Going From Global Trends to Corporate Strategy: Exhibit 1 (EMiceli Blog 1)
In the Exhibit 1 diagram (“Going From Global Trends to Corporate Strategy” Becker and Freeman, the McKinsey Quarterly, 2006 Number 3) “The Impact of 10 Trends”, executives were surveyed on how they expect 10 trends to effect both their global business and company profitability in the next five years. The three color-coded ratings for the survey consisted of: very important/important, neither important nor important and somewhat important/not important. Overall, executives ranked seven trends high in effecting global business, while the other three trends were ranked higher in effecting company profitability. I found two interesting findings regarding the rankings.
First, four of the seven trends that ranked high in effecting global business had a 25% percent higher rating in global business compared to company profitability. For example, the “Growing number of consumers in emerging economics/changing consumer tastes” trend had an 87% ranking for effecting global business and a 63% rating in the profitability column. For the “Increasing constraints in supply or usage of natural resources” trend, global business had a 71% ranking and profitability had a 40% ranking. Within each individual trend, I found it interesting that the percentage results were not closer in number and hand-in-hand with profitability. These percentages revealed that executives did not believe that the macroeconomic trends would impact their profitability as much as their global business.
In the remaining three trends that ranked higher in profitability than global business, the column percentages were very close (an average of 6.6). The trends consisted of: “Greater ease of obtaining information, developing knowledge”, “Increasing communication/interaction in business and social realms as a result of technological innovation” and “More intense social backlash against business.” The three trends all relate to the human, social component of business, including, how global trends effects how employees gain knowledge, how they communicate with each other and how their business effect different cultures and countries. When the human, social component is analyzed, the percentage results do not receive high ratings as the macroeconomic trends; however, their percentages within each trend are much closer in number revealing that executives believe that the trends impacts both global business and profitability equally.
Question: The executives agree that the majority of the trends will impact more their global business than profitability in the next five years. Why do the executives not believe that that these trends will not effect their profitability?