Budgeting for Austerity – the Opportunities

New Normal logo.pngThe 2012-14 Budget period offers great opportunities, as well as great challenges.

Will companies continue to focus on short-term developments in financial markets? Michael Porter’s Shared Value concept instead offers us a powerful model for creating future growth.

Will policymakers stop focusing on the 24 hour news cycle and instead begin to set out the bigger picture? We need a vision for the future, and a clear idea of how to get there.

Are these decisions hard to take? No.

Has the world the resources to start in this new direction? Yes.

Would we enjoy the challenge? Yes

Can we start today? Yes.

We all know that companies are going to have to set difficult budgets for the next few years. They will also have to deal with continued uncertainty. We cannot rely on wise and all-seeing policymakers to lead us forward. They may well decide to do more of the things, such as Quantitative Easing, that will make the situation worse instead of better.

But larger companies, in particular, could also start to examine how to expand long-term R&D. And every company could add a future dimension to its Budget in respect of the opportunities that will arise from the new markets being created by today’s demographic and societal changes:

• Nearly a third of the Western population is now in the 55+ age bracket. They have the incredible benefit of an extra decade of life expectancy, compared to previous generations. And they have money – maybe not a lot, but enough to buy useful products and services. Yet they remain woefully underserved and often unrecognised by most companies.

• People in emerging economies are starting to move out of poverty in large numbers. This ‘bottom of the pyramid’ market represents a wonderful opportunity to develop new products and services. Millions now have some money to spend for the first time in their lives.

The great megatrends of the future also offer vast opportunities for future growth. These involve the need to increase food production, improve water availability and reduce carbon footprint. They are vitally important, and also offer the potential for profitable future growth. So, of course, do the opportunities associated with increasing life expectancy.

Companies therefore have a clear choice as we move into the Budget period. The blog believes a New Normal lies ahead, as it is describing in its new Boom, Gloom and the New Normal eBook, co-authored with John Richardson.

Winners will accept the challenges that it offers, and begin to move in a new direction. Losers, however, will remain frozen in the headlights, unable to take the first steps that will lead them to success.

Collectively, as the world’s 3rd largest industry, chemical companies have enormous potential to do good at this most difficult time. But progress depends on each of us as individuals being prepared to adopt a positive outlook in the face of the problems with which we are surrounded.

As always, of course, the blog will be delighted to help any company that wishes to accept the challenges that offered by the transition to the New Normal. It is confident that they will discover a potential to be successful beyond their wildest dreams.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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