3- global trends
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Long-Term Global Trends – TM 298 - SDTalisayon
Some Global Trends
Technology Management 298
2nd Semester, 2011-2012
Dr. Serafin D. TalisayonProfessor, Technology Management Center
University of the Philippines
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• Energy
• Mineral resources
• Land
• Labor
• Information
• Food
Physical Inputs to the Global
Economy:
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Energy: tight supply
Oil depleted by 2030s, natural gas by mid-21st century
Oil getting expensive: petrochemical use onlyFossil fuels exacerbate global warming
Nuclear energy: dirty and risky to human life
Most solar-based sources still costly
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Mineral resources: bleak for some
SLI of several extends only to 2100s
Food: bleak Arable land area being exhausted
Phosphate rock reserves limited
Energy subsidy needed for intensive farming
ZPG only by last quarter of 21st
centuryMore food from sea farming
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Labor and information: no scarcity
Information/telecommunication/media revolutions
Population explosion
Importance of human/intellectual capital
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• Energy
• Mineral resources
• Land
• Labor
• Information
• Food
Physical Inputs to the GlobalEconomy:
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0
10
20
30
40
50
60
70
Low Mid High
Agri
Industry
Services
The global economy has
become a service
economy…
Source: World Development Report 2000/2001
http://www.worldbank.org/poverty/wdrpoverty/report/tab12.pdf
…which is more knowledge
intensive.
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Since 1985:
Value of international trade: grew 2x faster than world outputof goods & services
International trade in services: grew faster thantrade in goods
and… Markets for derivative financial instruments (futures,options, securities): grew faster than market forstocks & bonds
“Information about money has become more valuablethan money itself”
-- Walter Wriston (ex-chairman, Citicorp)
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Increasing Knowledge Content
of Goods
~ 80% of the cost of a Levi Strauss
jeans is knowledge.
>50% of the cost of petroleumis knowledge
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Increasing Knowledge Content
of Goods
~25% of the cost of the typical
aluminum beer can is knowledge
Freely downloaded Mozilla Firefox is
100% bits (pure knowledge) and 0%
atoms
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Buying Vitamin or Knowledge?
Generic Vitamin C P1 per 500-mg tablet
Poten-Cee
(Pascual Laboratories)
P2.70 per 500-mg tablet
Cecon
(Abbott Laboratories)
P4.50 per 500-mg tablet
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“Weightless economy” 1
– Danny T. Quah, London School of Economics
Production is“dematerializing” 2
– Thomas Stewart, Fortune Magazine
1. http://www.unesco.org/courier/1998_12/uk/dossier/txt11.htm2. Thomas Stewart: Intellectual Capital. Currency, 1997.
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In 1995, market-to-book ratio of 500 firms in
Standard & Poor index was 3.83
In 1997, market-to-book ratio of companies in theDow Jones index was 5.3
For information and knowledge-based companies,
market-to-book ratios often exceed 10; for example,
Google in November 2006 has a market value of $156 billion and tangible assets of only $10 billion (or
market-to-book ratio of 15.3)*
Market Value > Book Value
* http://www.valuecruncher.com/wordpress/wp-content/uploads/2006/11/valuecruncher-valuation-report-google-221106.pdf
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Intangible assets >> tangible assets
NYU-Brookings Institute Intangibles Research Project
Findings (among non-financial publicly-traded firms):
In 1978, tangibles: intangibles ratio = 80:20In 1988, tangibles: intangibles ratio = 45:55
In 1998, tangibles: intangibles ratio = 30:70
Source: Patrick H. Sullivan ―Value-Driven Intellectual Capital‖, 2000
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Historical trend of value of intangibles
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Intangible assets > tangible assets
In 2000 in the Philippines, some market-to-book ratios were:
ABS-CBN 3.9
Globe Telecom 3.8
BPI 3.0
PLDT 2.5
Ayala Corp 2.4Jollibee Foods 1.8
San Miguel Corp 1.6
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Knowledge assets ~ Intangible assets
Internet
Company
Market-to-Book
Ratio
Knowledge
Capital-to-Book
Ratio
America Online 194.4 76.0
USWeb 8.7 25.3
Yahoo 88.1 7.3
Lycos 28.2 21.2
RealNetworks 91.1 19.3Broadvision 41.4 18.8
CFO.com’s 2nd Annual Knowledge Capital Scoreboardhttp://charts.cfo.com/cfomag/charts/knowledgecap00-2.html
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Price-to-Book Valueof Some Philippine Companies (March-April 2007)
Philweb Corp 23.0 Robinsons Land Corp 3.3
Pacific Online Systems 9.1 EEI Corp 3.2
PLDT 6.0 Megaworld Corp 2.1
Benpres Holdings Corp 5.1 China Banking Corp 2.0
Jollibee Foods Corp 5.1 Union Bank of the Phil 1.9
Ayala Land Inc 4.9 BPI 1.8
Philex Mining Corp 3.8 San Miguel Corp 1.7
Globe Telecom 3.5 RCBC 1.6
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Knowledge assets > Tangible assets
―Increasingly, intangible knowledge assets are
dwarfing the value of tangible book assets at many
companies.‖
— S. L. Mintz, CFO MagazineFebruary 1, 2000
http://www.cfo.com/article/1,5309,1086,00.html
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Knowledge assets > Tangible assets
―For Internet companies, there is
hardly any relationship at all between
book value and market value.
Accounting may perhaps be the
world’s second oldest profession, but
its survival may well be at stake, if this
trend continues.‖
— Claes Fornell, Donald CookProfessor of Business,
University of Michigan
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Knowledge assets > Tangible assets
―Traditional financial controls are of limited use in
managing, understanding and assessing a knowledge-
based company.‖
— 1997 Annual Report WM Data
(biggest Swedish software and consulting firm)
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Knowledge assets > Tangible assets
―…coming out of the change in our economy
from one that is industrial-based to one that is
knowledge-based, where intellectual
property, soft assets, and other intangiblesincreasingly make up the bulk of the asset
base for wealth production in our society…
we must learn to better measure and account
for these assets, and reflect that in thefinancial reports of corporations.‖
— Commissioner Steven Wallman
US Securities and Exchange Commission
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Implications
Knowledge assets in people, processes and patrons had
become more important than physical assets (buildings and
equipment)
Traditional accounting is unable to see ~80% of corporate
assets
Knowledge management is necessary for recognizing,
tracking and managing intangible assets
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Intangible Assets >> Tangible
Assets―The accountingsystem doesn’tcapture anything,really.‖
—Judy Lewent
Chief Financial Officer,Merck
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Media and Telecommunications
Shifts --
from print to electronic medium
from local to regional/global reach
from unimedia to multimedia
from few closed, centralized sources to many open,
distributed information sources from one-way to two-way
from separate to mixed services/industries
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According to John Naisbitt in “Global Paradox ” the
combination of several global trends:
removal/reduction of trade barriers all over the world
telecommunications revolution
deregulation & globalization financial markets cosmopolitan & differentiation of consumer demands,
tastes & lifestyles
pressure to innovate & increase speed-to-market
lower cost of entry for businesses
Will result in…
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…Will result in:
less advantage of huge MNCs over SMEs
opportunities for SMEs due to their flexibility, fasterresponse to consumer demands, and ability to match thegrowth, multiplicity & differentiation of small niches
growth of strategic alliances among SMEs
complex communication and production networksspreading rapidly across the globe
Thus, the bigger and more complex the globalmarket, the smaller and stronger are its componententerprises: the “global paradox”
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Technologies Uses Modalities
computer entertainment digital
software education wireless
telephone communication interactive
television networking global
fiber optics virtual reality cellular
laser multimedia
―Over the next years & decades… (above)…will be put together in thousands ofcombinations by thousands of alliances &
entrepreneurs. The interplay will createproducts & services we can’t even imaginetoday‖
-- John Naisbitt: Global Paradox , 1994
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CHARACTER OF
MARKET
ORGANIZATIONAL AND MANAGEMENT
REQUIREMENTS
Large stable markets
for standardized
products;protected local
economies
“Fordist” model: high-investment, mass-productionindustrial systems; assembly line needing
specialization, standardization and dedicatedequipments.
“Taylor” model: management aims towardorganizations and processes for maximum
production efficiency; normally adversarial industrialrelations.
Role of innovation: to increase production efficiencyand control, to compete for larger market share.
Fast-changing,
diverse, fast-growing
niches for
customizable, short
lifecycle products;competitive global
economy
“Post-Fordist” model: low-investment but innovative,small and agile firms; customizable products need
“flexible specialization” and leaner production
systems.
Knowledge management: management aims to gainloyalties of knowledge workers, foster organizational
learning and nurture core competencies.
Role of innovation: to continuously anticipate, create
and capture new market niches.
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Philippine economy: a service
economy
SERVICES
INDUSTRY
AGRICULTURE
NINOY’S ASSASSINATION
1991-92 POWER CRISIS
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Philippine economy: a service
economy
1991-92 POWER CRISIS
EAST ASIAN FINANCIAL CRISIS
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Philippine economy: a service
economy Percent of GDP from services has exceeded that from
industry or agriculture since 1984.
Percent employment in services exceeds that from industry
or agriculture.
Over the last 3 decades, export mix had shifted away from
the primary sector (abaca, copra, sugar, copper, etc.)
towards the tertiary sector (OCWs).
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Our Competitive Edge:
Knowledge-Intensive Services
DOMINANT SERVICE SECTOR
NET SERVICE EXPORTER
NET ENERGY IMPORTER
LACKS RAW MATERIALS FOR STEEL &PETROCHEMICAL INDUSTRIES
Relative to Asia:
VERY OPEN SOCIETY
ENGLISH-SPEAKING
HIGH LITERACY RATE
ACTIVE PRIVATE TERTIARYEDUCATION SECTOR
VALUE ON EDUCATION & TRAVEL
SMALL GENDER GAPS
COMPETITIVE EDGE
IN SERVICES
COMPETITIVE EDGE INKNOWLEDGE-
INTENSIVE SERVICES
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The Global Economy is Changing
―Whereas at one time the decisive factor ofproduction was the land, and later capital, todaythe decisive factor is increasingly man himself,that is, his knowledge .‖
– Pope John Paul II
―The most important wars of the 21st centurywill be fought no longer on the physicalbattlefield, but in corporate boardrooms,laboratories, stock exchanges, classrooms, andshop floors.‖
– former president Fidel V. Ramos
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“I nformation and knowledge are the thermonuclear
competitive weapons of our time. Knowledge is more
valuable and more powerful than natural resources, big
factories, or fat bankrolls.”
-- Thomas A. Stewart,
author of Intellectual Capital: the New Wealth of
Organizations (Doubleday, 1977)
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