Geopolitics in business, a strategic approach for post-global markets

We are therefore guided by the author himself - a political scientist specialising in international relations - in understanding the value of this approach, in order to verify the possible benefits for our companies.

Geopolitics was born in a different world and for different purposes: why could it be useful to a business today? 

A geopolitical approach to business could be useful to companies, especially small and medium-sized ones, because compared to a decade or two ago, today's context is more similar to the one in which Geopolitics established itself as a discipline. Geopolitics, in fact, established itself between the end of the 19th and the beginning of the 20th century in a world that was strongly interdependent, but equally marked by considerable nationalist tensions and very high levels of competition between states. Today, in fact, from a framework of prevailing interdependence, trust in the institutions that regulate international trade and a tendency to favour regulatory harmonisation between different areas of the globe, we have moved to a world in which interconnections are strong - indeed, they are accentuated by the technological factor - but competition is intense and progressively less regulated than in the past. The current positions of the United States are proof of this. In short, the very relationship between interdependence and competition that characterises the relations between the different regions of the globe has strong similarities with that typical of the context in which Geopolitics was established.

With respect to the contribution that geopolitics could provide to business management, being aware of certain similarities (and differences) between historical periods and international contexts and possessing the tools (or the professionalism) capable of bringing this approach to companies will increase the effectiveness with which companies position themselves and penetrate international markets, while also protecting them against dramatic and sudden changes such as those of the last four years.

Does geopolitical insight suit some types of businesses better than others? 

In general, the term geopolitics is used improperly - extensively and vaguely - which tends to generate misunderstandings regarding both the underlying content of any strategic planning methods that include a particular reading of the international context, and the areas (types of business and markets) of application of this tool.

A manufacturing company organised according to a hierarchical model, which sources and sells on the domestic market, is unlikely to benefit from a geopolitical approach, nor will there be room within its organisation chart (by definition simple, because it is divided between those who decide and those who implement) for a geopolitical advisor figure. On the other hand, should such a reality intend to evolve and position itself correctly in foreign markets, some form of geopolitical investigation will make it possible to optimise the relationship between the risks and benefits of the operation.

In short, it does not always make sense to talk about geopolitics, nor does it make sense to call it in without then being able to define the content. In business, it is better to be rigorous and effective than to resort to terms that are evocative but vague in terms of content and application.

What and how could Italian SMEs benefit from a geopolitical approach and knowledge?

With respect to company types, the issue of size comes into play especially in relation to the issue of risk and the complexity of decision-making processes. In large and complex companies, decision-making processes are highly articulated and the single strategic choice tends to have a limited marginal impact. In addition, risk mitigation bodies are often in place, which tend to further slow down any changes of course by decision-makers. In smaller companies, on the other hand, the chain of command and these structures are more agile. The strategic value of the individual decision, therefore, is greater. Paradoxically, however, it is precisely in these contexts that structures and cultures oriented towards the preliminary analysis of the relationship between risks and opportunities associated with certain decisions tend to be lacking.

In a complex and uncertain world, knowing how to choose which markets to engage in, how much and when to engage is crucial. Consequently, small and medium-sized companies that know how to channel a geopolitical approach into their processes will leap forward in terms of effectiveness and results. In short, it is plausible that they will evolve towards higher forms of entrepreneurship.

At what level of corporate action is the geopolitical function positioned?

A geopolitical approach starts with leaders, top management or the family - in the case of a family business - who understand and see the value attached to such a methodology. In the absence of this input, geopolitics will remain a parlor topic, as no entrepreneur or manager will allocate a dedicated budget or role. Once that step is taken, if appropriately modified, this approach is also transferred to operational roles, the cycle of planning and subsequent strategy review in geopolitics will be complete, generating value.

Are there risks for companies from using a geopolitical approach to business?

Only one, I think. That of actually discovering one's potential, for better or for worse. To discover perhaps that one is navigating by sight when in reality the company could express quite different numbers - and I am not just talking about profits and turnover - and be faced with the choice of whether or not to decide to implement the financial, organisational and cultural changes necessary to compete at a higher level and in different markets. Or, on the other hand, realising that an apparently stable situation is in reality threatened by imminent changes in the context in respect of which, perhaps, the company is suffering from obvious internal shortcomings. In this case too, the question would boil down to a matter of self-assessment and propensity to change: two issues with respect to which both individuals and organisations almost always tend to discount themselves.

Resorting to geopolitics does not imply risks, then. On the contrary, it offers a reading capable of reconsidering them together with the related opportunities. However, as a tool, it could confront managers and entrepreneurs with an alternative representation of reality to the one they had constructed for themselves through reading keys linked to the typical schemes of business management. Rather than being risky, geopolitics is an uncomfortable methodology; especially for those in companies who had consolidated annuity positions that they were unwilling to relinquish, despite the context demanding it.

The knot to be cut at that point will then be whether to face change and how, or not. But even if one opts to maintain the status quo, one will do so with a different awareness of the risks and a different degree of responsibility. In short, as decision-makers, one will no longer be able to hide behind possible 'I didn't know or we didn't imagine' whose cover-up capacity is equal to that of a fig leaf.

How does a geopolitical scholar see the world today: is globalisation in crisis? In which direction could international trade and business go?

I would not speak of a crisis in the strict sense, because that would imply some form of degenerative process. I would rather say that a certain type of globalisation, the one that characterised the first two decades of the 2000s, has changed to such an extent that it can no longer be ascribed to that model. In the current situation, a new paradigm has not yet established itself with such obvious and stable characteristics that it can be defined in any way. Hence, I prefer to speak of a post-global scenario or patchwork globalisation: a heterogeneous system in which past structures still coexist and those of the imminent future begin to emerge. As far as international trade is concerned, making predictions is risky. However, judging from the positioning of the key players and the way in which these countries are resorting to the regulatory instrument, I believe that companies will have to acquire a more qualified ability to choose. Let me explain: don't attack and possibly quickly abandon new markets, but properly weigh up whether, where, when and how much to engage.

How do you see Italy's business in the global geopolitical context?

Not well, notwithstanding the fact that a rigorous answer would imply a serious comparison with similar realities. The issues that concern me most are the lack of know-how and the inadequate size of companies.

There is no lack of know-how, but in Italy it is difficult to remunerate expertise and the presumption of being able to do it oneself persists, because theory and practice would seem irreconcilable: a falsehood. If that were the case, engineering - which has been running the world for millennia - would be extinct and we would still be living in caves, I think. Theory and practice can go together. Indeed, they need to do so especially when it comes to strategic decisions. You need method - as well as courage - to do business, because only where there is method can adjustments be made that are not purely contingency manoeuvres, but true forms of re-planning, or if you prefer, dynamic and continuous planning.

 And what about the size of companies?

Italy suffers from a lack of stratification in the industrial fabric that I consider dramatic. The country is made up practically in its entirety (95 per cent) of small or micro enterprises (1-13 employees). Such a structure - I am talking about the country's system - is neither suitable for a national reality that claims to be part of the G7, nor for an international context in which the ability to aggregate finance, organisational structures, and human capital are crucial to be competitive. Nor do I believe that Italian excellence or genius can act as compensatory factors: this is a trite narrative of convenience just to leave things as they are. In an unstructured world, in my opinion, the answer to tomorrow's challenges is: more structure. Hence more small companies that evolve due to sound finance and far-sighted management into medium or medium-large companies that know how to 'fit' within the same supply chain to approach international markets and move nimbly and effectively within them. Otherwise, the creativity that seems to characterise us will be an ephemeral resource: it will be wasted.