While it’s not a new topic, new aspects demand our attention. Today, we face a world characterized by high uncertainty and decreasing stability. To succeed, the focus must shift to:
- Uncertainty
- Flexibility
- Readiness for change
- Cross-sectoral thinking
- Globalization vs. Individualization
We have analyzed a number of factors that drive economies and societies to development or slow down the dynamics, and also tried to trace their causes and interrelations. Understanding these interrelations, it is possible to systematically approach the renewal of the innovation potential of countries.
The European way:
The modern EU economy was built after WWII, and for many years, its rules have remained stable: business models relied on consistent capital raising, stable legislation, and manageable impacts from FOREX and inflation. EU’s connectivity policies aim at promoting efficiency in the EU single market and enhancing connectivity on a global scale.
The principles of the ownership, capital management directed all market environments, which is using in the business world for last 80 years.
In other words, we talk about of the three generations of labour resources. Stability and bureaucracy created the driven style of individual’s behaviour starting from early childhood, from the family tradition models to the standards at the Universities.
Capitalism, based on private ownership, has traditionally focused on efficient resource usage. In the 20th century, producers faced labor cost challenges. Today, legal frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) require companies to invest heavily in sustainability, including commitments to social protection, long-term care, and income guarantees. Businesses are now expected to project risks and make corporate-level provisions. For example: BMW recent topic.
As you may know, BMW released a 2024 sales forecast showing a sharp decline due to braking system issues in cars from the manufacturer Continental. This means that the world’s second-largest economy is experiencing a loss of revenue from the industry, which is also the largest automotive market in the world.
BMW stated that they expect their profit margin before interest and taxes to be between 6% and 7% in 2024, having previously forecasted a figure of 8% to 10%.
Straining social charter defense blocked the market reasonable solutions and Chinese electric vehicles has turned the page on the fuel-based vehicle market, making it a thing of the past. A systemic market effect. Could this have been predicted? The trend had been evident for a long time. Increasingly strict environmental legislation (CO2) is forcing companies to make tough decisions in favor of eco-friendly solutions.
Why didn’t BMW restructure its processes earlier?
▶️ Did they not see it?
▶️ Do they not know how?
▶️ Do they lack resources?
Of course not. What is the reason of such changes?
The key issue is internal misalignment within the system, bureaucracy and corporative culture. Trade unions resist changes that could lead to massive layoffs, creating obstacles. This trend has persisted for years.
That’s why it’s crucial for the nation economies to foresee system development, ensure alignment with other components, and plan resources for future growth.
In search of profit optimization, many companies outsourced functions to Asian countries in 1980th —and found themselves caught in a trap.
China, India, and some other Asian nations absorbed the knowledge, improved their processes, and reaped the benefits. Today, about 35% of the global economy is driven by rapidly developing countries. Here’s a breakdown of global GDP by region in 2023:
- North America: 28% of global GDP, with the U.S. alone contributing 24%, driven by a dominant services sector (77% of its GDP).
- East Asia and Pacific: 35% of global GDP, with China alone contributing 18%, led by its industrial sector (39% of GDP).
- Europe: The EU contributes about 15% of global GDP, with Germany, France, and the UK leading.
- Latin America and the Caribbean: 7% of global GDP, with Brazil and Mexico as key players.
- Sub-Saharan Africa: 3% of global GDP, with a larger emphasis on agriculture.
- Middle East and North Africa: Around 5%, driven primarily by oil in countries like Saudi Arabia and the UAE.
Asia’s rise is structural rather than temporary. The farther one looks into the future, therefore, the more clearly Asia appears to be—as has been the norm for most of its history—a multipolar region with numerous confident civilizations evolving largely independent of Western policies but constructively coexisting with one another.
Japan recovered from the crisis and became a pioneer in electronics due to human resources. China, traditionally used to reduce production costs, claims the place of the leading economy in the world. India, who is country with rich resources and highly developed research centers.
Asia, a region with unevenly distributed natural resources. South Korea and Japan had to rely to their human potential, exemplifies strategic leadership. East and Southeast Asian nations showcase how visionary, resource-focused planning can drive significant growth and development.
Europe’s business model which is influenced by regulations and cultural specifics, historically favoring stable evolution and low-risk environments. While a 5% ROI may be acceptable for European and American businesses, it falls short for rapidly developing economies, which could change the game.
What are the main factors of such achievements and lags of yesterday’s leaders of the world economy? Generally speaking, economies are formed and developed
- Resource capabilities and location
- Human capital
- Corporative capital
Sources:
- Cognitive neuroscience research: “Understanding East–West Cultural Differences on Perceived Compensation Fairness Among Executives: From a Neuroscience Perspective”
- https://www.forbes.com/sites/haydnshaughnessy/2013/03/07/why-is-samsung-such-an-innovative-company/
- https://www.wipo.int/edocs/pubdocs/en/wipo-pub-2000-2023-section1-en-global-innovation-tracker-global-innovation-index-2023.pdf
- https://www.strategyand.pwc.com/gx/en/insights/innovation1000.html
- https://www.wipo.int/web-publications/global-innovation-index-2024/en/global-innovation-tracker.html
- https://www.weforum.org/stories/2019/03/why-were-living-in-the-asian-century/
- https://publications.jrc.ec.europa.eu/repository/
- https://www.weforum.org/stories/2019/03/why-were-living-in-the-asian-century/
- https://publications.jrc.ec.europa.eu/repository/handle/JRC139680
