What will the tectonic shift change?

Capital readers will remember Prof. Jagdish Sheth. In his book “The Three Rules”, he noted that companies which were not amongst the leaders in their fields would find it difficult to survive. His new book, which will be published in the next few days, addresses a different subject. The book is called “Tectonic Shift” analyses the incredible change that the world is experiencing and provides clues about the future.

The Turkish Language Institution Dictionary defines the word ‘tectonics’ as ‘the branch of geology concerned with the study of the movements of fragmented strata of rock known as tectonic plates’. This definition has been used as the basis of the new book “Tectonic Shift” by Prof. Jagdish Sheth, who is one of the world’s leading management gurus. “Tectonic Shift” highlights this transformation, this ‘shift’ on a global scale and provides important clues regarding the future.

Capital readers will remember Prof. Jagdish Sheth from his book the “The Three Rules”. In that book Seth put forward the theory that: “The first three companies in each sector or product group have a chance. If you are outside the top three then your chance declines.” Now he reports ‘a major transformation’. Prof. Jagdish Sheth is a member of the teaching staff at Goizueta Business School at Emroy University and he made his first  comments about the book which will soon be published on the market to Capital.

Why Tectonic Shift?
I decided to write the book which I have called “Tectonic Shift” because I have a very different attitude towards globalization. Whether you went north or south of the equator, but particularly as you got closer to the poles, the traditional direction of trade and investment was West-East. In the north this included Europe, America, Canada, Japan and Korea. In the south it meant Chile, Argentina, South Africa and Australia.
I saw that, particularly in large developing markets and in developed countries, the flow of trade and investments is more North-South. In addition to other factors, there are two basic reasons for this.

The first is that all developed countries are rapidly ageing. For this reason they are facing serious growth problems internally. This situation shows itself most clearly in Japan and Germany. In order to continue economic development they need to integrate with developing countries.

The second is that countries with a potential for growth used once to believe in a communist or socialist ideology. Following the collapse of communism a large proportion of them wanted to introduce market reforms and encouraged advanced countries to trade with and invest in to their own countries. These include China, India, Russia, Mexico and Brazil.
“Tectonic Shift”, which is the title of the book, refers to the tectonic plates beneath the earth’s surface. If they move then this means that there will be large earthquakes and tsunamis. It is the same on the surface. The alliance between advanced countries and developing countries will have far-reaching results for the entire world.

The New World Of 2020
In 2020 China will overtake America in terms of consumption, production and the provision of services and become the sole great economic superpower in the world. It will be followed by India. A study prepared by Goldman Sachs and called the “BRIC Report” includes an economic model based on 2050 and shows that in terms of GDP the four major developing economies (Brazil, Russia, India and China) will overtake all the advanced countries.

Which Region Will Be The Leader?
I believe that three major trading blocks or markets will appear as the result of free trade and economic integration: the European Union, America and Asia. I was persuaded to separate the USA and Europe.

Since the war Europe has been less interested in history and memory and wants to move forward to places which do not need America. In terms of internal trade, the European Union is the largest with over US $1.5 trillion. In addition, Asia is finally becoming the largest trading partnership. Indeed, China is currently beginning to become the biggest trading partner for Japan and South Korea.

In addition, India’s trade relations with China are growing rapidly. Just ten years ago bilateral trade was less than US $200 million. Today it has passed US $25 billion. We can forecast that it will reach US $50 billion in 2010.

The Future Of The European Union
Despite all of its current difficulties, I am more optimistic about the future of the European Union. It has resources, markets, capital and technology. What is needed is a strong charismatic leader at the head of the European Union. In spite of this, every member country has the potential to put its European identity aside and create a weak federation.

When one looks at everything together then, as Winston Churchill said, the realization of the dream of a United States of Europe is almost inevitable, just like the United States of America was created after the 1865 Civil War. At that time, the government was headed by Abraham Lincoln who advocated the transition from an agricultural to an industrial economy and he led the industrial revolution. On the other hand, the countries of Eastern Europe and finally Russia will play an important role in the shaping of the European Union.

What Should Executives Do?
There are many different things which companies and business executives can do. The first is that entrepreneurs should shape, preferably through free market processes, the laws and regulations made governments.

The second is to get rid of the prejudices against other countries and cultures based on historical images.

The third is to utilize special abilities from all over the world, particularly from within their own trading blocks.

Companies should rotate management between all the countries and cultures where they do business. A general global language should be encouraged, such as English. Information technology and the Internet should be used in an aggressive manner.

The basic message of “Tectonic Shift” is that advanced countries have no choice but on work and integrate with the major developing economies on the basis of equality, respect and mutual benefit.