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The Impact of Macro Factors on Businesses
Technology - Aug 27, 2020
Gordon Moore, the co-founder of Intel proposed an observation which came to be known as Moore's law. He proposed that the number of transistors in a dense integrated circuit (IC) will double every two years and people will pay less for them over due course of time. His observation has been expanded to the larger context of technology and it has largely held its ground. This means that, the technological output should ideally double every two years.
Let's expand this 'technological output term and understand the modern macro factors which affect this output.
Factors Affecting Technological Output
Every business is set against the competitive forces of demand and supply model and this has not changed since the advent of civilization. In simple terms, this supply and demand depends on several factors. For e.g. a business ability and willingness to negotiate the price of the raw materials required for production depends on the level of customer demand. Then there are competitive factors which actually drive these negotiations.
Over the years, these factors have drastically changed, especially if we look from the competitive landscape. Now a days, businesses don't just have to compete with the vendors in their city or region; they now compete with businesses around the world, from the millions of sellers on Amazon or from the Chinese merchants on Alibaba. Competition drives the entire supply and demand model and this competition is now global in nature.
Macro Challenges and Business Uncertainty
Business don't have to just deal with competition. There are various macro factors which determine the overall environment in which the conditions of "supply" and "demand" can thrive. Let us look at the recent occurrence of events. The coronavirus pandemic has heavily disrupted the functioning of businesses worldwide. Barring industries catering to essential items, the operations of all other industries has come to a standstill. In addition, as countries are closing their borders, exports are jolted.
This has brought the entire world economy to the brink of recession. Going a little back, businesses were already being impacted due to the ongoing trade war between China and the USA and now the situation is even more grim. This denotes the fact that these macro challenges can be both natural and man-made. The important thing for businesses is how governing bodies react to these macro challenges.
Companies shouldn't take these macro challenges as one-off events which they can ride with time. Recent natural calamities like California wildfires and the enormous 2019 Australian bushfires brought the world to a sad realization that extreme weather and climate incidents will now be common occurrences. The uncertainties of past have become the new certainties. It is the need of the hour for Businesses to better acclimatize themselves with this change and do the necessary homework on how to thrive amidst the macro challenges.
The first step would include understanding the different kinds of macro challenges and then creating a business plan to deal with those challenges. The business plan should include all sectors of the business i.e. risk management, supply chain, customer service etc. The biggest task in front of the companies would be to integrate these business plans in their core functioning models. This is where methodologies, business and employee culture would come handy. If we look closely, the change is already underway.
Change starts from within
Business leaders worldwide are now asked to devise a more inclusive, citizen driven and sustainable business model which focusses on both profit and purpose. Even employees are now looking to work for organizations which are purpose-driven and whose mission statement excites them. The same can be said of customers who are not just looking to maximize their Return on Investments (ROIs) but are looking to partner with firms with whom they can align their long-term objectives. These objectives look a long way into future, they give importance to environment, they are inclusive, they believe in diversity, they are transparent and they are agile.
The crux of the message lies in the notion that a more transparent, agile, flexible and purpose driven organization is better suited to face the uncertainties brought upon by macro challenges. Let us throw more light on it with one example. Information Technology is one industry which is most suited to a remote work culture. Nevertheless, not all IT companies used to offer work from home facilities for their employees. When the pandemic hit and people were forced to stay indoors, IT organizations which had a flexible work culture i.e. an already established remote operation setup flourished whereas others struggled to put the logistics and applications in place.
Technological Impact and Macro Challenges
COVID-19 has drastically slowed down the global commerce and put many companies out of business. Nevertheless, it should also be remembered that it was technology which enabled many companies to stay in business and ensured that millions of people do not lose their jobs. Nevertheless, there is a need to do more in this area and make technology the great enabler which can keep the global economy running even in the worst of circumstances.
The crisis has also ripped the rule book and allowed companies to reimagine their entire business model overnight. For e.g. companies like Nissan, McLaren and Airbus are now building ventilators whereas perfume makers like Christian Dior and Givenchy are now manufacturing sanitizers.
Business leaders make these transformative decisions but technology enables these decisions to come out of the boardroom and see the light of the day. The different aspects of technology like analytics also give the business leaders this foresight to re-evaluate the business priorities and make good decisions.
Technology has brought dynamism to businesses, which is enabling them to efficiently adapt to any change, including the macro challenges. The fundamental aspect of this dynamic nature lies in the ability and agility to move their two most valuable assets- people and money wherever they are needed.
Technology will continue to evolve even in the midst of micro challenges. Even during the ongoing COVID-19 crisis, technological innovations are rapidly disrupting the market and bringing out new features and applications every day. The ball is now in the court of management leaders who must develop plans to balance the demands of employees and customers with stakeholders and investors while sailing through the changes brought upon by the macro factors.