How Companies Can Capitalize on Geopolitical Turmoil

Srividya Jandhyala is an award-winning researcher with a PhD from The Wharton School, and is a Professor of Management at ESSEC Business School. For over 15 years, her research has focused on the strategies of global companies and how they successfully navigate the international environment.

Jandhyala‘s new book, The Great Disruption: How Geopolitics is Changing Companies, Managers, and Work published earlier this year, and examines how geopolitical shifts and global politics shape companies’ strategies, investment decisions, and competitive advantage, and, offers practical strategies and real-word examples for navigating today’s complex landscape.

Inc. asked Jandhyala to talk about how her book can be useful to entrepreneurs:

What problem are you trying to help solve with this book? 

Most managers of global companies came of age in an era where geopolitics did not have such a constraining role.

These managers took for granted greater economic integration and strong institutional foundations that support it. They went to business school to learn about reading financial statements, analyzing investments, and selling to old and new customers. However, they had little-to-no training on navigating a world dominated by trade wars, national security concerns, shifts in the global balance of power, or technology decoupling. As they face a new landscape, they have to figure it out on the fly.

This book is an attempt to highlight research on these complex questions and offer a research-based, structured framework to think about how companies could navigate a fast-changing world.

How does the current geopolitical landscape affect small business owners? 

It is tempting to think of geopolitics as a factor that is only relevant for large multinational corporations. That could not be further from the truth.

Geopolitics shapes small companies and startups in many ways. Let me highlight 4 of these.

First, small companies see a direct effect on their costs and supply chains. For example, as tariffs increase, small businesses have to deal with increased costs and the challenge of managing their global supplier network.

Beyond this, geopolitics is also fundamentally reshaping the business model and strategy of many small companies and start-ups. Assessing the defining feature of geopolitical risk for companies (corporate nationality), the skills companies will need to invest in (scanning, personalizing, planning, and pivoting), as well as understanding how the future of work is impacted by geopolitics (not just technology) will offer managers a set of tools to deal with a dynamic environment.

Third, geopolitics shapes which technologies entrepreneurs and small businesses have access to. Whether this is through government funding that prioritizes certain technologies, export controls and investment screening rules that limit access to foreign technologies, or the rising challenges to scientific collaboration across countries, technology startups have to figure out an alternate path to viability.

Finally, small businesses, entrepreneurs, and startups are discovering that remote work is shaped by geopolitics. Even as the technology for remote work is improving, geopolitical considerations challenge its implementation. Government restrictions increasingly shape who can work on projects, what the work is, and where it can be done. For example, as national security focus and data localization become more widespread, companies will find it harder to distribute work geographically and allow the flexibility that comes with remote work.

Which of these areas should business owners pay the most attention to?

Corporate nationality is the defining feature of corporate geopolitical risk. When national security considerations are high, the key question defining a company’s geopolitical risk in a foreign market is: Where are you really from? The answer to this question defines whether a company faces challenges or finds opportunities.

It shapes how companies compete, the resources they have access to, and whether they have an advantage or disadvantage in global operations. Companies that come from perceived rival countries face challenges and even hostilities. Indeed, those challenges may have nothing to do with what the company does or how good its products and services are. Rather, it comes down to its corporate nationality.

Is there an upside to any of this?

Geopolitical flux is not just about risk, but also about opportunities. Imaginative leaders and managers will find ways to leverage the company’s position in the global system to create market opportunities.

At the same time, managers also should recognize that new organizational roles are coming up. These relate to more government engagement, acting as information brokers, and incorporating redundancy. Leaders should plan for a different type of project team and perhaps different metrics to gauge success.

Is there an important idea or concept that didn’t make it in the book?

Managers are smart but busy people. They are juggling many things, so they will focus their attention and their company’s resources on issues they see as being immediately critical. In years past, geopolitics was basically a strong tailwind, opening new markets and allowing them to compete on product and brand characteristics, or fashion trends.

Today’s situation is different, as geopolitics threatens to close lucrative markets, increase costs of doing business abroad, or create an uneven playing field. As long as the external environment remains in flux, companies have to rely on geopolitical strategies to understand the new world, internalize the impact, and pivot to align with longer term needs.

And finally—what does innovation mean to you? How does this book teach, examine, or spark innovation? 

Innovation, as the development of new ideas or technologies, is at the heart of geopolitical competition.

As innovation becomes the battlefield of geopolitical tensions, corporate nationality is increasingly defining which firms can access new knowledge, innovate, and find new sources of competitive advantage.

In sectors that are key to national security, a significant concern is that foreign firms—especially from perceived rival countries—do not undermine domestic innovation efforts or gain a relative advantage.

With these goals in mind, governments around the world have increased scrutiny of foreign firms and carefully assess whether foreign acquirers will pose national security threats. Such restrictions can dramatically lower the likelihood of foreign transactions and limit exchange between foreign and domestic firms.

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