Social-political situations are challenging when it seeps into the work environment. Whether they are government shutdowns, protests, civil wars, or movements, companies have to face the impacts with these events.
The social-political uncertainty has a major effect on the cost of work, cost of resources, and customer behaviour. It threatens business routines and activities and the business may even have to stop their operations due to new foreign importing and exporting laws.
Detailed Analysis of different outcomes is a MUST
To control the scope of uncertainty, it is imperative to evaluate the issues in order to adjust corporate tactics. You have to consider whether there is a big price jump due to the social-political situation, if it jeopardizes the business continuity, or what position it currently is in the market. These analysis can depend on what type of business it is. When it comes to declining markets, entrepreneurs have to be careful with moving the business to a new location since it can be expensive. On the flip side, moving the business might be a good option since it protects the key activities during the crisis. However, if the market is growing then the business has opportunities and resources to be more prepared and ready for uncertainty.
Strategies to deploy in a declining market
There are two strategies that can be used for steady or declining markets. The first strategy is the ‘Hedging Strategy’ in which the activities are reorganized towards the people that can get past the political issues. This is used when firms are faced with uncertainty with economic conditions, such as human resources or internal control. What firms can do is lower the function prices and have a drop in sales. For instance, due to the Brexit, Sony decided to keep all its stores in the UK but moved their EU headquarters to the Netherlands in order to keep their key activities in a safer place.
When there is a high uncertainty due to a decline in the market, the risks and threats to business continuity can be jeopardized if the businesses do not have reserves of cash and a presence in the economy. The strategy in this case should be to salvage as much as possible with saving what you can and lessening the negative effects. To recompense for the drop in profit, you will have to use the reserves of cash and try to dodge selling previous assets that could become handy if the economy rises.
Strategies to deploy in an uncertain market
The first strategy is to rebalance, meaning to relocate strategic and leadership assets to an alternative location that is nearby well-known growth engines. This can be very costly, but it is a practical method that focuses on the resources of the firm to be able to escape the consequences of uncertainty. The other strategy is to shift, which means relocating important parts of activities to another region starting with the functions that can easily be shifted with low costs. This is a thorough method since it is more organized, fast-paced, and its goal is to get rid of the uncertainty in the market.