Stormy waters: will business be able to navigate the challenges of the new year?
If you haven’t heard the term before, brace yourself: 2024 could become the year of ‘collective effervescence’.
Coined by sociologist Émile Durkheim more than a century ago, the phrase describes the sense of energy and harmony people feel when they come together in a group around an event. The Paris Olympics this year – particularly for those attending – could deliver exactly that, according to Ivo Vlaev, Professor of Behavioural Science at WBS.
The Thirty-third Summer Olympic Games, he says, could “create a heightened sense of community and collective joy, impacting social interactions and communal ties”.
Away from the excitement surrounding the Games, however, the world looks increasingly fragmented. With war in Europe and the Middle East and rising tensions elsewhere, global supply chains remain exposed and energy markets remain volatile. Add to this the increasing frequency of extreme weather events and it is no surprise that many experts are now talking of a global ‘polycrisis’.
“All this generates huge uncertainty for business to navigate and, as a result, the economic prospects for the year are rather subdued, a factor that is keeping the oil price relatively low,” says Michael Bradshaw, Professor of Global Energy, Strategy and International Business.
“When it comes to climate change, risk and accountability will be key issues for business leaders to consider. As with the COP-28 summit that agreed for the first time to ‘transition away’ from fossil fuels, the question is whether words will be translated into action.
“In a disorderly world where clearly it is not business as usual, can we deliver a just, orderly and timely transition away from fossil fuels?”
If keeping up with the changing requirements of climate action will be tricky for business, keeping pace with the relentless march of digital technology will be equally so.
“Predictions are particularly difficult in such fast-moving areas as data analytics and artificial intelligence," says Juergen Branke, Professor of Operational Research & Systems. “But what seems clear is that the big tech companies will all scramble to win the leadership race in generative AI.”
“At the same time, many smaller companies and start-ups will build an ecosystem around this technology, adapting it to new and innovative use cases.”
All companies, but especially larger ones, will need to focus their efforts on promoting creativity and innovation if they are to respond effectively to nimbler challengers.
“Some companies will also try to reinvent themselves to open up opportunities and to appeal to customers in wider ways, sometimes under the label of ‘lifestyle brands’,” says Pietro Micheli, Professor of Business Performance and Innovation.
“This will require change – even to their business models - and a much stronger attention to users’ needs, which will mean more focus on analysing large datasets, the ‘big data’.”
Changes in online retailing
Some of the nimblest challenges are coming from Chinese firms. In recent months, online retailing giant Amazon has been feeling the heat from Chinese cross-border e-commerce platforms including Shein, Temu and Tiktok, which are known for efficient supply chains, low prices and good customer service.
For the first time, this Christmas saw Amazon extending its Black Friday campaign cycle to 11 days, including a warm-up period of about a week. This was directly due to pressures from the Chinese e-commerce platforms who extended their activity cycle to more than 20 days, according to Qing Wang, Professor of Marketing and Innovation.
“Although, in the short term, Chinese e-commerce firms are only ‘chipping away’ at the lower end customers, in the longer term, they may represent what business theorist Clayton Christensen called ‘disruptive innovation’,” she says.
This is the process whereby a service takes root at the bottom of the market and relentlessly moves upmarket until it displaces the established competition.
“Given the phenomenal track record of its parent company Pinduoduo, it is likely that the Chinese e-commerce firms like Temu will change the dynamic in online retailing as we enter 2024,” says Professor Wang.
Notwithstanding the strong performances of individual firms, the prospects for the world economy as a whole remain uncertain. The outlook for the British economy looks particularly sluggish, though the country is second in Europe according to Ernst & Young for its ability to attract foreign direct investment (FDI). FDI is an important contributor to the economy and can play an important role in improving productivity.
“All FDI, but particularly high productivity, requires three things above all else, which are policy consistency at a macro level, openness to trade to organise global value chains, and increasingly support for investment and R&D,” say Nigel Driffield, Professor of International Business, and Xiaocan Yuan, Research Assistant in the Strategy & International Business Group.
“The UK is moving in the right direction in the third of these, though at a pace that puts it behind the EU, USA and China, and scores poorly on the first two.”
Nevertheless, the two WBS academics expect the UK to continue to attract investment activities with a focus on the UK market and its regional strengths. Specific examples include the biotech sector in the Oxford-Cambridge arc, advanced manufacturing in the West Midlands, creative and media in Greater Manchester, and clean energy in the North East.
Meanwhile, the UK’s largest employer – the NHS – is facing another difficult winter with patient waiting lists at a record high and unprecedented numbers of skilled clinical professionals leaving the organisation.
“Employee wellbeing and workplace culture are inextricably related to hospital performance and patient outcomes,” says Nicola Burgess, Visiting Professor at WBS. “And the sentiment among medical professionals is that they are overworked, undervalued, and underpaid, their dissatisfaction made visible and tangible through high profile, disruptive, and costly workforce strikes.”
The NHS Workforce Plan published in June 2023, however, gives her room for optimism. “With its focus on staff retention, training, professional development and workforce flexibility, it offers a glimmer of hope,” she says.
That probably sums up the prospects for a range of sectors in 2024. The world enters it in stormy waters, but there are always rays of hope. Businesses will inch towards aligning their practices to new sustainability goals, companies will navigate the fast-moving currents of AI, and retailers will innovate in the face of strong competitive headwinds. At the same time, high-tech sectors in the UK regions will continue to turn on new tides of investment.
All that said, by the time the Paris Olympics open in July, we may all be in need of a bit of collective effervescence.
Research at Warwick Business School is undertaken in partnership with policy and practice to ensure both relevance and practical application.
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