The winners take it all

A few politically incorrect insights, derived from the fact-based analysis of public data regarding the key drivers of the global economy: energy resources, agricultural resources, demography, intellectual capital.

Growth beyond the niche

Long-term growth is the key element and driver for companies to increase their enterprise value. However, in the long run every market offers only limited potential for growth: market growth decelerates, innovative power declines, commoditization tendencies set in, established competitors concentrate the most attractive segments, margins erode and offer less opportunities for profitable growth.

Energy and growth

Economic growth and growth of energy demand are correlated. Besides, global energy resources are mainly fossil, and therefore limited. As a result, future sources of economic growth will rely on access to energy resources (existing or new) and on energy efficient usages and businesses. Which industrial or public players have the financial means to invest and influence the evolution of the energy offer and demand? What should we do?

Micro vs. Macro strategies

Micro strategies make it possible to concentrate an activity. Macro strategies make it possible to concentrate an entire industry. The two types of strategy are complementary and must be rolled out over different time horizons. Without the former, there will be no profitability. Without the latter, there will be no growth over the long term.

Where are the middle classes going?

In 2030, the middles classes in emerging Asia will represent 60% of the world’s middles classes. The center of the industrial, economic, cultural, financial and political world will have moved in 15 years. This represents an unprecedented event for the modern economy. What company could possibly want to stay away from this this tremendous opportunity?

Who can beat Amazon?

Founded in 1994, Amazon has experienced strong growth of over 20% per year since then; its revenue now exceeds $100Bn. Its geographical locations have developed at a robust pace and its product offering has expanded as far as to fresh groceries in the US. Its success has been based on technological leadership, competitive prices and outstanding service. Consequently, is there a strategy to bypass Amazon for an Internet player selling products to consumers? What are the possible strategies for Internet players?

The illusion of low interest rates

Interest rates on 10-year US Treasury Bonds are at 1,6%. They have decreased continuously since their peak in 1982 (at 6%). Are those levels a harbinger of a major crisis, the bursting of a financial bubble, a series of bankruptcies, a lack of economic growth or increased expectations of volatility? Do they, on the contrary, warrant optimism, as a sign of a transition between two major economic cycles? Only one thing is for sure. Those rates will rise back up. Their average level is at 5% over very long periods. A hike back to those levels will strongly challenge the value of assets.

The magic of long-term growth

Strategic theory has always differentiated between high-growth and low-growth businesses. It is a useful perspective, especially to anticipate investment needs as well as the ability to gain market shares and to change competitive structures. However, the most discriminating perspective as to value creation is not the magnitude of growth, but its duration.

Strategic acquisition or merger, what value?

Large external growth deals are back: AB InBev’s public bid to take-over SABMiller in the beer industry, the acquisition of EMC by Dell in technology, the merger of Holcim and Lafarge in
cement, … These major acquisitions and mergers are often criticised for both the high price and the low probability of success of their synergies. Why pursue such strategies? What is their value?

Where does value come from?

Over the past ten years and despite two economic and financial crises, the average annual TSR of the Western Stock markets was 8% per year (with an average inflation of 2%). A sample of 250 major Western corporations reached a TSR of 10% per year. How was value created overthis period? Where will it come from in the next five, ten and twenty years?

Published in Challenges, October 2015