http://home.att.net/~dgeusz/idnetwork.htm&h=51&w=235&sz=3&tbnid=ct-fLmH12rcJ:&tbnh=22&tbnw=101&start=16&prev=/images?q=biocon+logo&hl=fr&lr=

http://images.google.ch/imgres?imgurl=www.ziyanmoulding.com/images/logo_tcl.gif&imgrefurl=http://www.ziyanmoulding.com/en/customer.htm&h=89&w=106&prev=/images?q=tcl+china+logo&svnum=10&hl=en&lr=&ie=UTF-8&oe=UTF-8

http://www.huawei.com.mx/perfil_archivos/solo_logo_huawei.gif

http://images.google.ch/imgres?imgurl=http://www.it158.com.cn/images/lenovo_logo.jpg&imgrefurl=http://www.it158.com.cn/&h=125&w=300&sz=21&tbnid=4ovrAxsTVCYJ:&tbnh=46&tbnw=110&start=12&prev=/images?q=lenovo+logo&hl=fr&lr=


THE ANSWER:GLOBALIZATION

2.0?


1985

30%

0%

20%

SHARE OF WORLD MANUFACTURING

PORT ELIZABETHNEW JERSEY

2010

45%OF CONTAINERS

LEAVINGARE EMPTY

2010

RE-LOCALIZATION


MANUFACTURING AS % OF GDP

1990

2009

16.0% 17.7% 28.2%

11.2%11.2% 11.4%11.4% 20.4%20.4%

FINANCIAL SECTORAS % OF PROFITS

1980 : 16% 2008: 41%2008: 41%

RE-INDUSTRIALIZATION?


- SERVICES-LED- CONSUMPTION-BASED

ECONOMY

TO A

- A TECHNOLOGY-BASED- EXPORT-ORIENTED

POWERHOUSE

FROM

THE BIG MISTAKE…

JEFF IMMELTCEO, GE

THAT IDEA WAS FLAT WRONG!


WORKERSCARS

EMPLOYMENT IN MANUFACTURING

1966: 8 Mo 2009: 2.5 Mo2009: 2.5 Mo

26,840645,000

5,8005,800600,000

RE-PRODUCTIVIZATION…


CHARLES DICKENS1812 - 1870

“INDUSTRYIS THE KEYSTONE OF PROSPERITY…

AND THESOUL

OF BUSINESS”


HOWWILL

CUSTOMERS REACT?


1 BILLION PHONES = $12bn

TWO TYPES OF ECONOMY:

1. REPLACEMENT ECONOMY

A PURCHASEREPLACES

AN EXISTING PRODUCT

« DRAMATIC » INNOVATION


THE OTHER ECONOMY…

2. FIRST BUY ECONOMY

A PURCHASEINTRODUCES

A NEW PRODUCT

PURCHASING POWER KEYNES

EMERGING MARKETS


TWO TYPES OF ECONOMY

I NEED IT!

EMERGING MARKETS

I WANT IT!

ADVANCED MARKETS


THE NEXTBUSINESSMODELS?


MARKET PROSPECTS FOR 2050s

A GENERATION AWAY ( just as the 70S…)


1766

392 628

809

525820082050

THE WORLD TODAY, AND TOMORROW…Population in millions

973

337731

577

4054EUROPENORTH AMER.

LATIN AMER. AFRICA ASIA

http://images.google.ch/imgres?imgurl=nrc.kvalito.no/grafikk/UN-logo.png&imgrefurl=http://nrc.kvalito.no/view.asp?anr=1177&hl=fr&h=209&w=247&start=19&prev=/images?q=UN+logo&svnum=10&hl=fr&lr=&ie=UTF-8&oe=UTF-8


2,644 Mo2008

3,600 Mo2030

EMERGING MIDDLE CLASS

- MONEY

- CONSUMPTION

EMERGING LESS POOR

$100 - $200 PC THE $2500 CAR MICROFINANCE MOBILE MONEY

NEW

BUSINESS MODEL

TWO ENGINES OF GROWTH…


- 1.2bn PEOPLE = NO SAFE WATER

- 80% DISEASES COME FROM WATER

TATA SWACH PURIFIER

$16.1

SAFE WATER…


FROM OLD TO NEW AFRICA…

4.9%GDP

GROWTH

316MILLION

CELL PHONES

1,400LISTED

COMPANIES

100REVENUES$ 1 BILLION

20REVENUES$ 3 BILLION

GDP= $1,700 bn10th

WORLD LARGEST ECONOMY


THE COMMODITY

FEVER


THE COMMODITIES COME BACK!

100%

1999 - 2009

Source: Bloomberg

PAST 12 MONTH

INDUSTRIALS

FOOD

+58%

+41%

Source: The Economist

200%

300%

GOLD

SUGARCOPPER

OIL

GASCORN

NICKEL

308%

270%269%

202%

108% 104%94%

378%

LEAD


COAL

46%

STEEL

27%

ALUMINIUM

19%

FISH

33%

CHINA’S APPETITE…AS A % OF WORLD CONSUMPTION

COPPER

20%

CEMENT

47%OIL

8.5%

http://www.crwflags.com/fotw/images/c/cn.gif


1970

100

0

50

CONSUMPTION IN MILLION TONNES

2008

38

62

13

79

36

103PORK

CHICKENBEEF

2010 2030

WORLDPRODUCTION

INCREASE CEREALS

+ 50% + 85%MEAT

THE PRESSURE OF FOOD


ECOLOGICAL FOOTPRINTECOLOGICAL FOOTPRINT

A DOG

MEDIUM-SIZED

0.84HECTARES

SOURCE: Robert and BrendaVALE, Victoria University, of Wellington, New Zealand

LAW OF UNEXPECTED CONSEQUENCES…

164 KgOF MEAT

95 Kg OF CEREALS

ANNUALTOYOTA LAND CRUISER4.6-LITRE

0.41HECTARES

10,000 Km


28% WERE ELECTRIC!

BACK TO THE FUTURE…

4,192 CARS BUILT

1900


65

RETIRED

76

GOOD SHAPE

80 5%

OVER-ACHIEVER

LIFE EXPECTANCY

+ 5 HOURS PER DAY

A SECOND LIFE: AGE AND WELLNESS


CHANGING THE MINDSET

COMPETENCIES AND SKILLS


THOMAS JEFFERSON, 1743 - 1826

NOTHING CANSTOP

THE MAN…

WITH THERIGHT

MENTAL ATTITUDE!


« WE STUDYA GOOD IDEA

AN ANONYMOUS CEO

?

A SENSE OF TRYING…

UNTIL IT BECOMESA

BAD ONE !»


RALPH GULDAHL1911- 1987

1937- 1939- TWO US OPEN- ONE MASTERS

A BOOK…

THE DANGER OF « OVERTHINKING »


CONFIDENCEIS

WHAT YOU HAVE

BEFOREYOU UNDERSTAND

THE PROBLEM!

WOODY ALLEN, 1935 -

JUST DO IT…


“THE PERSONWHO SAYS

IT CANNOT BE DONE

SHOULDNOT INTERRUPT

THE PERSON DOING IT!”

A CHINESE PROVERB

RESPECT WHAT IS LESS OBVIOUS…


ADJUST TO CHANGES IN SOCIETY

MARK TWAIN, 1835 - 1910

NEVER DO WRONG

ESPECIALLYWHEN SOMEBODY

ISLOOKING!


MONTAIGNE, 1533 - 1592

TIMING IS EVERYTHING

IT IS VERY WRONGTO BE RIGHT

BEFORE EVERYONEELSE!

NEWTON - AppleAUGUST 1993

LAKER AIRWAYSAUGUST 1978

NOT IF IT IS RIGHTBUT WHEN IT IS RIGHT


THE SPIRIT OF COMPETITIVENESS…

JEAN-BAPTISTE CHARCOT1867 - 1936

POURQUOI –PAS?

WHY NOT?MENTALITY

From Breakdown to Breakthrough - Invest Europe · 10/03/2011 · geneva, 10 march 2011 stephane...

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