Sustainable Development Goals (SDGs)

• The goal of the UN's 2015 agenda, adopted by all 193 member states, is to end extreme poverty, protect the planet, and fight inequality and injustice within 15 years.

Sustainable Development Goals (SDGs)

• The plan is underpinned by 17 targets for a better and more sustainable future.
• Businesses face increasing pressure to contribute more to society and the environment.
• SDGs present opportunities for innovation and growth.

Limitations of SDGs

• They are voluntary, meaning there are no legal requirements for businesses to achieve them, enabling selective engagement or inaction.
• Progress varies globally, with some regions lagging due to instability, infrastructure deficits, or economic hardships, thus perpetuating inequalities.
• Interconnectedness means progress on one goal can hinder another, such as industrial growth conflicting with environmental sustainability.
• Businesses may engage in "SDG-washing," using the goals for marketing without meaningful contributions, which dilutes the overall impact.
• Progress relies on international cooperation, which can be hampered by geopolitical tensions and differing national priorities.
• Progress towards the 2030 deadline varies, and long-term challenges such as climate change and social inequalities may not be resolved.

Megatrends Overview

• These are large, transformative phenomena with global reach and broad scope, impacting companies, governments, and individuals.
• They are long-term transformational processes useful for long-term planning and decision-making.
• Understanding megatrends is critical for navigating the business landscape and making better strategic decisions.
• As individuals, megatrends aid in making informed choices about living, investing, and careers.
• These trends interact and amplify each other, creating challenges and opportunities for innovation.

Impactful Technology

• Acceleration, distribution, and application of computing power, coupled with data growth, enables technological advances, but also poses practical and ethical challenges.
• Challenges include regulating big tech and balancing enhanced services with privacy rights.
• Governments must ensure new technologies are accessible, equitable, and socially beneficial.

Demographic Change

• Rapid demographic changes globally present new challenges for businesses and individuals.
• Aging populations will lead to fewer working-age people supporting more retirees.
• Falling populations are occurring in countries such as Japan, Italy, and Poland,.
• Africa's population growth will create new development opportunities.
• Migration will drive population growth in most high-income countries.
• Innovation opportunities will arise in housing and health sectors.
• A more inclusive and diverse workforce is essential for productivity and addressing labor shortages.
• Retraining and upskilling are considered vital for these demographic shifts.

Rapid Urbanization

• Over half the world's population lives in cities, generating 85% of global GDP.
• By 2050, over two-thirds of the population will be urban dwellers.
• Aging populations will shrink populations in America, Europe, and China
• Africa will feature the world’s largest urban agglomerations
• Rapid urbanization puts demands on infrastructure, environment, and job/service provision.
• Climate change from rising emissions presents an opportunity to develop low-carbon, resource-efficient cities with a decent standard of living.

Accelerating Individualization

• Technological advances and connectivity empower individuals with 5.16 billion people online.
• New forms of identity expression are emerging.
• Algorithms create echo chambers, amplifying political polarization.
• Social media focuses on self-influence and misinformation.
• The workforce is becoming more individualized with remote and hybrid work.

Economic Power Shift

• Asia is becoming the largest trading region, fueling a mass affluent community.
• China and India account for 36% of the world’s population and 25% of global GDP.
• Non-OECD economies are expected to account for 57% of GDP by 2030.
• The individual purchasing power in the West will likely remain higher than in China and India.
• No country will be clearly economically dominant.
• 4.8 billion people will be in the low-income class in the Asia-Pacific region.
• Wealth concentration is accelerating, with the richest 1% expected to own two-thirds of the world’s wealth.
• Geopolitical tensions and trade wars drive uncertainty and instability, fundamentally altering national and economic prosperity.

Climate & Resources Security

• Climate change is placing enormous pressure on critical natural resources.
• Global average temperatures will likely rise by more than 1.5 degrees Celsius by the middle of the next decade.
• This necessitates cutting gas emissions by at least 50% by 2030, as some communities and ecosystems will not survive.
• If current trends continue, 33 countries will face severe water shortages by 2040.
• Adapting to this megatrend requires mitigation strategies, ecosystem-based adaptations, and green infrastructure such as cultivating mangroves and the Great Green Wall project.
• Meeting net-zero emissions by 2050 requires over two-thirds of energy consumption to come from renewable resources.

Wicked Problems

• Megatrends intersect with wicked problems, which are complex social and policy issues resistant to resolution.
• Examples include inequality, poverty, environmental degradation, and climate change.
• These problems are interconnected, multifaceted, evolving, and tied to diverse stakeholder interests.
• Businesses must innovate responsibly and adopt sustainable strategies to avoid missed opportunities and regulatory challenges.
• Examples of wicked problems include clean water shortages, food shortages, youth unemployment, population growth, and global security.

Characteristics of Wicked Problems include

• Problems involve many stakeholders with different values and priorities.
• The issue’s roots are complex and tangled.
• The problem changes with every attempt to address it.
• There are no precedents for the challenge.
• There is nothing to indicate the right answer.

Limitations of Wicked Problems

• Complex and big but fixed target
• There is a need for conceptualizing these bigger social trends and shifts since Government, individuals and org work to solve these problems - focusing on one
• Businesses are expected to consider their role in contributing to, addressing, and assisting society.
• Examples include the Climate Action Network of Australia and philanthropic foundations.
• Also included is the Development of eco-friendly solutions, although, their bigger impact needs to be considered

Business Today

• Businesses have the innovation, technology, and talents to solve world’s challenges.
• Despite demands on businesses to tackle wicked problems, they must navigate the delicate phase of the global economy's post-pandemic re-balancing.
• There is a need to reskill millions of people as 1 in 8 people have one or more green skills.
• According to a KPMG survey, over 300 Australian business leaders considered the effects of these challenges.

Biggest Business Trends:

• AI and machine learning are continuing to integrate into goods and services.
• Generative AI enables organizations to automate customer experiences and operations.
• Industry leaders must develop a generative AI strategy for long-term success.
• Automation increases the value of human-centric skills, and organizations will invest more in developing soft skills.
• There is a shift in hiring practices to focus on experience and skills rather than education or age.
• Increased investment is needed in training and upskilling for disruptive technologies such as AI.
• Consumer demand for environmentally responsible businesses is rising.
• Sustainable practices often lead to financial benefits, with companies focusing on genuine sustainability efforts to avoid greenwashing.
• Companies will provide customized solutions to enhance customer engagement such as Personalized Cosmetics or custom Shoes .
• Data is a critical business asset with growing monetization opportunities.
• Smaller businesses will adopt AI-driven data strategies.
• Companies prioritize seamless customer interactions and satisfaction.
• Marketing, delivery, and issue resolution must be frictionless with Chief Experience Officers (CXOs) becoming more common.
• Hybrid and remote work remain key for attracting global talent, with companies focusing on flexibility and work-life balance, and hybrid roles staying above pre-pandemic levels.
• Addressing unconscious bias in hiring, training, and management is a must.
• AI-driven decision-making must be monitored for fairness, as diverse and inclusive workplaces drive innovation and productivity
• Businesses must prepare for threats such as cyberattacks, economic downturns, and environmental risks.
• To ensure long-term stability through proactive planning, learning from past crises helps build adaptable strategies.

Case Study: Zegna

• Went public in 2021
• It established a commitment toward casual wear.
• By 2022, casual wear made up 70% of Zegna’s apparel collection sales, while formal wear stood at 30%.
• The pandemic and lockdowns caused supply chain bottlenecks, weakening Italian fabric suppliers.
• Soaring inflation made things worse.
• There was a struggle to grow volumes while keeping its place-based branding.
• In 2020, Zegna sold Agnona due to “tough months”.
• Volumes dropped by 50%, and production plants and shops had to temporarily close
• A recovery in sales after the pandemic meant the company expected to grow from about $290 billion in 2019 to $353 billion in 2022.
• Menswear was growing at a faster pace in 2021, though growth rates were similar to womens in 2022.

Key Trends affecting Zegna

• Global pandemic reset dress code from formal menswear to casual wear.
• Minimalist, timeless style with neutral colors and no visible logo.
• Growing concern for the environment, with Zegna introducing sustainable materials and a stronger focus on recycling.
• Economies of scale advantages in production, marketing, supply, and logistics.
• Sales were stable, but shopping frequency was decreasing

Strategy

• Brand would be centered around casual wear, drastically cutting its stock keeping unit (SKU) offering from 10,000 to 3,000 in a couple of years.
• Casual wear included unstructured jackets and revisited workers’ overskirts, shirts, and pants made out of high-end fabrics.
• In 2022, 65% of Zegna’s sales were casual, while 35% were formal, and the company expected casual to grow further in 2023.
• The company wants to stop following seasonal fashion trends and build recognizability around fewer iconic items, defining identity through these products.
• Made-to-measure sales decline had been softened by the resilience of made-to-measure.
• The company can deliver garments in as little as 2 weeks compared to competitors who need at least 4, differentiating themselves from them.
• Bespoke Atelier makes only a few garments per year and travels all over the world, but it is not easy to find talented Italian tailors as the older generation leaves the workforce.
• Collaborations in 2020, they partnered with a streetwear fashion brand to energize the collection, but customers did not cross-buy with Zegna’s core assortment.
• A parallel outdoor line in partnership with Norda provides high-end trekking garments, bringing in more sticky customers.
• In 2022, prices increased twice, following other companies’ lead.
• The company reduced its presence in outlet stores to sell at full price with no discounts.

Marketing

• Consistency will help gain recognizability.
• Modern marketing is hyperlocal.
• Advertising in international airports was stopped, and the company focused on private airports, grabbing a niche market of high-income earners/wealthy consumers.
• They shifted from fashion magazines to a local golf magazine, which is a stereotype of rich people
• A boost in partnerships has occurred via sponsoring the Real Madrid soccer team.
• The goal is to be in customers’ lives and where there are amazing experiences.
• The company wants customers to buy the product for the logo and what it means, with the logo becoming a window into the founder’s values.

Products

• Increased consistency, focusing on specific products such as the triple-stitch sneaker.
• The company wants everyone to have the shoe as a basic of their brand such that the triple stitch will soon generate $100 million of sales per year, up from just $20 million in 2021.

Store Network and Approach

• A Change in style also involved store network, with 85% of brand sales vs. 15% via wholesalers in 2022.
• The company changed the format of its stores.
• Windows show casual outfits and the triple-stitch shoe, with formal wear moved to dedicated rooms.
• An interactive outfit tool was launched, enabling customers to visualize 49 billion different combinations, which is helpful with casual wear made to measure because it is harder to visualize with many different garments.
• There is an increased focus on store productivity because of pressure from investors to increase gross margins, which are lower for ready-to-wear items.
• There is an effort to transform wholesalers' deals into shop-in-shop contracts where they bring in personnel because wholesalers will bring in many customers.

Outreach and Data Science

• Sending thank you messages right after store visits or sending invitations to return to store generates sales by inviting customers to the store.
• The data science team calculates when the customer is likely to shop again based on customer and sales data with a median for customers returning at only 25 days.
• Store managers received prompts telling them who to invite and what items to suggest, as the app would send prompts later on in customer journey.
• Targeting children is also an approach, for example, for a fan of Real Madrid, letting the customer know that they have a gift for the Real Madrid-loving child.
• In 2022, 50% of in-store sales had been originated via outreach, where outreach customers spent 80% more than the others.

Customer Loyalty

• Net Promoter Score (NPS) is a measure of customer loyalty.
• There are store-level targets to increase the group of Zegna friends per store/customers.
• The customer base has widened with move to casual, with a cool, young, fashionable, and trendy style.
• It developed a sustainable business before the sustainability trend started, which, for many, "made me stick to the brand today".
• The new style helped it grow its volumes, like in the US, but it did not leave customers behind, as it kept offering suits and many buy both.
• Zegna took advantage of the trend of growing demand for luxury leisurewear.
• The Company predicts an growth in the Chinese Market in 2023

Moving Forward

• Casual as a further challenge because it is more subject to trends than accessories or formal wear, exposing the company to direct competition.
• Setting up trade schools in knitwear, shoemaking, fabrics, and other disciplines addresses the problem in Italy of finding these types of workers, therefore creating the future workforce for their brand.
• There is hesitancy about moving too far away from formal wear with customers getting back to suits in 2023 and putting deconstructed suits in a fashion show to follow trend.
• With accessories covering 15% of sales, direction on shoes as the main basic product is needed, or a bigger focus on bags and wallets should be pursued.
• Partnerships are questioned because the company does not want to lose the iconic identity of the brand by involving others who might compromise the founder's goals and desires.

Importance of External Analysis

• Businesses must adapt to changes in their micro and macro-environment to survive.
• The macro-environment comprises the PESTLE framework and the micro-environment comprises range of stakeholders.
• The Digital revolution and the global pandemic have forced companies to change.

Porter's Five Forces

• It is a business strategy tool used to understand competitive forces in an industry.
• A business compass that helps figure out where your business stands in the industry at a particular point in time
• Defending against Five Forces and shaping them in business’s favour are crucial to business success
• It helps evaluate how to take advantage of a strong position, improve from a weak position, discover opportunities, anticipate risks, and avoid wrong steps.
• Intense Five Forces in an industry make profits harder to achieve.

Threat of New Entrants

• Assesses the ease of new competitors entering the industry and decreasing profitability.
• Capital requirements for new entrants
• The strength of existing competitor's: brand names, customer loyalty, intellectual property protection, product differentiation, economies of scale, Cost advantage they have
• Cost for buyers to switch to another seller
• Ease of access to distribution channels, materials and resources
• Gov regulations/restrictions for new entrants and risk of retaliation from existing competitors

Bargaining Power of Buyers

• Assesses the ease for buyers to pressure businesses to drive prices down and demand higher quality.
• Buyer concentration or fragmentation
• Buyer's price-sensitivity and elasticity of demand
• The number of competing products in the industry and the cost for buyers to switch to another seller
• Buyers' access to product information, standardization or differentiation of industry products

Competitive Rivalry

• Assesses the intensity of competition among existing firms.
• Considers things like the number of competitors, industry growth, barriers to exit, competitor fixed costs, customer loyalties to competitors products, cost for buyers to switch

Threat of Substitute products

• Assesses the extent to which substitute products are available to satisfy customer needs.
• The number of substitute products available and if costs for buyers to switch to substitute products
• The potential for new substitute products to come into the market

Bargaining power of suppliers

• Assesses the ease for suppliers to drive up prices and influence quality of input products.
• Supplier concentration or fragmentation, suppliers reliance on the industry for income
• Suppliers' contribution to the industry products' quality

5 Forces Purpose:

• Competitive rivalry is directly influenced by all the other 4 forces.
• High buyer power intensifies competition as firms lower prices to attract customers.
• High supplier power can lead to higher costs.
• Threat of substitutes increases competition.
• Threat of new entrants increases competition.

How to complete a Five Forces analysis

• Define the business's industry and identify key competitors.
• Evaluate the level and extent of factors that influence each force.
• Analyze how each force affects the business, how the business is responding, and how to better take advantage of or defend against each force.

Limitations of a Five Forces analysis

• Views customers as just one of several factors.
• Overlooks cooperation and long-term relationships.
• Does not explicitly consider partnerships.
• Assumes industries are separate and distinct, with no overlap or interaction.
• Works well in stable sectors, but not in industries with rapid technological changes and shifting consumer preferences.

e.g. The Body Shop: Five Forces

• Buyer power → medium
• Threats of substitutes → high
• Threats of new entrants → low-medium
• Competitive rivalry → high
• Supplier power → low to medium

PESTLE Analysis

• Examines the macro-environment to identify "key drivers of change" affecting the business.
• Helps maximize the business's ability to capitalize on opportunities and protect against threats.

PESTLE Factors

• Political: government policy, political stability, regulations, and geopolitics.
• Environmental: climate change, natural disasters, sustainability, and waste management.
• Legal: consumer laws, competition laws, employment laws, and intellectual property laws.
• Technological: new technologies, automation, R&D, and social media.
• Social: consumer attitudes, cultural trends, demographics, and wealth consciousness.
• Economic: economic growth, interest rates, inflation, and unemployment rates.

How to Complete PESTLE Analysis

• List all important elements that affect the business
• Narrow down the list to include only those elements that will be a “key drivers of change” for the business
• Analyse interactions between the elements, focusing on ‘high impact’ combinations of influences

Limitations of PESTLE Analysis

• The macro-environment is constantly changing and so the information used in the PESTLE analysis may become outdated quickly
• Too much Data which may lead to ‘paralysis by analysis’
• Each PESTLE factor can have multiple changing dimensions, interactions and implications which may not always be easy to capture and measure

The Body Shop: PESTLE Factors

• Political: international regulations, green business practices, trade agreements, and initiatives against single-use plastics.
• Economic: economic downturns, currency fluctuations, global inflation, and sales tax.
• Social: environmental awareness, changing beauty norms, aging population, beauty standards, and wellness trends.
• Technological: digital marketing, big data and analytics, AI, augmented reality.
• Legal: safety guidelines, protection of patents and trademarks, legal limits to advertising, and regulations around animal testing and sustainable practices.
• Environmental: climate change, sustainable packaging, production waste, and renewable energy sources.

Zegna: Five Forces

• Threat of New Entrants: Medium-High
• Bargaining Power of Buyers: High
• Competitive Rivalry: High
• Threat of Substitutes: Medium-High
• Bargaining Power of Suppliers: Medium