Tuesday, November 6, 2007

The top TEN TRENDS

That will drive business in the next 10 years

1 Business Aimed At the Bottom of the Pyramid


Despite Latin America´s economic growth, the vast majority of the region´s population continues to live in poverty. According to data from the Economic Commission for Latin America and the Caribbean (ECLAC), 38.5% of Latin America´s population -- 205 million people – are considered poor. Designing products and services to better serve this segment of the population can have a dual positive effect: As new business opportunities open, they generate a “virtuous circle” of development. Just look at the boom in micro-credit and prepaid cell phones and their impacts on low-income people and micro-business. For resource extraction enterprises such as mining and oil companies, this tendency is manifested through the development of business clusters in zones of influence near their operations, which help sustain over time the economic benefits generated by mining or petroleum exploitation.

2 Renewable Energy

For reasons that have as much to do with cost as they do with the environment, the world is moving towards low carbon emissions development model, in which renewable energy sources will play an increasingly important role. This also means new business opportunities. According to the Latin American Energy Organization (Olade), Latin America is only taking advantage of 26% of its hydroelectric and 4 % of its renewable energy potential. Last year, the state of São Paulo commissioned a study to identify the chief sources of greenhouse gas emissions in its territory, which, among other things, will assist in the development of business around carbon credits. In addition to hydroelectric energy, biofuels, wind and geothermal power will dominate the energy picture in the coming years.

3 Water Management

The scarcity of fresh water is another issue that will be prominent on a global level in the years to come and will have a major impact on the business landscape. A number of projects –from real estate development to mining and energy— could remain on paper only due to the scarcity of this key resource. The development of technologies for more efficient use of water, whether through recycling, decreasing water losses or desalinization of sea water, will be one of the most promising business opportunities in the next decade.

4 Process Automation

The rapid development of information and telecommunications technologies indicates that process automation will be one of the keys to cost reduction and greater efficiency in company operations, whether in a bank or a mine. This phenomenon will create a gradual yet significant change in how business is conceived and managed in the coming years.

5 Process Integration

Closely related to the process automation trend, process integration will significantly transform company organizational charts. In the financial sector, bank tellers are no longer simply processing transactions but selling solutions, equipped with on-screen access to all kinds of information about their clients. For resource extraction companies, assignment of tasks in the field will no longer be a purely engineering decision, but will become part of commercial and customer support processes.

6 The New Metamorphosis of IT and Telecommunications

We move in an IP world, in which every day more communication occurs through the now-famous Internet protocol. The phenomenon has brought about important changes, starting with voice over IP or experiments with photonic technology for remote operations of heavy equipment, initiated by Chilean copper company Codelco in conjunction with NTT of Japan. But this is just the beginning. “We haven’t seen anything in comparison with what is to come in the next 10 years,” says Jose Antonio Rios, international president of Global Crossing, one of the largest fiber optic network companies in the world. Which of the systems and architectures, such as IP Multimedia Subsystem (IMS) in telecommunications or the Service Oriented Architecture (SOA) in information systems, will predominate is not easy to guess. But what is clear is that the progress shown by information and telecommunications technologies in the next 10 years will radically change the way business is managed.

7 A Multipolar World

The end of the Cold War brought an end to a geopolitical model that divided the world under the hegemony of two global powers. In recent years the world has been largely under the influence of one major power, the United States. But now, with the rise of China’s economic power, this scenario is changing. Will we see a return to the bipolar world of the Cold War? No. China depends on the U.S. and European markets and has abandoned confrontational diplomacy, exercising its power in a more subtle way and promoting a multipolar world. China’s geopolitical strategy will have effects on Latin America and will influence the design of foreign and trade policies in the region. The China-Brazil alliance within the World Trade Organization and the free trade agreement signed by China and Chile are early manifestations of the new Chinese diplomacy.

8 New Multinational Corporations and South-South Investments

The trend began to appear in the 1990s, but in the last few years has begun to gain strength. Major multinational companies are no longer exclusively based in developed countries. A growing number of global players, such as Brazil’s CVRD, Mexico’s Cemex, Huawei of China and India’s Tata have become industry leaders and active participants in mergers and acquisitions throughout the world. Their global presence will continue to grow and increasingly their business decisions will be made using criteria based on the global market. At the same time, so-called “south-south’ investments will continue to increase. According to figures from UNCTAD, the United Nations Conference on Trade and Development, in 2005 south-south investments represented one-third of the total foreign direct investment flow in the world.

9 A Wireless World

The telecommunications revolution is progressing toward a world that is clearly wireless, at least for the last mile. We are not just talking about the ubiquitous cellular phone handset. Wireless applications are just now beginning to demonstrate their potential. For an idea of where this technology is taking us, just consider the evolution of small radio-frequency identification devices that allow you to monitor a tire from thousands of kilometers away, or the combination of cellular phone technology with satellite technology for asset management.

10 Fiscal Reform

It’s one of the major tasks still pending in most Latin American countries, with extreme cases such as Mexico, where the government barely collects taxes equal to 12% of the country’s GDP (excluding oil taxes), or that of Brazil, where taxes totaling 34% of the nation’s GDP are collected through a tangled and irrational tax system. The rationalization of taxes is one of the major issues on the Latin American economic agenda and a key for improving the region’s competitiveness and the standard of living of its people.

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