The Winds of Political Change Offer Opportunity for Firms, If There's Strategy

June 26 , 2021
By Asseged G. Medhin ( Asseged G.Medhin, deputy CEO of Global Insurance Company. )

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Some business leaders and CEOs argue that they should go for market share against competitors by focusing on a single portfolio. However, 20th-century business performances indicate that new ways ought to be employed. It should be no different in Ethiopia, where an election has just taken place. Change of policies, a mix of the new and the old, or a continuation of what has been should inspire business leaders to be smarter to benefit from the changes in the political system.

When political changes challenge the existing social arrangement, business organisations should balance the persuasive ideological power with conservative traditional goings-about and rethink their growth.

In Ethiopia, in all sectors, moving to enhance market share in the short-term on whatever good or service is the dominant thinking. Now is the time to check it, especially in a post-election period where a new government sets agendas and priorities. Companies react to political adjustments either as a threat or an opportunity to build on. The latter is often a driving force since no other choice but to adjust and be profitable could be offered. As a result, they should raise their telescopes to see beyond the horizon, check the heartbeat of their core business and find a way to build on the opportunities that could be provided.

This concept of growth allows companies to maintain their strategic position, settle their short-term and long-term obligations, and distribute dividends from the net cash income they generate. It is a plus to the business, should they remain in a political and social environment that remains unchanged.

One of these coping mechanisms is the adequacy of capital for a business, as it is for personal finances or a national economy facing the winds of change. With effective strategy, it will help companies thrive through change.

What size of capital is adequate? And to what scale and magnitude should the companies adjust following political changes?

This is a tough assignment that demands them to scrutinise every variable. Whatever contingency plan they already developed, it is not a guarantee in uncertain economies, as the degree of predictability is not at arm’s length. Hence, the special need for capital adequacy as a hedge.

The 21st century and changes in our country require us to “rethink growth” from every business dimension. For instance, we should gain market share without consuming a disproportionate amount of net cash in the form of more inventory or having large account receivables. If not, it is a null and void strategy that will gradually close the business.

The strategy should be based on a conscious, integrated transformational plan, mainly on an inevitable force of external parameters that would affect existing resources. Without it, we fail to exist further as a business.

Look no further for proof of this than the global crises brought on by the COVID-19 pandemic. It has overnight closed economies and nearly mortally wounded sectors such as retail, tourism and entertainment. The burden it has unloaded on businesses globally, for those large firms unable to manage it wisely, has been devastating. Rethinking growth has become the only antidote.

Profitability, increasing market share, and cash efficiency all come from giving value to customers, having an effective business process and integrating ICT and human asset development. In that regard, it is crucial to rethink growth by giving special attention to valuing customers and their actual preference following changes in the political landscape. If businesses, industries and sectors manage their way through it strategically, it could offer a winning cocktail that boosts economic output and unleashes the productive force of the country.

Asseged Gebremedhin is the deputy CEO of Global Insurance.

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PUBLISHED ON Jun 26,2021 [ VOL 22 , NO 1104]

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