Business strategy should take into account the geoeconomics surrounding a business firm at the micro level and the country itself on the macro level. Here are few highlights:
Most of the time a country gets into crosshair with one or more geoeconomics centres only if they are too dependent on international trade. This gets exasperated in today’s context of US-China rivalry. The incoming president of Indonesia General Prabowo was blunt when he said he would have relationship with both US & China equitably. Not only Indonesia but countries in the East Asian region as a whole need to be more non-aligned in terms of trade and other relationship with these centres of geoeconomics power.
Avoiding vulnerability is a policy measure in the governments of these countries along with stipulated “neutral business strategy” in the case of firms that are located therein. Vulnerability to a great extent is measured by the degree of inter-dependency a country has on the subject of international trade. In the case of Non Korea it is non-existent. But others cannot enjoy this luxury.
Where a country has vast lower-middle class or poor class can take vulnerability in its stride. If the population is skewed towards middle-class that is growing leaps and bound then geoeconomics vulnerability increases geometrically. Satisfying their needs requires firms to import products from a single source that is comparably cheaper amongst others in geoeconomics spectrum. A god source for this type of imports is China that supplies products at as low as one-fourth of the cost of US items.
This leads to the analysis of proportion of inter-dependence that matters much in international trade. Taking the example of US–China trade rivalry we can segment four scenarios:
High dependency on both
Moderate dependency on both
High dependency on China less on USA
High dependency on US less on China
Overall the impact of geoeconomics vulnerability is higher in
scenarios first and fourth as US tends to impose sanctions against any country
that does not toe her line without much qualms. In the case of China she
does not bang on the sanctions game pronto!
Additional dimension of vulnerability spectrum that somewhat softens the degree and quality of it is the nature and tenor of sanctions imposed. Ordinarily vulnerability could be either symmetric or asymmetric. In the case of former both countries US & China in cohesion could decimate a target country that experience high dependency in terms of exports to and imports from both of them.
Asymmetric vulnerability occurs where only one country could, act as a spoiler whereas the other can help the victim to alleviate the ills of geoeconomics downswing. A good example is Azerbaijan which exports to and imports from both countries deliberately in order to forestall at best and lessens at least any ill-effects of geoeconomics vulnerability emanating from either party!
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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