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Doing Business in a global environment

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As St. Vincent and the Grenadines strives to diversify its economic base, agriculture will be seen to make a smaller percentage contribution to gross domestic product, but this should not be interpreted as a diminution in the importance of the sector to balanced growth and development. We must however acknowledge that in the future, when capitalists talk about their wealth, they will by and large be talking about their control of knowledge. At the end of the 18th century, the industrial revolution brought an end to agriculture as the dominant creator of wealth in the developed world although this did not yet apply to us in these parts. By the end of the 19th century however electrification and systematic research and development, created what economic historians refer to as the second industrial revolution.{{more}} New industries emerged and old ones were transformed; railways went underground to become subways and what were hitherto local economies became national economies.

Today at the beginning of the 21st century, the third industrial revolution is underway. Computers, telecommunications, biotechnology are transforming all facets of life. And while the second industrial revolution saw the transformation from local to national economies so the third industrial revolution is seeing a further transformation from national to global economy.

Businesses can buy from wherever on the globe costs are lowest, and sell wherever on the globe prices are highest.

With economic globalization, national governments are losing many of their abilities to control their own economies. In the area of finance, wealth can easily be held outside the jurisdiction of one’s own government. Whatever the physical location, everyone now borrows essentially in the same global market.

Oil is a good example of the impact of the third revolution on an old industry. What used to be an industry which was largely manpower driven, is now dependent on brainpower. Super conductors permit acoustical soundings, the well-paid brawny labour of the past has been replaced by the well-paid knowledge worker.

Our modern world is so complex that it can neither be managed by governments alone, nor left purely to market forces working through international business. It requires an effective partnership between government and business. This is because governments cannot be expected to have all the expertise to organize the many complex areas of activity required to manage their economies in the absence of cooperation from other partners.

But complexity is not the only reason why partnership is essential. It is also in the interest of business that government fulfils its role efficiently. To achieve this objective, the modern company whether it be financial or commercial must play its part, working in the realm of ideas and public policy advice to help shape government decisions.

For small and medium sized enterprises coming on stream today, it is necessary that they devise their own strategies. There are two components of strategy – a variable and a constant. The variable is the firm’s specific market strategy: low cost provider, niche market, and new product market. These specifics are likely to change as market and industry conditions change. The constant in strategy is the organization’s system for continuous improvement. No matter the market strategy its execution must continually improve or the company will eventually lose ground to superior competitors.

There is a saying that history is written by winners; they focus on the winning battles and marginalize the losing skirmishes. A similar bias is at work in the way that managers often seek to identify the drivers of business success. But you can’t pinpoint the key to superior performance by looking just at what went well. Failing companies adopt many of the same strategies and practices that industry leaders do, so there are valuable lessons to be learnt from failures. Similarly you don’t learn much from watching a film of a game on which you killed the competition. It would be much more instructive if it is a game in which you were thrashed or a game you thought you were going to win, but lost instead.

Development whether it is to take place in the real or financial sector must be seen as a partnership between all the critical players in the economy. In some instances all that is necessary on the part of the public sector is to provide the infrastructure and the platform from which the private sector can flourish. But in today’s competitive global environment, it is necessary that all businesses have a strategy that can stand the test of time.

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