“Success is the ability to go from one failure to another with no loss of enthusiasm”. Winston Churchill -already a beloved character in this blog- always believed that falling down, standing up and learning was the path towards any goal. He also understood the need of an extremely well designed plan to reach it. His words still have got the power of a meaningful sentence.
When a concept becomes a trend two things happen. It starts to be used anytime and, on the other hand, its meaning loses relevance and importance.
This is what has happened with “innovation” and more specifically with “R&D investment”. It turned out to be worse when Media and Political messages integrated that idea as the real and only solution for everything, also linked to the “new production model”.
Let’s face it, the whole idea is quite appropriate. The equation R&D plus production model makes sense. But then again, the formula remains uncompleted, though.
Although progression of the USA’s (being this country the first principal value in world economy) GDP is 2.4% for 2015 and 2.6% for 2016, the main factor that explains this downsizing comes from the combination of China’s economy slowing (second principal value in world economy), financial upheavals and the fall of the price of raw materials.
According to OECD, it’s expected for China to grow up to 6.7% during 2015 and to reach 6.5% in 2016. These forecasts are based upon the Purchasing Managers Index (PMI) indicator for the Asian country, which point out that it is below 50 points, meaning economic contraction. (When this indicator is above 50, it refers to economic expansion and being below 50 refers to contraction).
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Anti-cyclic moments, time for planning
The most desirable issue consists on converting the risk that represents an anti-cyclic moment into an opportunity to analyze and to establish a medium and long term planning. Basically because, if operating globally from such a point of view, this will give a preliminary survey of needs and will contribute to accelerate slow recovery entering into a new sustainable balance.
Marine transport as an international trade indicator
Within this blog among my Global Drivers, transport is an indicator to evaluate world economy situation.
Marine transport, besides being a global economy indicator, helps to define future development trends, even in advanced countries and as well as in emergent countries. It also indicates about how economic, enterprise and competitive planning should be within mid and long term.
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Marine transportation, which represents more than 80% of traded goods in the world, is growing over world GDP (UNCTAD). World maritime trade grew with only a 3.8% rhythm in 2013, moving 9.6 billion tones. Within, containers raised a 5.1% (651 million TEUs), a very similar percentage to bulk goods trade growth. The relevant issue here is to have on account that this rate represents the lowest rate of the last 5 years.
On the other hand, in 2014 marine trade grew up 4.1%, moving over 10.5 billion tones, and its estimated growth for 2015 will be 3.9%, representing over 10.9 billion tones.
Analyzing the short term, and due to the estimated marine growth contraction, everything indicates a slow recovery; notwithstanding, the positive point is that the gap between offer and demand is reducing.
Baltic Dry is one of the main indexes for measuring world economy situation, besides evaluating transport evolution of solid raw materials by sea. It reached its maximum historical rate in 2008. With economic crisis, the index sunk, reaching a lowest historic rate in 2015, which allows to empower the previous comment about slow recovery.
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Less BRICS and MINT and more economic and trading activity geographical areas
The most extended stream of analysis talks about emerging countries, as key factors within the growth economic equation. Without taking analytical value to this pattern, it is pertinent to point out that there are new reasons to adopt a new vision, centered in areas instead of countries, due to four reasons:
1.- Maintaining the focus on countries offers incomplete parameters because observing economic zones and areas will allow to establish interdependency connections, to measure intra-zone and inter-zone fluxes and, at the end, to obtain the most relevant analytical information in global strategic planning terms.
2.- Some of these countries being part of these two groups represent instability and uncertainty, due to institutional questions as well as political, demographic and to industrial development issues.
3.- A country’s frailties can be compensated (related to international trade streams) by other countries’ strengths not aligned within neither BRICS nor MINT.
- If this analytical perspective is assumed, not only a more realistic view can be obtained, but a more positive definition as well from expectations and opportunities.
*BRICS: Brazil, Russia, India, China and South Africa.
*MINT: Mexico, Indonesia, Nigeria and Turkey.
Changes in trade world geography: The box that is still changing the world
A widening point of view exercise must be carried out and focus put on development areas and not in countries. At this point, it is relevant to underline that there new emerging centers within the marine transportation net which configure with accuracy the delimitation of this trade development zones.
On one hand, the Panama Canal expansion project will rise up to 80% the volume of goods (TEUs) moving within this infrastructure.
On the other hand, the growth on the trade of intermediate products, with a higher added value along with specialized production concentration to serve this demand, takes logistics chains to seek economies of scale. In doing so, the growing size of container carriers’ trend is reinforced producing a direct impact over port facilities, alliances, buys, mergers and is also affecting the concentration of port operators.
RISE OF HIGH ADDED VALUE PRODUCTS TRADE+ CONCENTRATION OF SPECIALIZED PRODUCTION= ECONOMIES OF SCALE= GROWTH OF SHIPS’ SIZE=IMPACT OVER PORT FACILITIES, SHIPPING COMPANIES PORT OPERATORS CONCENTRATION
- The most important is the intra Far East (ASEAN countries)
- Far East, Middle East and South Asia.
- Far East and Latin America.
- Trans Pacific.
- Europe Far East.
- Africa and Far East.
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It could become a general rule of action to use container routes, although these mean only a 13%, because in net value are over 50% of the total amount of carried goods, and thus, their impact sets a trend (“The Box That Changed the World”, de Arthur Donovan & Joseph Bonney).
The zones described are production and consuming zones which, put in relation with the expected growth population, give an idea about the challenges awaiting to satisfy future needs.
It must be clear that currently is the moment to face these challenges. Although slow recovery is not a desirable fact, it gives the chance to prepare and to establish a planning to grow in a sustainable and resilient way.
Cooperation among zones will contribute to the development of world growth. The idea is to advance towards a pattern which should include convergence and synergies among the different areas, avoiding debates and dialectics between developed economies and the emerging ones. The model must try to pass over every country’s weaknesses, focusing over the strengths that come from growth population and its effects over the rise of production and consuming centers. It must also assimilate the concept of strategic geographical zone within world trade routes.
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These are the six global drivers of strategic management (infraestructures, technology, economics, society, environment and resources) that have become essential for shaping the future of our world. Also, these will stablish the main subjects and categories to write about in this blog. My intention is to do it from a global and multidisciplinary approach. Therefore, this will imply variations on the interest over the drivers and also different outcomes depending on their measurement and their treatment.