Economy

Multi-billion dollar industries

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SmartCompany’s Developing an Entrepreneurial Australia Roundtable came up with 10 multi-billion dollar industries of the future. JAMES THOMSON talks to IBISWorld’s general manager Rob Bryant about two more

SmartCompany Roundtable

As part of SmartCompany’s Developing an Entrepreneurial Australia Roundtable, we asked IBISWorld general manager Rob Bryant to nominate the 10 multi-billion dollar industries of the future. 

We then asked our panel of 17 entrepreneurs and experts to try and identify the niches within these sectors that Australian businesses can exploit. In the second of a five-part series, JAMES THOMSON looks at two more of the 10 big industries of the future – ICT and health. 

If you are already operating in one of these sectors, we’d love to hear from you about the opportunities and barriers that exist. Send your feedback here. See last week’s story for the first two of these billion-dollar sectors.

 

3. IC&T and knowledge industries – communications & data services

To understand the importance of the information, communication and technology industry and the communications and data services sub-sector, you need to look to the past.

When IBISWorld general manager Rob Bryant examines the last 100 years, he sees two distinct eras. The period leading up the 1964 is the industrial age, where the pervasive utilities were electricity, gas, water and telephony and the industry-specific systems and technologies included chemicals and mass production technologies.

After 1964, Australia entered the infotronics age, which Bryant expects will last until the 2040s. The industry-specific systems and technologies range from open-cut mining and laser-levelling in agriculture, to self-service retailing, biotechnology, distance-learning for education and much more.

Key statistics, 2007

Statistic

Value

Industry revenue

$45,802.9 million

Revenue growth (2006-07)

0.1%

Number of enterprises

1303

Employment

193,650

Exports

$815 million

Imports

$860 million

IBISWorld estimates

Products and service segmentation

Major market segments

Industry outlook

The communications and data sub-sector was represented at SmartCompany’s Roundtable by Simon Baker, chief executive of online real estate classifieds company, realestate.com.au.

While Baker is bullish about his company’s growth prospects in Australia and overseas (realestate.com.au operates in 12 countries) he says there is one thing holding the ICT sector back. “We need broadband infrastructure that actually works,” he says.

IBISWorld forecasts that this industry will grow at an average annual rate of 1.6% over the five year period to 2012-13. Revenue during this period will continue to be influenced by GDP growth, downstream demand from the corporate sector and changes in legislative requirements.

The digital revolution will seek to entrench consumer needs for technologically advanced and effective communication tools.

Key sensitivities

IBISWorld also nominates a number of factors that will affect the performance of the property and business services sectors. These include:

  • Domestic appliance retailing. The penetration and use of personal computers in the home and consumer use of electronic on-line services (for example, home shopping).
  • Free-to-air and pay television services. The rate of growth in new users (that is, users of the telecommunications networks), particularly electronic services such as on-line services and pay-TV services.
  • Property and business services. The rate of growth in new users (users of telecommunications networks), particularly electronic services such as electronic data interchange.
  • Legislative compliance requirements – communication services. Federal and state government policies and regulations for the communications industries and new network user industries, such as on-line services, broadcasting (including pay-TV) multimedia and computing industries. Changes to local government planning regulations with respect to the construction of new telecommunications infrastructure.
  • GDP growth. The rate of growth in new users (users of the telecommunications networks), particularly electronic services such as EFTPOS systems.

 

 

4. Health

Australia’s aging population will create a number of opportunities, but none bigger than the health sector. IBISWorld forecasts that this industry will grow at an average annual rate of 5.2% over the five year period to 2012-13, although it must be said there are some uncertainties about future growth. More particularly, it is difficult to determine the extent to which drugs currently in development will progress to the market and be successful.

Key statistics, 2007

Statistic

Value

Industry revenue

$87,221 million

Revenue growth (2006-07)

3.9%

Number of enterprises

136,781

Employment

1.078 million

IBISWorld estimate

 

Products and service segmentation

Major market segments

Industry outlook

The Australian biotechnology has been focusing on the areas of human health and agriculture. Both these areas are the focus of the National Biotechnology Strategy, and are expected to continue showing positive growth in the outlook period.

Richard Treagus, chief executive of Australian biotechnology company Acrux, was SmartCompany’s health and biotechnology representative at the Roundtable. His company has developed a technology that allows pharmaceuticals to be taken through the skin, applied as a spray or a liquid. Its first product, a menopause drug called EvaMist, hit the shelves in the US in April.

Treagus nominated pharmaceutical development and health system development as two areas of the health sector that are good targets for Australian companies. But there are plenty more; the aged care area will have to grow, as will the childcare sector.

IBISWorld expects the personal health care services sector to provide growth – just as personal trainers have filled the gap between the fitness club and the customer, we are likely to see health practitioners working directly with customers, rather than through an intermediary like a doctor’s surgery or medical centres.

Richard Treagus also nominates a few hurdles to pursuing growth, notably a lack of skilled workers and IP protection. Funding models also remain a huge challenge and Treagus would like to see investors take a more long-term view of the sector.

Key sensitivities

IBISWorld also nominates a number of factors that will affect the performance of the property and business services sectors. These include:

  • Age group (55+). An ageing population is creating demand for more life-enhancing and life-extending drugs, which are developed by this industry.
  • GDP growth. The industry is extremely reliant on sound investor confidence, which is bolstered by a strong economy. Strong confidence in sharemarket returns, along with the potential of the biotechnology industry to bring products to market, will increase the availability of speculative capital used to fund start ups and more established companies (that may be close to product commercialisation). Investor confidence also ensures that capital remains with a company over the long term (as products can take a decade or two to come to market).
  • Research and development expenditure. The Federal Government provides grants and funding to biotech companies, as well as funding government research facilities such as CSIRO. Changes in the structure of government funding have been blamed for slower industry growth in recent years.
  • All Ordinaries Index. A healthy sharemarket assists biotechnology companies in raising capital.

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