Go East young man

Earlier this week I was speaking at the Born Global event run by Entrepreneur Country. On the same day, the latest UK unemployment figures were released, with the shocking statistic that youth unemployment now exceeds over 1 million, with a staggering 21% of 16 – 24 year olds without a job.

While I was listening to some excellent speakers, urging entrepreneurs to look around the world to expand their businesses in fast growing economies, it struck me that perhaps there are opportunities for ambitious young people who are willing to travel.

In our offices in Vadoroda, India, there are currently 3 interns who have come to India to learn how business works there. They are from Mexico, Brazil and China. They have recognised that today’s economy is global and the more you can learn from other countries at the beginning of your career, the more marketable you will be. Employers in fast growing economies value the skills that British people can bring to the market; examples could be a trainer in a call centre, or a marketing graduate who can provide a view of the UK economy and customers.

Any young Brit that is willing to go and spend 6-12 months in one of these emerging countries will almost certainly walk into a job when they get back. I think if we had a generation of young people, who had experience of other fast growing markets it could only help the UK to become more competitive as an economy and perhaps even assist us in getting back on the path to growth.

The wealthy in China

I just read a fascinating article in the UK Sunday Times today.  It describes the market opportunity for luxury brands in China (http://bit.ly/9iOMEZ).  More than just luxury brands, it tells me very clearly that nearly all products and services that are successful in the developed world can be potentially even more successful in the developing world, particularly the BRIC countries.  If you’re not already considering your company’s market opportunity, you really need to wake up and realise what’s going on.  If you don’t know how to, ready my book, Born Global.

BRIC + US Institute of Directors Conference – October 20, 2009

Last week I chaired the afternoon session of the BRIC + US conference held at the Institute of Directors in London (Hot Spots in a Cold World).

During the day, each of Brazil, Russia, India, China and US were given the opportunity to present why their countries represented significant market opportunities for companies looking to set up in their respective countries. And each of the speakers gave a fantastic picture demonstrating in clear terms why companies of all sizes should consider expansion into these countries. It never ceases to amaze me how little knowledge there is in OECD countries about the high growth emerging economies in particular so let me gave you a few of the numbers that were mentioned:

• In China, there are 274 cities with populations of greater than 1 million people and over the next 20 years, some 350 million additional people will relocate from the countryside to cities
• Russia aims to become a top 5 global economy by 2020 – just 11 years from now
• India is committed to sustainable growth of at least 6-7% per annum leading to it becoming a top 3 nation by 2050
• 47% of Brazil’s energy already comes from renewable sources making it a global leader in the field
• The population of the US will reach 400m by 2040 making it the 3rd most populous country on Earth after China and India

The message from the conference was clear, you cannot simply think in domestic terms, if you really want your business to succeed, you need to take an international perspective.

Is the world about to end?

If you spend time in New York or London, it’s pretty easy to get the feeling the world is caving in on itself.  Constant bad news of banks going out of business and the financial services industry in turmoil leads us to worry about the future, maybe we’re heading for a 1930’s style depression?

But in the last few days alone, I have had several conversations and read several articles that add some perspective and prove that things are not as bad globally as the media would have us believe:

1.  I spoke to our guy in Dubai on Friday.  He reminded me that the volume of investments in the Middle East is truly extraordinary.  From the zero emissions Masdar City in Abu Dhabi to Al Maktoum International Airport in Dubai, hundreds of billions of dollars are being spent right here, right now, with zero dependence on western investment banks or private equity funds.  I have read somewhere that the total funds committed to Middle Eastern infrastructure projects far exceeds $200bn.  That should put the $700bn “save the world” Fed plan into some perspective.

2.  Even with weakness in the US economy, and higher transportation prices making Chinese manufactured goods more expensive, The Economist Intelligence Unit still forecasts China’s GDP to grow by 9% in 2009.  China is expected to have around 200 cities with more than 1 million inhabitants as the population moves from the country to the cities; that’s a massive capital investment over the next few years.

3.  More than 52% of Brazil’s population is now considered middle class, defined as having household monthly incomes between $600 and about $2500, having a job in the formal economy, access to credit and ownership of a car or motorbike.  That equates to about 100 million people.

The bottom line is that the world is not about to fall in on itself.  The opportunities are out there, you probably just have to spread yourself a little further than usual to reach them.  The time to consider globalization of your business is now!

Are we heading for a recession?

I spent last Thursday at the annual conference of the UK branch of the Turnaround Management Association (www.tma-uk.org). The organization takes its membership from a variety of turnaround disciplines ranging from insolvency practitioners who pick up the pieces when it’s all gone wrong to interim managers who step into struggling companies and aim to turn them around.

The speaker line up was very impressive ranging from Steven Norris, former British government minister and now Chairman of Jarvis plc, to Russ Kane, former radio presenter and now both Chief Barker (CEO) of the Variety Club of Great Britain (a charity that raises more than $22m a year to help disadvantaged children of all backgrounds (www.varietyclub.org.uk) and CEO in Russell Alexander, a PR consultancy. Although all presentations were excellent and insightful, perhaps the most impressive was one by Jon Moulton, Managing Partner of private equity firm Alchemy Partners LLC. Jon gave a detailed explanation of the current credit crunch and explained in detail how it differs from credit crunches of the past (this isn’t just banks tightening their lending criteria, this is the fact that above a certain level, there simply is no credit available). What struck me about his presentation was that it seems like the chances of major economies slipping into recession are very high.

Naturally as CEO of Quickstart Global, my thoughts turned to what this might mean for our business and for the broader business community. My conclusions are:

1. Tighter lending criteria will mean that consumers will stop selling equity in their homes to bring in short term cash. This in turn will lead to lower consumer spending.

2. Companies that leveraged themselves significantly during the last few years and built up debt are likely to struggle if their earnings drop leaving those dependent on consumer spending particularly venerable.

3. Companies that did not build up debt and less dependent on consumer spending will be cushioned from the worst but may still experience a downturn in earning through a knock on effect of other companies reigning in their spending.

4. Globalization will have a similar boost to the technology recession of 2001/2002. That period showed that when lowered budgets became difficult to manage, companies turned to a globally leveraged solution or offshore outsourcing. My view is that they will do the same again giving a further boost to the globalization movement.

I am less certain of whether this will be global or not. Will India, China, Russia or Brazil fall into recession? I would say the jury is out on this. Apart from the IT giants, Indian companies rely on their domestic markets. Russia and Brazil are rich in natural resources where demand will stay strong. The only question is how much the Chinese economy depends on US consumer spending versus the domestic market?

Time will tell whether there is a recession or not. In today’s Sunday newspapers, the view of the chances of recession was mixed. Regardless, I am confident that more and more companies will turn to a globally leveraged model in order to maximize their competitiveness.

Finally, a word on the TMA. This was my first experience of this organization and I have to say, everyone I met was very impressive. These people knew their subject. Of particular note in addition to those mentioned above was an insolvency lawyer called Rachael Davis who has recently Olswang and Matthew Quade at turnaround specialist at PKF.