Business Strategies for De-coupling

Colleague Eric Johnson outlines three strategies to adapt to geo-political risk:

• Bring supply chains closer to home: managers must examine risks and build strategies that are customized to the markets they serve. Risk and regulation will require keeping data and supply chains closer to home. As a result, localization will help managers protect the chains of information, design and supply.
• Operations Hedging: a process that spreads capabilities to reduce risk of disruption – will become increasingly important, in turn reducing economies of scale and increasing costs. For example, earlier this month, Apple partner Foxconn Technology Group announced plans to invest about $700 million on a new plant in India to reduce reliance on China.
• Exit high-cost areas: managers should evaluate exiting some countries due to the expense of supporting subscale operations or serving small markets. American clothing retailer Gap sold its Chinese business to Baozun, a local e-commerce company, in late 2022 after 12 years of operating in the region.