Political, Social concerns drive non-Western companies

Triangle.pngLast week’s New Normal seminar in Houston continued the success of the Singapore and Frankfurt events. It sparked lively debate about the major opportunities for future growth in the New Normal. These include:

• The over-55 age group in the West – already 272m in number
• Those millions emerging from poverty in the East

One key discussion was around the different outlooks of Western companies, versus many of those in the Middle East and China. As the chart shows:

Western companies focus on economics, with some input from politicians eg taxes, employment law. American companies in particular believe the Profit & Loss (P&L) account is the key driver of success
• This is not so true in the Middle East. Companies there have a focus on the P&L, but usually have close linkages to government, and are very mindful of social needs such as providing employment
• Companies in China start from a different perspective. The majors such as Sinopec are largely state-owned, and their prime role is to act as utilities, providing raw materials to the factories to keep people employed

These distinctions are now taking on growing importance. In 1980, almost all the major companies were Western in orientation, and focused on the P&L. But today, half of the Top 10 companies are from the Middle East and China. So their views matter.

This is another example of the power of the Shared Value concept. As Harvard’s Prof Michael Porter has argued, it creates the potential for “the next wave of innovation and productivity growth”. It enables companies to focus on long-term opportunities and not just short-term financial metrics.

There is no going back to the post-1980 Supercycle world. Companies who now adopt the Shared Value approach will position themselves for success in the New Normal.

The next New Normal courses are later this month in Singapore, and in London in December. Please click here for more details of how to join.

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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