2019 will be a time to look at the world differently: we shall benefit from the first synchronized economic recovery in over 10 years. Central banks will phase out printing money, but interest rates will largely remain flat.

Cash and liquidity will continue to abound, especially in sovereign wealth funds, financial institutions and companies. It will fuel more M&As, IPOs and the restructuring of established large players in several sectors.


The traditional approach to assess the economy fails to encompass a new reality. Huge amounts of money is printed by governments but inflation remains flat. New technologies and artificial intelligence flourish everywhere but productivity increases are marginal. The economy recovers but most household do not see any improvement of their income. Finally many governments do not reduce their debt level but continue to borrow on international markets at negative or negligible rates. The "immaterial economy", mainly driven by intangible assets, social media and new business models, is badly recorded in statistics. However it does exist and its impact on the "material economy" is significant and cannot be overlooked anymore. 


Nations fully control domestic taxation but have little access to global profits. The US administration values overseas profits of US companies not returning home because of the level of taxation at more than $1'300bn. Thus, global companies are overloaded with liquidities which result from global profits sheltered by tax rulings and other tax advantages abroad. Most of this cash is used for dividends, share buybacks, and mergers & acquisitions. In general, liquidity abounds in global companies everywhere. European companies have $1'400bn of cash and cash equivalent on their balance sheets, and Japanese companies slightly more.


Governments are thus developing a coordinated action to gain access to this money, by creating new taxes, closing loopholes and harmonizing procedures. The new basic principle is territorial taxation that can be summarized as follows: companies must pay taxes where they make profits, not where they are registered… Offshore sites are under pressure. Harmonization of practices will prevail but it will not imply a coordination of tax rates. In the US, the most radical reform of the tax system in decades significantly reduces corporate tax rate from 35% to 21%. Such a move is welcomed by the business community in general, but the impact on the budget and the federal debt is uncertain, and so is the effect on additional economic growth. 


The combination of huge amount of liquidities, often parked outside the country of residence of global companies, with new technologies and tax optimization has lead to a flurry of Mergers and Acquisitions. The consolidation of entire industry sectors and the ownership of companies is profoundly affected by this trend. In addition, global technology companies now have the possibility to extend their business reach beyond their initial industry sector. Amazon is a world leader in cloud technology, Google and Facebook in digital advertizing, Tesla in batteries and solar panels, and Amazon now produces as many watches as the entire Swiss industry. Size matters. Ant financial, the electronic payment company of Alibaba, is 16 times larger than Paypal.


Emerging economies increasingly use their money to buy assets (companies) abroad, but also to globalize their local champions. As a consequence, a proliferation of new companies and new brands from emerging economies has appeared on the global market. It is estimated that some 1,000 companies from emerging economies, with revenues more than $1bn, can be qualified as global companies today. In addition, many such companies are family owned, and/or in their entrepreneurial stage. Today, 65% of companies in Latin America with a global turnover of $1bn and above are family owned; in the Gulf countries, it is 75% and in South east Asia 85%! Their vitality and willingness to take risks is often in contrast with the more cautious and bureaucratic approach of long established corporations.


Technology disrupts many different sectors by displacing jobs globally. The emergence of artificial intelligence and robotics is spreading cheap machine-brain power based on big data mining. In this paradigm, the access to cheap manpower, and even brain power, in emerging economies is less fundamental to competitiveness than it used to be. In several cases, factories are returning to their home countries, mainly in the US and in Europe. However it is a mixed blessing for job creation. Blue collar jobs that were destroyed in advanced economies when factories left to low cost countries are now replaced in by new premises hiring highly qualified manpower. In emerging economies, a risk of premature deindustrialization is perceived as foreign companies leave. In both cases, social destabilization and a questioning of the benefits of globalization is the consequence.  


The arrival of the millennials as consumers and employees force companies to reassess their approach to products and markets. This new generation is driven by "Meism"; a self-centered approach to life, an eagerness for transparency, which means that nothing should be confidential anymore; a willingness to improve the state of the world, especially through sustainable development, and a conviction that "free is cool", which implies a reassessment of profitability models for companies. This new paradigm reinforces Peter Drucker's statement: " Changes in society have now more impact than change in management". Companies that ignore this new fact will face strong headwinds from consumers, society and governments.


This world competitiveness landscape implies new attitudes and new approaches to managing people. It is not only being good at "what you do" that counts, but also being good at "what you are". Winners will need to deal with more uncertainty and a higher degree of discomfort. They should nurture a healthy sense of ambition for their organization and themselves. Resilience and the ability to quickly re-invent oneself are key to success.

Companies need to stimulate a mind-set of imagination (why not?), of energy (why not now) and of commitment (why not me). Companies are increasingly questioned, especially by the millennials, about their contribution to society, beyond their financial results. The “legality” of the actions of companies - conforming to the law - is no longer enough in a world where public opinion also demands "legitimacy" - conforming to a higher standard. In such a world, companies will need to answer the broader question: why us?

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