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Gone are the days when it's possible to make blanket statements about industries set to boom and stand by them with confidence. Although some industries received a boost from the rapid digitisation influenced by Covid-19, how and why businesses grow, and how we evaluate this, has changed.
To determine which businesses in which industries may boom in 2022, it's essential to look back at the definition of business growth, says Herman de Kock, Executive Head: Sales & Service Planning & Management at Nedbank Commercial Banking.
We need to refer back to the definition of business growth – it implies the conventional increase in sales, or turnover, whilst sustaining or even better increasing profitability. But business growth also should imply increased contribution to sustainable development goals. The latter implies a combination of, or in some cases only selected few of the numerous sustainable development goals (SDGs), with the ultimate outcome of social upliftment and the preservation of the environment, says De Kock.
With this context the emphasis is more on the entity or business regardless of industry and how it responds to the macro around it. De Kock believes it also depends on some key fundamentals of any business to operate and grow – namely how close that business is to satisfying the need of a customer base to the extent that the demand drives a price that sustainably exceeds the cost to satisfy that need.
The role of the Covid-19 pandemic cannot be underestimated either, despite being two years on from the first hard lockdowns. The pandemic revealed differences in various industries' ability to cope, which has resulted in economists using three analogies to identify recovery strategies.
A 'V' shape indicates an ability to recover fast; 'U' shape indicates slightly longer to recover; whereas an 'L' shape represents businesses still impacted by Covid-19 that may never recover.
“Looking at industries through the understanding of how Covid impacted all economies, one can easily see which industries fitted the V shape because of their ability to trade as essential services such as food and medicine. Other industries fitted into the U shape, taking some time to recover such as certain forms of transport and fast foods. And then there were industries such as travel, entertainment, and hospitality that in some cases struggle to this day.
De Kock does, however, believe that some industries such as information, communications and digital, together with pharmaceutical and even biotech, did attain a boost from the Covid-19 pandemic - and they may continue to benefit from this into 2022. But given the past two years, it's unlikely that these businesses can remain passive.
"The added lens required on each of the industries, given the changes in trade and behaviour as a result of Covid, is to what extent they are positioned to transform their business model to capitalise on the changing demands of Covid and the 4th industrial revolution - from a business to consumer perspective, business to business perspective, or both," says De Kock.
There are, therefore, several macro factors that can actively weigh towards accelerated growth in 2022. These include acceptance of digital payment and trade mechanisms, such as contactless payments or scan to pay, and transforming business models by participating on platforms such as Alibaba, Amazon, Takealot, and Nedbank's Avo.
“To put in in a nutshell, it is more important to how close you are to your customer base in terms of understanding their need, how conveniently you can provide access to that need and how much they are willing to pay for it,” says de Kock.
This post was sponsored by Nedbank and produced by Adspace Studio.
