Lessons From Luxury Goods: the future never proceeds as expected

This article contains some important observations – Luxury goods: style rises in the easthttp://www.ft.com/cms/s/0/5fc71b48-7f09-11e1-a26e-00144feab49a.html

Conventional thinking has been that burgeoning consumer demand in Asia would save the West and especially the West’s luxury goods sector.

Maybe this might not be the case.

This article points to the emergence of a more likely range of outcomes:

(1) Organisations (or in China’s case state owned enterprises) will buy up Western brands at potentially bargain basement prices.
(2) Increasingly innovative economies, with growing intellectual capital, will create their own brands.
(3) The emerging economies may overtake the ‘advanced’ economies in terms of innovation capabilities. The sad fact is that people have to work in close proximity to each other to produce innovative ideas and products – I am one of those who holds that all the ‘virtual’ networks in the world can’t replace good old trust and face to face working. The point that to work, R & D has to be close to the ‘production’ line, is made in this article: America reassembles industrial policy
(4) The next chapter in this story of growing capabilities will be the emerging economies’ emergence (if you excuse the pun) and dominance in the services sector.

None of this is long-term good news for the ‘advanced’ economies.

So what does all this mean?

Focusing on Asia for growth might not be the relatively straightforward decision many may think. The West, the ‘advanced’ economies that I have referred to, will fight back, electorates will make sure of that. The great battle for ‘economic rebalancing’ is about to start as the West seeks both to (a) reduce exposure to a volatile banking sector and (b) stimulate manufacturing in an attempt to encourage a broader employment base than financial services can provide.

So we need to be careful. We are on the edge of a protectionist battle. What seem to be commonsense decisions now, might not look so straightforward in a couple of years’ time. But there’s a second point too. We don’t yet know what role the emerging economies will take on the world stage, especially as the influence (and power) of the US declines.

The future may not be as benign and straightforward as we think.

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