"Five-O" Formula To Shape Economic Future
The 21st century economy will operate off a new set of equations defined by market forces and conditions that did not exist in the 20th. The sudden convergence of globalization and computerization has resulted in a dramatic reshaping of principles and a rethinking of formulas that were basic to the economies of the past. The new "Five-O" formula, identified and defined by the Trends Research Institute, will be the driving force and regulator of the future health of the world's business.
NEW DEALS
A fast-track trend to globalization (with reduced tariffs, freed markets and thrown open borders) and a massive wave of computerization that has created new tools of efficiency unimaginable in a pre-wired world, have reacted to create the "Five-O" formula:
• Overproduction -- there are more products and services available worldwide than can ever be consumed.
• Overcapacity -- there are a glut of advanced facilities and excess service capabilities to supply the world marketplace with more than can ever be consumed.
• Open markets -- In the borderless new millennium marketplace, products and services flow freely, unbound by the old economic channels.
• Overpopulation -- In the multi-national bazaar, companies will freely exploit the 6-billion-plus labor pool, without regard to geography.
• On-line -- A planet full of browsers is weaving its way through the web, forging the connecting link in the new millennium's economic chain.
MORE EQUALS LESS
The sum of the "Five-Os" equals lower wages, a foreseeable future of low-inflation and, possibly, deflation. While each of the "Five-O" market forces is significant on its own, taken together their power and their implications are exponentially increased. Overproduction, overcapacity, unrestricted open market access, and an infinite supply of skilled, semi-skilled and unskilled labor worldwide assures that supply will continue to outstrip demand.
The impact of the first four "O"s are exponentially enhanced by the On-line phenomenon. On the retail front, consumers are enthralled with web applications that point to bargain basement prices, from automobiles to real estate, from insurance to medical care. But consumer bargain-hunting hardly compares to the savings being sought by business. In 1998, $42 billion dollars of web revenue was generated in business to business transactions, compared to a mere $16 billion in direct to consumer activity.
Web-power shifts the balance of power, giving manufacturers and end users more control over raw material and processes. With some 25% of the world's gross domestic product consisting of manufacturing/materials procurements, the planet's wealth is up for grabs on the Internet.
Plants that once relied on a single supplier for hard-to-find materials can, with a few mouse clicks, shop the globe for the best deal. All along the business food chain, from raw product through delivery, buyers are demanding cost savings.
Wall Street and Washington have not recognized the wider implications of this new economic equation. The old standards of measurement can't explain the lack of wage and price inflation that typically accompany economic growth. But the answers can be found by looking closely at elements of the "Five-O" formula.
THRIVING AND SURVIVING IN THE "FIVE-O" WORLD
In the brave new "Five-O" world of lower wages and low inflation, marketers selling commodity-priced items will fiercely fight a never-ending series of price wars. The struggle to eke out profits from ever-lower margins will force further consolidations throughout the retail environment.
Businesses seeking greater profit margins will need to find new market opportunities in areas where competitive pressures are less intense. That requires devoting energy and resources toward discovering new consumer needs and desires-- employing trend tracking skills to identify the products and services that people don't yet know they want, but are ready for.
Gerald Celente, author of Trends 2000 and Trend Tracking, is Director and founder of The Trends Research institute, the pioneer in forecasting, analyzing, and managing trends.
