Brands must plan for low-growth

11 February 2013

LONDON: Businesses need to change their thinking if they are to succeed in a future where low-growth economies are the norm, according to a new report.

In Succeeding in low-growth markets, The Futures Company argues that slow economic growth will be the backdrop to everything for at least the next decade, a situation unfamiliar to most business leaders.

It identifies seven 'headwinds' that companies should address if they are to stay ahead in a slow-growing global economy, along with a possible strategy.

These include demographics, unequal societies, the growth of the service sector, the debt overhang, higher energy prices, the rise of the digital economy and the problem of scale.

Long-term growth rates will be affected by ageing populations, where older workers will be looking for "bridge jobs" to ease them into retirement, notes the study, so smart firms will consider redesigning human resources structures to attract such staff.

It also cites greater inequality, as currently evident in the US and UK, as a factor leading to lower growth and lower rates of innovation. This will mean that wages will have to rise as a share of the overall economy and firms will look to make markets with more shared value.

Productivity gains are difficult in the service sector, the report claims, but sees this as a growing area and says redesigning services could enable providers to reduce costs while focusing more closely on the needs of the user.

It sees the debt overhang threatening a Japanese-style 'lost decade', with debt-based purchase models for big ticket items needing to be rethought, perhaps along the lines of the mobile phone market where providers have rolled capital costs into fixed-price service contracts.

Higher oil prices are also identified as a threat to economic recovery, meaning that the stripping out energy costs and shifting from fossil fuels will lead to competitive advantages.

One effect of the digital economy, the study points out, has been to expose national economies to wider competition with a subsequent impact on wages and jobs. One suggested solution is to use technology to customise and localise.

But it will be harder for larger firms to grow at the same rate as previously, says the report, as they are often focused on incremental improvements rather the more radical approaches to innovation that they need.

Subscribers to Warc can also view the full report on warc.com

Data sourced from The Futures Company; additional content by Warc staff