Businesses don’t exist in a vacuum. They’re part of a wider context of local ecosystems, national economies and an increasingly globalised international environment.
That’s why at ESEI, we want to make sure that our students – who will eventually become business leaders – know how external factors like economy and geopolitics affect businesses.
In a year as full of changes as 2020, it’s especially important that business leaders are aware of the context they exist in. That’s the only way they can learn how to adapt or react to it.
To find out more about the topic, we asked ESEI professor and international business consultant Jan Jonckheere.
About Jan Jonckheere
Jan has 31 years of experience working in international business. As a consultant, he advises SMBs on export and international expansion strategies. He’s an expert in international trade techniques, opening export markets, strategic management, and supply chain management.
He teaches two Master’s courses at ESEI: Operations and Production Management (Business Management programme) and Geopolitical Environment (International Business and International Relations programme).
There’s always room for debate around real-world issues in Jan’s classes. Students often engage in discussions about the current state of economies and the impact of the global geopolitical environment on businesses.
We asked him to give us a glimpse into his perspective. Here’s what he had to say:
Shifts in the balance of power
The COVID-19 pandemic triggered an economic and social crisis that left no nation untouched. While the crisis halted things like international tourism and trade, it accelerated others. Most notably, it quickened the global shift that had begun years before the pandemic: the redistribution of power amongst the global economy’s most potent players.
The balance of power between the European Union, the United States, Russia and China is a topic that Jan often discusses with his students. He notes that the events of this year have turned the tide in China’s favour.
“China had already been getting stronger before the pandemic. And now, it’s the only growing economy in the world,” he says.
China continues to develop as “the factory of the world.” It is asserting its international dominance by investing in other countries. The US, on the other hand, has been on a different journey.
“The US has started to face inward and turn away from the rest of the world. This began during the Obama administration, and Trump has dramatically accelerated it by withdrawing American troops from US military bases around the world, including Iraq and Afghanistan, working against international institutions instead of with them, and changing the conditions for trade with other parts of the world,” Jan says.
He explains that the absence of these troops creates a power vacuum.
“Wherever the US uses political power, China and Russia see opportunities,” Jan says. “These countries are actively expanding their military influence. In fact, China now has the world’s largest navy.”
In Jan’s view, the upcoming US elections won’t make much of a difference, regardless of the outcome. “It’s already gone too far.” As for the European Union, he says: “The EU is stuck in the middle between China and the US in terms of power, politics and economy.”
The EU is an organisation made up of 27 countries with different cultures, languages and markets. That means it has certain disadvantages when compared to the large, relatively homogenous markets of China and the US.
“Scaling up a company in the EU is much more difficult than it is in the US,” Jan says. “The EU has a couple of companies that you would call unicorns (startups valued over a billion dollars). But there are no tech giants like Facebook, Google or Amazon.”
Avoiding supply chain disruptions
Globalisation has many implications for businesses. And some of them were made very clear during the first few months of the pandemic.
Companies around the world rely on China’s factories for raw materials and manufactured products. The pandemic started in Wuhan, a city in the highly industrialised province of Hubei, where 200 of the Fortune Global 500 firms have a presence. This resulted in the disruption of global supply chains and consequent supply shortages around the world.
In order to build a more sustainable supply chain model, companies must think of new ways to source their products. Jan explains companies have started to mitigate risk by bringing back some production from China and other Asian countries.
“Nearshoring is a growing trend. Companies want flexibility. If their suppliers are in Turkey, for example, a country that has a Customs Union with the EU, they don’t need to worry about their supply chains breaking when something happens in the world,” he says.
Companies need to make these changes in order to adapt to the new way of doing business after the pandemic. But what else can companies do to not just survive, but continue to serve the changing needs of their customers?
How businesses can survive and thrive in a changing world
In his classes, Jan expects his students to adopt a critical mindset, which they develop through exercises and debates. He doesn’t just want them to understand the current economic and geopolitical happenings of the world. He also wants them to learn how to “use that information in their companies and apply the concepts they learn about in real-life situations.”
Jan points out that the digital revolution is underway. In the next few years, changes are going to happen very fast.
“We need to make sure we don’t get left behind,” he says. “That’s why a critical mindset is important.”
In Jan’s view, 2021 will be a tough year. However, companies can’t afford to spend it moping over their losses. They must focus on what’s to come after.
“We can be pessimistic, but there will be a moment when the virus disappears. We don’t know when, but it will. So what companies can do now is start preparing for when that moment comes,” he says.
The most obvious trend that companies need to jump on is digitalisation and the proliferation of omnichannel marketing. Consumer habits are changing and people are spending more time and money online. In answer, businesses must increase their online presence to reach their target audiences.Those that do will be better equipped to respond to the inevitable surge of post-crisis demand.
Jan also thinks that businesses should consider taking their operations beyond their countries borders.
“The crisis can be a good moment for SMBs to start thinking about exporting. Take advantage of the time that you have now. Start looking for distributors, and be ready to start exporting for when the crisis is over,” he says.
The next step in your career
Is a professional career in international business for you? You can learn more about our International Business and International Relations programme here!