How Geopolitics Impacts Business Decision Makers and Why it is Important?

How Geopolitics Impacts Businesses

Geopolitics deals with the relations between nations and the forces that determine the friendly or hostile relations between them. Businesses, on the other hand, operate in a macro and micro external environment wherein the larger economic, political, and social forces as well as the smaller laws of the economy and the land determine their success or otherwise.

Thus, there are many who feel that businesses should not overly pay attention to geopolitics since it deals with issues and events that are outside the universe of the businesses and part of a larger realm that has little or no significance to the everyday operations of the businesses.

Having said that, it is also the case that in recent years, geopolitics has come to impinge upon the functioning of businesses since the globalized and integrated world and the global economy in which they function has become intertwined with the relations between nations and the geopolitical forces that impact the businesses have become more pronounced.

Indeed, in times when an event or a happening in one part of the world impacts businesses and individuals in other parts of the world, it is the case that business decision makers ought to pay more attention to the geopolitical happenings and the ebb and flow of the tides of history and the relations between the nations.

Equip Yourself with Knowledge and the Tools to Make Informed Decisions

This is the reason why many top-notch business schools have begun offering optional and elective courses on geopolitics to students in a bid to introduce them to the ways and means in which geopolitics impacts businesses.

Indeed, already business schools in Europe and the United States have courses on these topics to anyone who is interested in knowing how the intersection of economy and finance with the geopolitical forces evolves and impacts businesses.

Thus, if you are a student or a management professional who is aiming to become a decision maker, it would go a whole lot of good if you started paying attention to geopolitical events happening around the world.

If you are already in the senior or middle management roles and wish to make more informed business decision decisions, it would be useful to subscribe to any of the numerous think tanks and corporate advisory firms that specialize in advising businesses on how geopolitics impacts them.

Indeed, there are firms such as Stratfor and the one run by analysts such as Ian Bremmer that already have a large client base among corporates with the specific aim of advising and consulting on how the intersection of geopolitics and business transpires in the real world.

Specific Examples of How Geopolitics Impacts Business Decision Makers

If you are wondering about the specific ways in which geopolitics impacts you as a decision maker, this section would be especially useful to consider specific examples of the same.

To start with, if a war breaks out in the Middle East or on the Korean Peninsula, it would be safe to say that there would be a spike in the price of oil in case of the former, and a disruption of electronic gadgets and the supply chains that feed them in the case of the latter.

In cases, the stock and the bond markets would be volatile in addition to severe turbulence in the regions affected that can impact everything from your travel plans to personal safety and security of your employees in case they are stranded in those regions.

Apart from this, if sanctions are imposed on a particular country by the United Nations or the United States, it would be safe to say that the firms that operate in those countries would witness a dip in their stock prices as well as be impacted in their ability to raise capital from the markets since they are no longer allowed to access such sources of financing.

Further, a key and vital aspect are the firms that supply goods and services to military and the defense sectors that are particularly impacted by geopolitical happenings.

Indeed, it is common sense to deduce that any geopolitical event would impact any business that operates in global markets as well as any sector-specific firms that specialize in any of the areas that are influenced and impacted by world events.

Apart from that, business decision makers who are planning to enter specific markets in nations that are geopolitical hotspots should also be cognizant of the possibility for war and other hostilities that are likely in such nations and markets since their operations would be impacted there in such instances.

Forewarned is Forearmed

Thus, it would be clear by now that geopolitics does indeed impact business decision makers and hence, it would not be remiss to state that ambitious management students and professionals factor in the study of geopolitics to their courses or on the job learning so that they can make better and informed decisions about their careers as well as the firms in which they work.

It is also the case that one must not be overly obsessed with geopolitics since it is something that is entirely unpredictable just as many of the recent technology-driven changes have been.

However, it is also the case that due to its sheer complexity and unpredictability as well as its ability to make deep and lasting impacts on businesses, it would be a good idea to at least start paying attention to geopolitics right from the time of college and in business schools so that you are equipped with the right set of tools to make decisions.

To conclude, forewarned is forearmed and hence, keep an eye on the events in the world and you would surely benefit from the same.


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The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.