The good times for global firms are ending, according to a report by McKinsey Global Institute (MGI). In a recently released study on tilted ‘Playing to win: the new global competition for corporate profits’, MGI indicates that a 30-year period of unprecedented corporate profit growth (when net profits more than trebled between 1980 and 2013) is drawing to a close.
Corporations might no longer benefit from the falling costs, taxes and interest expenses that have helped underpin the global profit growth of the recent past, the report said.
Among the factors that could compress profits is competition from emerging markets, especially Chinese firms. Their increased presence could lower the overall ratio of profitability, shrinking corporate profits by $900 billion, the report said. Technology disruption and the resulting consumer surplus could reduce profits by an additional $700 billion in sectors such as retail and healthcare.
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