50. Multinational corporations are uniting the world and growing more exposed to its risks.
The continuing fragmentation of the post-Cold War world has reduced the stability of some lands where government formerly could guarantee a favorable—or at least predictable—business environment. The current unrest in Iraq is one example. One risk now declining is the threat of sudden, extreme currency fluctuations. In Europe, at least, the adoption of the euro is making for a more stable financial environment.
Assessment: This trend will continue for at least the next 30 years, as companies in the developing world diversify into less developed markets.
Implications: It is becoming ever more difficult for business to be confident that decisions about plant location, marketing, and other critical issues will continue to appear wise even five years into the future. All long-term plans must include an even greater margin for risk management. This will encourage outsourcing rather than investment in offshore facilities that could be endangered by sudden changes in business conditions.
Countries that can demonstrate a significant likelihood of stability and predictable business outcomes will enjoy a strong competitive advantage over neighbors that cannot. Witness the rapid growth of investment in India now that deregulation and privatization have general political support, compared with other Asian lands where conditions are less predictable.
Although Russia has continued to attract Western investment, particularly in its energy industry, increasingly autocratic governance by the Putin regime and any successors could eventually discourage foreign companies from doing business there or require much more favorable terms to justify accepting the associated risks.
Major corporations also can help to moderate some risks in unstable countries, such as by threatening to take their business elsewhere.
Implications for hospitality and travel: Unfortunately, multinational operations bring risks beyond those of national stability, or its absence. Some western firms have cut back or abandoned their operations in Russia, concluding that Moscow’s capricious treatment of foreign concerns could be too costly to ignore. Others have found it difficult to deal with autocratic government and petty corruption in China. Primitive banking and legal systems, poor communications and infrastructures, and other such problems in developing lands can make it difficult for western firms to operate in the developing world. No industry is so exposed to these problems as hospitality and travel.
51. Consumers increasingly demand social responsibility from companies and each other.
Companies increasingly are being judged on how they treat the environment, their workers, and their customers. Many are changing their business practices as a result. For example, home-improvement retailers Home Depot and Lowe's have stopped buying wood from countries with endangered forests, while Nike now publishes its discoveries of worker abuse by offshore suppliers. Costco offers much better benefits than its competitors and has half the employee turnover rate as a result. In a 2005 survey of nearly 1,200 companies, 81 percent— and 98 percent of large firms—said corporate citizenship is a priority; 84 percent said that being socially responsible has improved profits. Once the business-friendly Bush administration leaves Washington, government intervention will rebound in sectors from finance to industrial chemicals. To avoid political backlash from the right, regulation is likely to be carefully targeted and limited, at least for a time.
Assessment: This trend is well established in the industrialized world, but only beginning in the developing world. It can be expected to grow more powerful as the no-nonsense, bottom-line-oriented Generation Xers and Millennials gain influence.
Implications: Once the current, business-friendly administration leaves Washington, government intervention will supplant deregulation in the airline industry (in the interest of safety and services), financial services (to control instability and costs), electric utilities (nuclear problems), and the chemical industry (toxic wastes).
In the United States, frequent incidents of political corruption may spread the demand for greater responsibility into the field of government and public service, although that is not yet clear. As the Internet spreads Western attitudes throughout the world, consumers and environmental activists in other regions will find more ways to use local court systems to promote their goals. Litigation is likely to become a global risk for companies that do not make the environment a priority.