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Tackling the world’s affordable housing challenge

October 27, 2014 Comments off

Tackling the world’s affordable housing challenge
Source: McKinsey & Company

Decent, affordable housing is fundamental to the health and well-being of people and to the smooth functioning of economies. Yet around the world, in developing and advanced economies alike, cities are struggling to meet that need. If current trends in urbanization and income growth persist, by 2025 the number of urban households that live in substandard housing—or are so financially stretched by housing costs that they forego other essentials, such as healthcare—could grow to 440 million, from 330 million. This could mean that the global affordable housing gap would affect one in three urban dwellers, about 1.6 billion people.

A new McKinsey Global Institute (MGI) report, A blueprint for addressing the global affordable housing challenge, defines the affordability gap as the difference between the cost of an acceptable standard housing unit (which varies by location) and what households can afford to pay using no more than 30 percent of income. The analysis draws on MGI’s Cityscope database of 2,400 metropolitan areas, as well as case studies from around the world. It finds that the affordable housing gap now stands at $650 billion a year and that the problem will only grow as urban populations expand: current trends suggest that there could be 106 million more low-income urban households by 2025, for example. To replace today’s inadequate housing and build the additional units needed by 2025 would require $9 trillion to $11 trillion in construction spending alone. With land, the total cost could be $16 trillion. Of this, we estimate that $1 trillion to $3 trillion may have to come from public funding.

However, four approaches used in concert could reduce the cost of affordable housing by 20 to 50 percent and substantially narrow the affordable housing gap by 2025. These largely market-oriented solutions—lowering the cost of land, construction, operations and maintenance, and financing—could make housing affordable for households earning 50 to 80 percent of median income.

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A time for stress: The challenges facing Europe’s banks

October 10, 2014 Comments off

A time for stress: The challenges facing Europe’s banks (PDF)
Source: McKinsey & Company

In November the European Central Bank (ECB) will officially take overall responsibility for the supervision of major European banks under the Single Supervisory Mechanism. This is one of the biggest structural changes in the financial-services regulatory environment in the past 30 years. Europe’s banks are facing tough new minimum that they need to make some major changes.

2015 Individual (Health Insurance) Exchange Filings as of August 27, 2014

September 4, 2014 Comments off

2015 Individual Exchange Filings as of August 27, 2014 (PDF)
Source: McKinsey & Company

The content that follows includes public individual market exchange filings released as of August 27, 2014, for the following 19 states: California, Colorado, Connecticut, District of Columbia, Georgia, Indiana, Kentucky, Maine, Maryland, Michigan, Nevada, New York, Ohio, Oregon, Rhode Island, Tennessee, Vermont, Virginia, Washington.

Analyses are confined to states that include complete filings for on-exchange carriers as well as rate tables for those filings.

Please note: these rates are preliminary and have not gone through the final rate review process (that is, HHS and in some cases states have not approved the filings, and carriers can still change pricing and remove themselves from offering products). This report does not include off-exchange rates.

See also: 2015 Individual Exchange Filings (Real-time updates on emerging 2015 rate filings)

McKinsey on Sustainability & Resource Productivity — Issue 2, Summer 2014

August 14, 2014 Comments off

McKinsey on Sustainability & Resource Productivity — Issue 2, Summer 2014
Source: McKinsey & Company

Articles in this issue

McKinsey on Sustainability & Resource Productivity—Introduction
In this second issue of McKinsey on Sustainability & Resource Productivity, we seek to establish the value of sustainability and to demonstrate how these opportunities can (and are) being captured in a range of industries.

Profits with purpose: How organizing for sustainability can benefit the bottom line
Becoming a sustainability leader requires big changes, but the effort is worth it—in both environmental and economic terms.

The human factor: Amassing troops for the ’resource revolution‘
Companies on the front lines of the resource revolution need to implement creative talent-management strategies.

Riding the resource wave: How extractive companies can succeed in the new resource era
With economic and social expectations rising in resource-rich countries, extractive companies must rethink how they do business.

Brave new world: Myths and realities of clean technologies
Don’t be fooled by high-profile setbacks. The cleantech sector is gaining steam—with less and less regulatory assistance.

Unconventional wisdom: Fracturing enters a new era
Faced with change on a scale not seen in decades, companies must alter their business plans to accommodate unconventionals or else risk irrelevance.

The disruptive potential of solar power
As costs fall, the importance of solar power to senior executives is rising.

Bioenergy in Europe: A new beginning—or the end of the road?
Bioenergy faces challenges in Europe, but there is reason to believe it can make a comeback.

Creating growth clusters: What role for local government?

August 6, 2014 Comments off

Creating growth clusters: What role for local government?
Source: McKinsey & Company

Many governments in industrialized countries aim to encourage entrepreneurship and start-up activity to spur job creation and economic growth. To what extent governments are capable of doing so is uncertain. Nonetheless, policy makers at the regional and municipal levels are closer to the sources of innovation than those at the national level. For example, innovation in the form of start-up activity tends to occur in large metropolitan areas, initially without the involvement of policy makers. Take Berlin, where a vibrant ecosystem developed in the past several years without systematic government intervention.

While an enabling policy context might not be a precondition for seeding entrepreneurial activity, it may become more critical when taking a cluster to scale. To flourish, entrepreneurial activity requires a concentration of talent, infrastructure, capital, and networks—key success factors of a start-up ecosystem, as epitomized by Silicon Valley. Not all economic-policy instruments aimed at nurturing start-ups are at the city level. Still, local policy makers should think systematically about what it takes to support a start-up ecosystem. When doing so, their focus could be on tackling the bottlenecks and constraints that might otherwise inhibit a vibrant start-up ecosystem rather than picking winners by supporting investment in particular sectors or business models.

Lions go global: Deepening Africa’s ties to the United States

August 5, 2014 Comments off

Lions go global: Deepening Africa’s ties to the United States
Source: McKinsey & Company
The White House has invited some 50 African heads of state to Washington, DC, this week, presenting a historic opportunity to deepen US ties to the continent. But it would be a mistake to assume that the benefits of the US–Africa Leaders Summit will flow primarily to Africa. There is huge economic potential for the United States, too.

Africa is transforming from a continent in need of assistance to a continent of opportunity. Its economic growth is today second only to the East Asia region, which includes China,1 and Africa was home to 8 of the world’s 15 fastest-growing economies between 2000 and 2013. Indeed, the continent’s GDP of more than $2 trillion in 2013 is now larger than India’s.

Investors around the world have taken notice. Private-capital flows to Africa totaled $545 billion from 2003 to 2012, surpassing remittances and official aid. Yet the United States lags well behind Europe, BRIC, and the Middle East in terms of the amount of foreign-direct investment (FDI) it sends to Africa. Moreover, the US share of African trade stands at only 13 percent, just half the share of Western Europe or Asia.

This may be a missed opportunity. Africa offers a higher rate of return on FDI than most emerging economies—in sharp contrast to returns that foreign investors earned 20 years ago (Exhibit 2). But to date, economic engagement between the United States and Africa has been limited relative to its potential, and much smaller than Europe’s and Asia’s economic engagement with Africa.

China’s digital transformation

July 29, 2014 Comments off

China’s digital transformation
Source: McKinsey & Company

As individual companies adopt web technologies, they gain the ability to streamline everything from product development and supply-chain management to sales, marketing, and customer interactions. For China’s small enterprises, greater digitization provides an opportunity to boost their labor productivity, collaborate in new ways, and expand their reach via e-commerce. In fact, new applications of the Internet could account for up to 22 percent of China’s labor-productivity growth by 2025.

Yet the Internet is not merely a tool for automation and efficiency; it also expands markets rapidly. Greater adoption of web technologies in China could lead to the introduction of entirely new products and services if government and industry take the right steps to maximize the potential (exhibit). A new report from the McKinsey Global Institute (MGI), China’s digital transformation: The Internet’s impact on productivity and growth, projects that new Internet applications could fuel some 7 to 22 percent of China’s incremental GDP growth through 2025, depending on the rate of adoption. That translates into 4 trillion to 14 trillion renminbi in annual GDP in 2025.

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