Corporate Strategy in an Uncertain World
2016 may be considered as a very volatile year with many uncertainties occurring, like the Brexit and Donald Trump as the next US President. In this very unpredictable environment, corporate leaders are pressured to not only deliver consistently high financial results, but also have a clear winning and sustainable competitive strategy.
The challenge for corporate leaders is about being able to not only lead their organisation to greater heights, but also keep their organisation versatile and flexible to follow their vision as well as constantly adapt to the numerous changes.
Managing Geopolitical Risks
The fallout of two major 2016 events - the United Kingdom (UK) breaking off from the European Union (EU) and Donald Trump becoming the next US President - will bring along many uncertainties in 2017.
In the speech of the British Prime Minister Theresa May, the British government seem to be preparing for a 'hard-Brexit', with the UK giving up full access to the European Union in order to have full sovereignty over its borders. Moreover, with the rise of populism, the European Union will also face challenges and risks, that may break it apart.
As a result, global organisations, operating within the UK and European markets, need to prepare contingency plans for various potential scenarios. In a post-Brexit environment, global banks, like HSBC, Goldman Sachs and UBS, are already preparing for the UK losing free access to the other 27 countries in the EU. For business continuity purposes, critical staff, operating within the European capital markets, are being moved to Paris, Frankfurt and elsewhere within the EU.
" ... the British government seem to be
preparing for a 'hard-Brexit', with the UK
giving up full access to the European Union in
order to have full sovereignty over its borders ... "
Brexit will also bring about uncertainties within the automotive industry in the UK and Europe. Japanese automotive manufacturers, like Toyota, Honda and Nissan, have significant manufacturing activities within the UK, producing cars, that are primarily meant for export in the EU. Similarly, car manufacturers in Germany and France, that export to the UK, will be affected. Brexit will definitely affect their short term financial results with a drop in exports as well as their long term investment plans in the UK.
Another geopolitical risk in 2017 is the rise of Donald Trump as the next US President. In his inaugural speech, he is focused on putting 'America First'. Moreover, if he puts into action his campaign rhetoric against China and Mexico, he will bring America on a collision path against its global economic partners. A trade and currency war against China and Mexico will be detrimental to all and it may eventually pull the global economy into recession again.
"Another geopolitical risk in 2017 is the rise of Donald Trump as the next US President. In his inaugural speech, he is focused on putting 'America First'."
Although it is very hard to predict the aftermath of these geopolitical events, corporate leaders need to do major organisational assessment and scenario planning so as to be in a better position to foresee and adapt to the changing environment. Moreover, to manage resistance against major changes and keep their organisation flexible, these leaders need to keep communicating to their workforce about the challenges ahead and the steps taken to tackle them.
Other major challenges faced by organisations come from disruptive technologies. All industries are facing some form of disruption brought about by new technologies. They are not only challenging, changing and re-inventing the traditional business models, but also the pace of change, that they are bringing about, is getting faster and faster.
Hence, the life-cycle of products and services is getting shorter and shorter. On the one hand, successful organisations are those that innovate and drive those trends in new disruptive technologies. On the other hand, organisations, that try to just manage and adapt to these changes, will eventually face obsolescence.
"All industries are facing some form of disruption
brought about by new technologies. They are not only
challenging, changing and re-inventing the traditional
business models, but also the pace of change, that they are
bringing about, is getting faster and faster."
Another rule repealed by Trump is the Dodd-Frank Section 1504, the Cardin-Lugar rule, also known as the 'Publish What You Pay' law. It was meant to combat corruption by forcing US listed energy and mining companies to publish all payments made to foreign countries. The result of this executive action is that in the name of maximising profits, these companies may undertake course of actions that will lead to an increase in corruption in Africa, as well as in the plundering of its many natural resources.
As for foreign assistance to Africa, the US spent $8bn in 2016 for various programmes encompassing people, health education, peace and security, as well as others. For 2017, it is forecasted that the amount for assistance to Africa will drop to about $7.1bn and for 2018, the US Department of State is budgeting an even lower amount of $5.2bn, a drop of about 31% from 2016.
"... startups like Betterment, Wealthfront,
Money Farm and Scalable Capital are
changing the wealth management and private
banking industry by providing customer
focused services at a much lower fee."
Another example is Uber, that is challenging the whole transportation and logistic industry. With its technology platform, Uber has disrupted the whole taxi industry by providing better connection between drivers and customers. Uber is now focusing on self driving technologies, that will eventually transform the transportation industry. Not only Uber is currently testing self driving taxis in Pittsburg, but also, through its recently acquired startup Otto, it will change the trucking industry with the Otto self driving technology.
Last but not least, manufacturing is being transformed by Industry 4.0, that is bringing about automation, collaborative robotics, and artificial intelligence together. Additive manufacturing and Industry 4.0 will change the way we design and manufacture products. For instance, in the automotive industry, Ford is automating its assembly plant in Germany with collaborative robotics, whereas General Electric is using more and more additive manufacturing in its aerospace business.
The future is unpredictable. The big challenge for corporate leaders is to be aware of disruptive trends and implement transformational changes within their organisations, so as to drive change and maintain their competitive edge within their industry.