The Covid-19 pandemic has posed unprecedented disruptions to education systems; however it has also accelerated many of the structural changes undergoing in the sector and opened up new opportunities. The emergence online and hybrid learning models, the take-up of Massive Online Open Courses (MOOCs) and augmented and virtual reality (AR/VR) have the potential to reshape the sector and pose serious threats to current incumbents, if investment in supporting connectivity infrastructure and training is not embraced. 

The global education sector has reached an impressive scale, having grown rapidly over the previous decade, and forecasted to double in market size within the next decade. Total enrollment across all levels of education reached 829 million students in late 2019, a 14% increase from 2010. In 2019, more than 5.5 million students studied in degree programmes outside their home countries, more than double the number doing so in 2000. The global education market is projected to continue expanding rapidly and more than double in size, reaching US$2.4trn by 2027, up from US$1.1trn in 2019.1

Growing student population: Global student enrollment, 2010-2019 (million students) growth rates

The pandemic has accelerated the digital imperative, a likely irreversible change, that is forcing education providers to rethink their strategies. Although most students have returned to classrooms since the height of the pandemic, educational institutions can now be certain that blended or digital-only modes of learning are part of their future. Established high education providers can no longer afford to put off investment in the digital future, as growing competition from new entrants in the market intensifies. The strongest challenges are posed by online-only providers of MOOCs (Massive Online Open Courses). This segment has seen rapid growth in 2020, increasing its international base of registered learners by 50%, and reaching 180 million users (excluding China).2 US-based MOOC Coursera has led the charge, adding 30 million new users in 2020 and attracting substantial new funding to increase its expansion. There is growing expectations that MOOCs, as they refine their models, will have a larger impact on the sector in the years to come. 

Global spending on education technology is also showing signs of expansion. Total spending worldwide in 2020 was US$227bn, accounting for 3.6% of total expenditure on education and training. Spending is expected to grow rapidly in the coming years, reaching US$404bn in 2025.3  Advanced technologies that enable immersive and multi-sensory learning methods, such as augmented and virtual reality (AR/VR), are expected to grow fastest to around US$13bn globally, while AI and robotics spend is expected to reach US$9bn.4 Investors follow the suit, as the EdTech segments attracted over US$16bn venture capital (VC) investment in 2020, up from just US$1.8bn in 2014.

EdTech boom: Global Venture Capital (VC) investment in EdTech, 2015-2020 (US$bn) 

There are however significant structural challenges that remain in place that may hinder the growth EdTech. The lack of high-quality broadband infrastructure needed to support more advanced forms of learning, coupled with teachers’ lack of readiness to embrace digital forms of learning are some of the biggest limits to the growth in the sector. Governments and telecom companies have a major role to play in upgrading the current broadband infrastructure, guaranteeing faster levels of connectivity and increasing digital skills training. There are further concerns towards data security and the need to ensure adequate data privacy practices by EdTech firms. 

    1 Fortune Business Insights, 2020: https://www.fortunebusinessinsights.com/higher-education-market-104503 2 The Report by Class Central, 2020: https://www.classcentral.com/report/the-second-year-of-the-mooc/ 3 HolonIQ, January 2021: https://www.holoniq.com/edtech/10-charts-that-explain-the-global-education-technology-market/ 4 Ibid

As a driver of economic growth and competitiveness, however, the science and production of digital technologies are also becoming an area of fierce competition between countries. Global spending on ICT (information and communication technology) has increased steadily at 4% annually for several years, reaching a total of US$4.9trn in 2019.1 Despite the pandemic-related slowdown in momentum for traditional type of hardware and enterprise software, spending on newer technologies such as IoT (Internet of Things), robotics, 3D printing, AI and VR is expected to grow at a faster pace. Global ICT spending is forecasted to increase from US$5.2trn in 2021 to US$5.8trn in 2023, with an annual growth of 6%. Newer technologies will account for 23% of total spend in 2023, up from 14% in 2018.2

The digital economy is also a considerable driver of international trade, with cross border exports of ICT good and services estimated at US$2.74trn in 20203. While trade in goods accounts for the highest share, trade in ICT services is growing annually by 7.7% (CAGR) between 2010 and 2017.4

Rapid recovery: Worldwide ICT spending, 2018-2023 (US$ bn)

Several high-profile sub-sectors epitomize the rapid growth of and challenges faced by the digital technology sector. The worldwide revenue from the sale of artificial intelligence (AI) -based software and services stood at US$62bn in 2020 and is set to reach US$998 by 20285. One study estimated the potential value generated by application of AI techniques across various industries places the market between US$3.5trn and US$5.8trn.6 However, there are two main obstacles that hinder a widescale AI adoption: the shortage of good quality data and data scientists, particularly as the talent that drives improvements in AI is largely concentrated in large economies such as the US, UK, Germany and China. 

Cybersecurity is also an area that has attracted growing investment from corporates and VCs. With the advent of the digital economy, cyber threats put organizations and societies at risk. Global revenues for cybersecurity services are projected to grow from US$67bn in 2019 to US$111bn in 2025.7 Funding for companies providing cybersecurity services has increased nine-fold to US$7.8bn in 20208. The pandemic has further highlighted security vulnerabilities faced by organizations, as the mass shift to remote working coupled with the increased use of cloud infrastructure and services have exposed many to cybersecurity threats. 

The pandemic has also impacted semiconductors, a key commodity for the digital economy representing a market expected to grow to US$469bn in 2021.9 A rise in demand for digital services and computer equipment caused severe supply chain disruptions across the global semiconductor production. The shortages have thrown light on the inadequate resilience of technology sector supply chains. They have also underscored the extreme concentration of semiconductor production. Although US firms account for 47% of global sales, most exports originate from East Asia—namely Taiwan, South Korea and China. Moreover, the most advanced generation of semiconductors is currently produced at scale only by Taiwan’s TSMC and South Korea’s Samsung.10

Something’s phishy: Share of cyber security breaches reported by UK companies over previous 12 months, by type of breach

As digital dominates more parts of the global economy, governments are taking proactive action to include the digital economy within national industrial policy. The need to gain strategic autonomy, in light of growing geopolitical rivalries, is prompting governments to adopt policies aimed at protecting their national technology sector. Since 2008, 101 countries representing more than 90% of global GDP have adopted formal industrial development strategies.11 These have focused mainly on supporting technology innovation and the digital economy. The resulting risk of fragmentation of global technology supply chains is likely to stay high on the agenda for global technology companies and governments around the world.

 

1IDC, Global ICT Spending: Forecast 2020-2023: https://www.idc.com/promo/global-ict-spending/forecast 2 Ibid 3 Estimated using World Development Indicators and IDC data. 4 Ibid 5 Grand View Research, Artificial Intelligence Market Size, Share & Trends Analysis Report, 2021-2028: https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-ai-market 6 McKinsey Global Institute, Notes from the AI Frontier, 2018:https://www.mckinsey.com/featured-insights/artificial-intelligence/notes-from-the-ai-frontier-applications-and-value-of-deep-learning 7 The Business Research Company, “Cybersecurity Industry Overview Shows US To Account For The Largest Share Among Countries, In The Global Cyber Securities Market 2020”, November 2020: https://www.globenewswire.com/news-release/2020/11/05/2121251/0/en/Cybersecurity-Industry-Overview- Shows-US-To-Account-For-The-Largest-Share-Among-Countries-In-The-Global-Cyber-Securities-Market-2020.html 8 Crunchbase, The Rise Of Global Cybersecurity Venture Funding, 2021: https://about.crunchbase.com/cybersecurity-research-report-2021/ 9 Semiconductor Industry Association, 2021 Factbook: https://www.semiconductors.org/wp-content/uploads/2021/05/2021-SIA-Factbook-May-19-FINAL.pdf 10 Ibid 11 UNCTAD, World Investment Forum 2018: https://unctad.org/system/files/official-document/wir2018_en.pdf  

 

 

 

Prior to the Covid-19 pandemic, consumer goods accounted for a quarter of the world’s trade in goods, representing US$4.8trn in 2019.1 In 2020 private consumption declined by nearly 11% in the UK and Italy, 6-7% in Germany, France and Japan and 4% and 3% in the US and China respectively.2 Some goods sectors suffered more than others. Travel, entertainment and hospitality were some of the hardest hit, while others, like electronics, saw demand increase as remote working became widespread. The pandemic has further accelerated several structural changes already underway. These include a rapid growth in e-commerce and digitalisation of global supply chains, an increased focus on sustainability, a move towards greater servicification and the reshaping of global value chains.

 

 Pandemic shock: Change in private consumption during the Global recession (2009) and Covid-19 pandemic (2020) | Real annual change (%)

 

During the pandemic, consumers pivoted to digital channels, with 60% of consumers worldwide changing their shopping behaviors during the pandemic, most of whom intend to continue with their new behaviors.3 The migration from high street stores to e-commerce platforms has accelerated digitalisation, with businesses that had already invested in e-commerce coming out as chief beneficiaries. Amazon, for example, posted a 70% increase in earnings during the first nine months of 20204, with profits three times higher than 2019.5

The pandemic also highlighted the issue of resilience and sustainability of global supply chains. Multinational enterprises (MNEs) in 2020 slowly started to scale back their supply chains, considering the geopolitical and economic tensions between the US and China and the growing issue of sourcing from a single geography. Significant supply chain disruptions were faced by businesses during the pandemic, with one survey on supply chain executives in the food and consumer goods industries highlighting that at the height of the pandemic, 91% of respondents said they had problems with suppliers.6 These tensions are playing out in the context of rapidly changing geographical distribution of global trade patterns. In the decade since the 2008 financial crisis, Chinese share of global exports has increased to 17% (from 11.5%) and 13.4% of global imports (from 8.7%).7 The Asia-Pacific region is now largely expected to outgrow developed markets in consumer goods, accounting for up to 35% of the global industry share by 2022.8 

 

The changing game of trade: The export volume of goods index rebased to 2010=100

The rise of digital and sustainable consumption poses significant opportunities and challenges for businesses in the consumer goods sector. The online retail market is forecast to double in size by 20259, with new or low frequency users expected to drive a 160% increase in e-commerce purchases over the coming years. Businesses are showing some strong interest in harnessing the trends of digitalization with 80% of executives in the industry specifically allocating investments to improve their e-commerce shopping platforms in 2021.10

Digital future: Share of on-line retail on total retail sales (%)

Sustainability has also moved high in the consumer goods agenda, with more than half of consumers across all markets intending to purchase more sustainable products once the pandemic subsides.11Businesses are adapting to increase resilience and sustainability of their internal businesses and their supply chains. Advances in cloud software, blockchain, artificial intelligence (AI) and satellite technology can be harnessed to enable flexibility and resilience in supply chains.

  1 UNCTAD. ‘Key statistics and trends in international trade 2020’ (internet). United Nations Conference on Trade and Development. 2021 (accessed 9.6.21). Available at: https://unctad.org/system/files/official-document/ditctab2020d4_en.pdf 2 Remes, J. Manyika, J et al. ‘The consumer demand recovery and lasting effects of COVID-19’ internet). McKinsey. 2021 (accessed 9.6.21). Available at: https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/the-consumer-demand-recovery-and-lasting-effects-of-covid-19 3 McKinsey. ‘Perspectives on retail and consumer goods’ (internet). McKinsey & Company, 2020 (accessed 7.6.21). Available at:https://www.mckinsey.com/~/media/McKinsey/Industries/Retail/Our%20Insights/Perspectives%20on%20retail%20and%20consumer%20goods%20Number%208/Perspectives -on-Retail-and-Consumer-Goods_Issue-8.pdf 4Takefman, B. ‘Amazon profits increased nearly 200% since start of Covid-19 pandemic’ (internet). ResearchFDI. 2021 (accessed 14.6.21). Available at: https://researchfdi.com/amazon-covid-19-pandemic-profits/ 5Sky News. ‘Amazon’s profits more than tripled in the first three months of 2021’ (internet). Sky. 2021. Accessed 14.6.21). Available at: https://news.sky.com/story/amazons-profits-more-than-tripled-in-the-firs... 6 Alicke, K. Gupta, R. Trautwein, V. ‘Resetting supply chains for the next normal’ (internet). McKinsey. 2020 (accessed 8.6.21). Available at: https://www.mckinsey.com/business-functions/operations/our-insights/resetting-supply-chains-for-the-next-normal 7 Eurostat. ‘World trade in goods’ (internet). Eurostat - statistics explained. 2020 (accessed 8.6.21). Available at:https://ec.europa.eu/eurostat/statisticsexplained/index.php?title=World_trade_in_goods#World_trade_in_goods:_developments_between_2008_a nd_201f 8 Accenture. ‘A new era of trade for consumer goods industry’ (internet). Accenture, 2020 (accessed 8.6.21). Available at: https://www.accenture.com/_acnmedia/pdf-73/accenture-new-era-of-trade-for-consumer-goods-industry.pdf 9 EIU. ‘Digital disruption: risks and opportunities in the shift to online’ (internet). Economist Intelligence Unit. 2020 (accessed 14.6.21). Available at: https://www.eiu.com/n/digital-disruption-risks-and-opportunities-in-the-shift-to-online/ 10 Deloitte. ‘2021 consumer products industry outlook: No-regret moves in the face of uncertainty’ (internet). Deloitte. 2021 (accessed 14.6.21). Available at: https://www2.deloitte.com/us/en/pages/consumer-business/articles/consumer-products-industry-outlook.html 11 YouGov. ‘International FMCG/CPG report 2021’ (internet). YouGov. 2021 (accessed 14.6.21). Available at: https://db42aa43a2d5ed566294-81964d36a501d7a15be4d8350b0feec4.ssl.cf3.rackcdn.com/YouGov-International-FMCG-Report- 2021%20(2).pdf