Tesla, Lululemon, Mastercard and Google topped a new global ranking of future-readiness while Apple, Twitter, Spotify, HSBC and Audi underperformed when compared to competitors in their respective industries.
The Institute for Management Development’s (IMD) Centre for Future Readiness in Switzerland studied more than a decade of data from 2010 to 2021 to rank publicly listed companies against their competitors by how prepared they are for the post-pandemic economy and their likelihood of survival in a world of fast and frequent change.
Capital markets plunged across all sectors in the early days of the Covid-19 pandemic but a recovery soon followed. Beginning in April 2020, the S&P 500 went on its greatest 50-day rally in history.
Rather than a death sentence for growth, Covid-19 has proven to be a test case, rewarding companies that were prepared to harness the acceleration of trends and hastening the decline of those who were hesitant to change, according to stock performance analysis from McKinsey.
“Our predictive analytics equips executives with intelligence to not just recover from the recent economic blow, but better respond to tomorrow's disruptions – like Omicron – with lessons on how not just to survive, but thrive in the future,” said professor Howard Yu, author of the Future Readiness Indicator at IMD.
The ranking analysed 86 of the highest-grossing companies in the four highest-revenue industries: fashion and retail, automotive, financial services and technology.
The US led the list with 40 American companies. Next came China and Germany with seven each; France and Japan with six each; Switzerland and the UK with four each; South Korea with three; Sweden with two; and Argentina, Canada, Italy, the Netherlands, Singapore, Spain and Taiwan with one each.
The ranking relied on objective measurements to arrive at a composite score, which an artificial intelligence-driven algorithm compared against the industry average.
It used data to rank companies against critical drivers of innovation such as financial fundamentals, investors’ expectations of future growth, employee diversity, research and development, early results of innovation, business diversity, cash and debts, brand value, business productivity and openness to new ideas.
Fashion and retail
The ranking analysed 16 fashion and retail companies based on revenue of $3.2 billion to $44.5 billion and also considered the strength of e-commerce, presence in mobile apps, the volume of Google search presence, the ability to personalise offerings and the extent to which consumers consider the companies to be environmentally sustainable, among other factors.
Sportswear brands Lululemon and Nike were ranked first and second, followed by luxury brands Hermes, Burberry, Kering and LVMH.
Before the pandemic, the researchers found that top-ranking sportswear brands had already rewired their core operations, "allowing them to instantly make markdown and promotion decisions and move inventory across countries".
Lower-ranking brands such Under Armour, H&M and Hanesbrands, which "took a shortcut" of laying new digital tools on top of existing operations, struggled through the pandemic and "will have difficulty competing in the coming years", according to IMD.
The research found that luxury brands are not as reliant on background digital infrastructure to generate revenue. Instead, personalisation is a key to the future of luxury retail.
LVMH and Burberry, respectively low-ranking and high-ranking in digital savviness, are the two fashion or retail brands that rank highest in positive sentiment. Instead of supply chain digitisation, high-ranking luxury brands depend on data analytics to better understand their customers, and the relationship between market scarcity and exclusivity.
Automotive
The ranking looked at the 19 top publicly traded car makers based on revenue of $6.2bn to $291.9bn and looked at data from 2010 to 2020.
Four traditional car makers – Toyota, BMW, Ford, and Hyundai – hold the second through to fifth positions, but new entrant Tesla captured the top spot.
IMD found that most traditional car makers, despite mechanical expertise, "share conservative views and are relatively unsuited to address vehicle electrification, connectivity and autonomous driving".
For example, during the chip shortage, companies such as Audi found themselves in uncharted territory. But the second-ranking car maker, Toyota, had prepared itself by stockpiling chips and avoided the worst of the disruption to reclaim the title of world's largest car maker.
Tesla’s expertise in programming allowed it to rewrite its firmware, continue production and sell a record number of vehicles during the chip shortage, earning it the top spot.
Two Chinese EV-only car makers, BYD and NIO, share their origins with Tesla in software and are poised to survive future crises and achieve continuous growth, according to IMD.
Financial services
High-ranking financial services brands used the pandemic to shift operations from in-person retail to AI-driven applications. They reaped the benefits as the sector generated record revenue.
Traditional payment companies Mastercard and Visa led the rankings, followed by Ant Group, Square and PayPal.
"Mastercard and Visa lacked the expertise and capabilities to outrun the FinTech giants, so they adopted the concept of frenemies, that is, they collaborated with their rising competition by creating easy-to-adopt application programming interfaces to allow access to PayPal, Square and even Coinbase [with its Visa cryptocurrency debit card]," according to IMD.
Opening their systems to the broader digital ecosystem allows Mastercard and Visa to learn from disruptors and apply what they learn to their own organisations.
The research reveals that the highest-ranking financial services brands are more aggressive than their peers in exploring and exploiting new technology, their openness to collaboration and their conviction that they must continue to prepare for disruption. They are already IT companies that happen to be in the financial industry.
Technology
The research includes 29 top technology companies across the semiconductors, software and hardware segments that were selected by revenue of $3.7bn to $218.9bn. It looks at data from 2018 to 2021.
The five top-ranking technology companies – Google, Amazon, Microsoft, Facebook, and US-based semiconductor company AMD – "all have an entrepreneurial orientation, willingness to branch out from their core businesses, ability to scale up quickly and a shared inner vision of the future", according to IMD.
The researchers concluded that high-ranking technology companies’ flexible organisational structures enabled them to make quick, tough decisions when the pandemic struck.
Consumer-orientated companies such as Amazon, Facebook, Netflix and Alibaba adapted quickly to meet their customers’ demand for home delivery services and personal electronics. In contrast, business-to-business-focused technology companies such as Microsoft and Salesforce offered new products to enable work at a distance.
Apple scored lower than competitors Microsoft, Amazon and Google on employee diversity, early results on innovation and business productivity.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Like a Fading Shadow
Antonio Muñoz Molina
Translated from the Spanish by Camilo A. Ramirez
Tuskar Rock Press (pp. 310)
VEZEETA PROFILE
Date started: 2012
Founder: Amir Barsoum
Based: Dubai, UAE
Sector: HealthTech / MedTech
Size: 300 employees
Funding: $22.6 million (as of September 2018)
Investors: Technology Development Fund, Silicon Badia, Beco Capital, Vostok New Ventures, Endeavour Catalyst, Crescent Enterprises’ CE-Ventures, Saudi Technology Ventures and IFC
'Shakuntala Devi'
Starring: Vidya Balan, Sanya Malhotra
Director: Anu Menon
Rating: Three out of five stars
MATCH INFO
UAE Division 1
Abu Dhabi Harlequins 12-24 Abu Dhabi Saracens
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Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg
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Countries offering golden visas
UK
Innovator Founder Visa is aimed at those who can demonstrate relevant experience in business and sufficient investment funds to set up and scale up a new business in the UK. It offers permanent residence after three years.
Germany
Investing or establishing a business in Germany offers you a residence permit, which eventually leads to citizenship. The investment must meet an economic need and you have to have lived in Germany for five years to become a citizen.
Italy
The scheme is designed for foreign investors committed to making a significant contribution to the economy. Requires a minimum investment of €250,000 which can rise to €2 million.
Switzerland
Residence Programme offers residence to applicants and their families through economic contributions. The applicant must agree to pay an annual lump sum in tax.
Canada
Start-Up Visa Programme allows foreign entrepreneurs the opportunity to create a business in Canada and apply for permanent residence.
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
