The Potential Key Megatrends

Before discussing key megatrends, let us get familiar with the word megatrend. ‘Megatrend’ is a word coined to describe and group a set of changes in the world that have a huge impact, unprecedented in their magnitude, and unstoppable in their stride. They are global, sustained and macro economic forces of development that put their mark on business, economy, society, cultures and personal lives, defining how the future world will be and its increasing speed of change.

Megatrends often make disruptive changes to industries, specifically within technology and the environment. Take an example of climate change. As the world moves towards green alternatives and clean energy, investors are searching for opportunities in companies that are pacing towards sustainability and eco-concerns. The recent example of this is the COVID-19 pandemic. Because of this humanitarian crisis, people are focusing on a healthier lifestyle and adapting social distancing, WFH, etc. This has investors finding business more engaged on digital platforms. These megatrends affect commercial businesses, agriculture and food industries, tourism, and many more sectors.

Megatrend investing requires a commitment and understanding towards a trend that will potentially form and evolve the world and economies for many decades. Investors should direct their investment by predicting what products or companies will successfully disrupt or transform an industry based on these trends from automation to an ageing society.

The key 5 megatrends can be:

  1. Change in Global Economic Power

  2. Demographic Change

  3. Urbanization at a rapid pace

  4. Growth in Technology

  5. Climate Change/Resource Scarcity

 

  1. Change in Global Economic Power

Every country is competing to either be a global power or forming alliances with them. Along with the growth and size of the emerging markets, it’s important to appreciate the interconnectivity of the trade and investment flows between them, which are growing much faster than the traditional routes of trading from developed to developing and developed to developed countries.

Possible implications

• The growing multi-polar world created by the shift from largely Western-led global organizations to regional players may show a new competitive environment for companies.

• The influence and capital of a mature market may lessen and become less attractive for talent and business. There might be competition between governments using tax and regulation as well as investment support.

• Competing versions of capitalism could arise as well as an array of strategic economies. Planned economies could build/support new global champions in strategically important business sectors.

 

  1. Demographic Change

Excess population growth in some regions against declines in others contributes to shifts in economic power, resource scarcity, changes in societal norms, etc. Countries have very different demographic trajectories. In some regions, populations are aging rapidly, even shrinking, and their workforces will be constrained as a share of the total population while in other regions, the population is young and growing, which will create larger labor forces and consumer markets. Youthful, growing populations must be fed, housed, educated, and employed for the productive potential to be realized.

Possible implications

• As the population rapidly ages, in mature economies and the ability to use debt is limited, governments may come under pressure to raise taxes to maintain the functionality of the society.

• Shifts in longevity may have an impact on business models, pension costs, and talent goals/ambitions.

• Societal and political pressure to create jobs may grow, especially for older workers and the “have nots.”

 • Health systems should be re-engineered to handle many more participants in economies that will often see declining GDP.

 

  1. Urbanization at a rapid pace

In developed economies and older cities in the developing world, infrastructure will be pinched to the utmost as the population increases. However, in developing economies, new cities will rise rapidly and require massive investments in smart infrastructure to accommodate growth in population.

Possible implications

• As metro cities grow in breadth and count, many analysts believe that their aggregate power will rival that of national governments due to the sheer size of their constituencies.

• Megaprojects will be required to build city infrastructure, support new trade flows (airports, seaports), address education, health, security, employment demands, etc.

 

  1. Growth in Technology

Advancement in fields like artificial intelligence, nanotechnology, and other frontiers of research and development is growing productive potential and creating new investment opportunities. Internet, network-capable mobile devices, data analytics, cloud computing, and machine and deep learning capabilities will continue to change the world. Many companies across all sectors are tussling with how these developments will affect consumer expectations, customer service, and the underlying business models that support this.

Possible implications

• Technology will enable virtual and physical business as well as operating models.

• Assets (and liabilities) will be increasingly accessed on flexible terms: where previously assets were primarily available to own, adaptable businesses now provide them for rent in innovative ways.

• Access to systems and information should enable management models to smoothen organizational structures.

  1. Climate change/Resource Scarcity

Having constrained resources and the impact of climate change are some of the most difficult economic concerns. Impacts may include increases in extreme weather and rising sea levels, which could make farming, hunting, and fishing, or other such activities difficult or impossible in some places. One of such impact is noticed now because of COVID-19 pandemic and Locus outspread. The need for sustainable solutions is needed for resources to fuel growth and feed populations.

Possible implications

• Securing resources regionally as well as internationally via strategic relationships becomes even more critical for governments and businesses.

• Increased conflict and political tension, especially over resources, may occur as food, energy, and water patterns change.

• More regulations are implemented, both directly relating to environmental changes and indirectly through taxation and similar types of incentives/disincentives.

• New industries created, or existing ones developed, in response to energy scarcity, climate change, and lack of resources; the pace of these changes will be accelerated by new technologies.