Business environments, uncertainty and strategies for survival

[addthis tool=”addthis_inline_share_toolbox”]

It is relatively easy to see the effects of business environments in oft-cited examples such as IT in Bengaluru or Hyderabad, the Creative industry in Mumbai or Hyderabad again or say Coffee in Malnad (south western Karnataka) and Wyanad (north eastern Kerala). It is also not difficult to understand that forces beyond the control of Tata Motors is what drove the Nano project out of Bengal and the quick reaction from the Gujarat Government that drove it right across the country to its current western Indian home. It is more difficult to locate such an advantage that business environments accord businesses when conditions between contexts are very similar, evidenced for instance by the failure of the IT / ITES sectors to take root anywhere beyond Bengaluru, in spite of arguably identical base conditions in Hubli, Mysore, Mangalore etc., within the state of Karnataka, though the scales could be different.  

Business environments of course extend well beyond geographic concentration of factors of production, demand elements or availability of appropriate forms of capital and so on and encompass elements across and between value chains or value networks as they increasingly known.

They (Business environments) can in simple terms be understood as the resultant total of conditions within which organizations, institutions, entrepreneurs or groups of individuals operate in the pursuit of fulfilling the needs and wants of paying customers, via enterprise, public or private. These are conditions, both existent and created; existent as in present historically or a result of preferential access to natural endowments and the like, and created conditions, as in deliberate actions taken by different actors, public and private, with influence. These actors could be Government agencies, trade partners, large businesses, industry associations, investors, NGOs and resident communities themselves. These actions, amongst other things, include policy making, creating and fostering institutional frameworks, setting up and running a skills and training apparatus as also logistics and communications infrastructure and so on. Indeed, the result of any of these actions can range from clearly regressive to trail blazingly progressive.

It is clear therefore that scores of different factors come together in complex ways to create the, at times ‘kinked’, continuum of conditions, in which businesses must navigate the reality of daily existence. Good conditions by extension would make routine operational issues relatively easy and allow time and creative resource to strategically create better futures. The worse the conditions, on the other hand, including such things as war, climate change, hostile / predatory competition or even globalization, which individual businesses may have little effect on, can make the ‘here and now’, the greatest imperative, thus making even the medium, let alone the long term, extremely uncertain.

This became apparent in the post great recession phase (2009 onwards) when it became clear that the de-coupling of large and growing chunks of the world economy (BRICS and other emerging markets) from the western economy (including Japan), was indeed a good thing. The Indian economy turned out to be one of the most resilient. On the other hand, more connected parts of the global economy faced an economic tsunami of sorts. The housing sector in the US to the oil & gas sector in Angola were equally brutally affected.    

We have also seen from recent elections results across the world and the impending BREXIT, that globalization is at least partially reversible, the implication being that it may after all be a good thing to be somewhat inward looking while not missing out on opportunities that external markets bring. Oriya diamond cutters in Surat would certainly breathe easier if the diamond trade could strike this balance. The overall point being that business environments are at once hyper local and global. It is vital therefore to find ways to create resilience in local systems even while exploiting external (near field and far field) opportunities and withstanding destabilizing forces at the same time. 

This coming together of actors, factors, often with some geographical concentration and occasional ‘force majeure’ type phenomena, may be seen as economic systems, with less or more connectedness to other economic systems. This way of categorizing businesses and contexts has been argued to be an effective way to study business environments. A study consequently from a systems point of view, would account for degrees of isolation from other systems versus interconnectedness and suggest ways to make both the local and global profitable and more importantly simultaneously sustainable.

[addthis tool=”addthis_inline_share_toolbox”]

Ishwar Haritas
Finance & Strategy
In a career spanning over 15 years Prof. Haritas has worked in industry, not for profit organizations and Inter-governmental agencies, in over 15 countries, across 3 continents, on scores of strategy design and execution projects / programmes. Early in his career he was part of several strategy planning groups both at national and Asia Pac levels and serviced such clients as American Express, Iridium, Standard Chartered Bank, BPL Telecom, ProFX and Madura Garments. Subsequently, as an independent management consultant he led several strategic reorganization and value chain reconfiguration projects with medium sized Indian businesses looking to expand into international markets and into higher value added activity.