6 Global mega trends& their Impact on the Economic Health of Nations & Firms

John Gregg, Principal

Navigate Consulting

April, 2015

1. Random events that have a low probability of occurrenceand a major impact on the mega trendsSource: Navigate Consulting

Resources &Environment

Governance &Activism

Demographics ConsumptionPatterns

Technology &Innovation

Wildcards

5 2

6

4 3

The 6 Mega-Trends

1

1

Globalisation

1.

1

Globalization is shaking the foundations of the world as we

know it and shifting economic power from "North" to "South"

3

North

South

1. The term South was first coined by the UN in the 1960s to referto those countries that were not part of the

1st World (i.e. NATO) r the 2nd World (i.e. the Soviet Union); with the collapse of the Soviet Union, the term isusually used to referto all emerging markets

Consumption

Patterns

Regulation &Activism1

72.6% mobilepenetration globally

89%

44%

Smartphone penetrationAmong Australians by2017

of Australian smartphoneusers make mobilepurchases

• 47% of mobile users are in Asia

• 130% penetration in Western Europe –

meaning that there are more phones thanusers

The old rules of sale no longer apply, the new consumerIs fully mobile, and could be anywhere at anytime

2

… and consumers areincreasingly choosing text as acommunications medium

6.1 Trillion

64%

Text messages sent globallyin 2014

Increase expected by 2019

Social Media is mobile and

prolific …

800,000,000

200,000,000

130

Active Facebook users

Users accessing Facebook

through their mobile devices

Friends per user

Source: Media reports, Mobithinking global statistics

2 Social media is a bourgeoning marketplace2

Nike ID has capturedthe marketfor personalizedathletic footwearBurberry launchedan online service for bespoke trench coatsin 2011New sites like Threadless.com and FashionStake.comrely oncrowd-sourcingto determineassortment

Adidas established a Design Center in Shanghaiin 2008 to

createcloser connection to Chinese consumerMarc Jacobs launcheda collection of sari-inspireddresses tocourt the Indian consumerand Louis Vuitton celebratedDiwali instore windows

Consumers asCo-creators

LocalizedDesign

Prada is launchinga “Made in…” series, to createlocalizeddesigns by collaboratingwith artisans and using traditionalmaterialsand techniques of a region

Customized offerings require a nimble supply chain to meet demand

Wildcards

And is giving consumers a say in developing their ownproducts and services

Goyard, Louis Vuitton and Coach allow customers to stamp

monograms on their bags for a personal touch

2

7

….andenables

convenientcomparison

shopping

Consumers have a variety of new waysto search for the lowest price

Example: the mobile consumer

Ubiquitous

access toinformation

facilitatesconsumer

pricediscovery….

-4

-6

-8

-10

-12

-2 2004 2006 2008 2010 2012 2014 2016

ChinaFrance

India

Japan

Mexico

United Kingdom

United States

While they are forced to do so by falling orslowing income growth

Real Personal Disposable Income(% change p.a.)

14

12

10

8

6

4

2

0

Source: EconomistIntelligenceUnit, NavigateConsulting

On the commodities market, easy access to information isallowing consumers to put great pressure on suppliers

2

We are at a unique historical moment whenevery Major global power is redefining itself

The US faces a formidable arrayof challenges to its leadership“Perhaps the greatest danger to asustainable future . . . is our seeminginability to balance the needs of thepresent with the requirements ofyears yet to come.”

Center for the Study of thePresidency

With remarkable economic dynamism,China still faces significant challenges• Stratification a major concern-

income, use of resources, environment

• How to incorporate the 900 millionin the interior in the other China

• Uncertainty about how Beijing willreconcile its political system with itsmarket capitalism

Europe’s historical experiment withunity is being put to the test

•Where is the EU moving. Will it

widen and deepen, or has it reached

the limits of integration? Unification

or federation?

•Financial crisis in Greece has

shown cracks in the broader EU

architecture

Delineating the boundaries ofthe next Russia•Evolving legitimacy role inFederation and in relations withNear Abroad countries

•Raises overarching questions

about what kind of Russia itwants to be—democraticor lessthan democratic—and where itwants to be (i.e.,oriented towardEurope or Asia?)

33

Source: Energy Information Agency, Food and AgricultureOrganization

200

100

0

2000

Oil Price

Food Price

2014

Volatile natural resource prices

• The FAO warns that there are permanentfactors

underpinning prices that will work to keep them at bothhigher average levels than in the past andreducethelong-term pricedeclinein real times

FAO Food and Oil Price Indices, 2000-2014(Base=2002-2004)

300

We are entering an era of heightened global demandfor food, water and energy

Strong demand pressures

• We will see a doubling of demand for food, water and

energy by 2050• Energy demandcontinues to grow with non-OECD

countries driving the bulk of the growth• Unsustainablewater use has already led to aquifer and

great lake depletion

World Marketed Energy Demand:OECD and Non-OECD,

1990 2035 (quad-rillion btus)

500Non-OECD

400

300

200

100

01990

OECD

2035

3

0

Source: Navigate Consulting

4

Only sustainability will allow 8 billion people in 2040to live at high standards on our planet

2040: 8 billion people striving to …

… consume

We will need 5 planets …… be mobile

… communicate

… use energy

… or become “sustainable”

… be healthy

4

Contribution of knowledge industries to GDPin selected high-performing OECD countries

Ratio of intangible to tangible investments 1,US companies

136

110

82

606254

40

20

0

60

100

80

140

120

1950s 2000s1990s1980s1970s1960s

394040

414242

4343

0

10

5

25

20

15

30

35

45

40

Korea NetherlandsFranceUKGermany Sweden BelgiumUS

Knowledge work is an increasingly important component of the global economy

Investment priorities by corporationsshow a shift towards knowledge activities

1. Intangible investments are R&D, software, design and new product development; tangibles are machines

and buildings Source: US Federal Reserve, OECD, Navigate

5

445542

425605

416

1034

467621651

EgyptChina

7071

12001000

2000

South IndonesiaThailand TurkeyFrance Germany JapanUKUS

800600

400

Tertiary Graduates, 2014 (000s)

7200

2782

2600

2400

2200

2000

18001600

1400

= Established market

= Emerging market

Korea

78% of US engineering doctorates in 2014 were awarded to foreign students, 3/4 of whomare from Asia, up from 51% in 1999

Source: UNESCO, National Science Foundation, Navigate Consulting

Emerging markets such as China, Egypt, South Korea, Indonesia, Thailand and Turkey are producing as many or more university graduates as established markets

The supply of educated workers is increasingly coming from the developing world

5

Japan 3.4

3.5

Mexico 0.5

Russia

South Africa

1.1

0.9

China 1.5

France 2.1

Germany 2.5

Switzerland 2.9

Source: OECD Science and Technology Industry Outlook , Navigate analysis

Mexico 1.2

China

South Africa

1.6

1.5

Switzerland 7.0

Russia 7.2

Germany 7.5

France 8.2

Japan 11.1

16.6

…and have a large pool of knowledgeworkers

R&D Personnel per 1,000 total employment, Selected

countries

Finland

6

Developed countries are investing heavily in R&Dto stay competitive in global economy

Knowledge centers like Finland, and Japan spendlarge percentages of their GDP on R&D…

Gross Expenditureon R&D as a % of GDP, Selected

countries

Finland

6

however their number is enormous

Iran closes theStraits of Hormuz

Global Pandemic

Power Strugglein Beijing Currency Collapse

Nuclear DetonationConfrontation with

North Korea

NaturalDisaster

BioterrorAttack

Viruses Disable GPSSatellites

Carbon SequestrationBreakthrough

CropPandemic

QuantumLeap

What if two of these wildcards would happen by 2025?

Source: Navigate

Wildcards are random events with low probability to happen,

Wildcards