Why businesses need 'geopolitical muscle' in a multipolar world

Many corporations are unprepared for one of our largest generational challenges – the outsized impact of geopolitics. Leaders must act swiftly to prepare their organizations for this new reality by developing their own geopolitical muscle.

For the better part of three decades, CEOs navigated a rare historical anomaly: an era of accelerating globalization. From the 1990s to the late 2010s, economies, cultures, and populations were steadily integrating, harmonized under an international order where globalization thrived, just-in-time supply chains reigned supreme, and geopolitics barely registered on corporate agendas. This era is definitely over.

The post-Cold War era of international cooperation, shaped by Western-led institutions and trade regimes, is giving way to a more contentious and fragmented global landscape. While some predict a return to a bipolar world akin to the Cold War, this perspective is overly simplistic. Instead, the momentum is toward multipolarity. On one side, we have the Western bloc, which is made up of the US, Europe, and their allies in the Indo-Pacific, on the other side, the last two years has seen the emergence of a “new” Eastern bloc, led by China and Russia. Then there are dynamic middle powers increasingly asserting influence through diverse blocs, regimes, and regional alliances. This shift challenges organizations to adapt to a decentralized and multifaceted geopolitical environment.

Geopolitical rivalries, alliances, and aspirations are rewiring the global economy – and will continue to do so in the years ahead. Although we project that total world trade in goods will keep growing at an average real growth rate of 2.9% annually for the next 10 years, those goods will travel on markedly different routes. Critical tectonic shifts include:

Understanding and adapting to these shifts is critical for organizations aiming to thrive in the new global trade landscape. Leaders must anticipate the implications of these tectonic changes and position their operations strategically to navigate a rapidly evolving economic terrain.

As widening geopolitical fissures continue to redefine the world order, a once dormant economic philosophy is on the rise - economic statecraft. Nations are negotiating a tapestry of rules and regulations among smaller groups of allies and deploying new policy tools and approaches to advance their interests. Economic sanctions that were traditionally limited in geographic scope are now being applied more broadly, affecting firms around the world. Foreign investment decisions and mergers and acquisitions in sectors that weren’t deemed sensitive a few years ago have become politically loaded. Winning and remaining resilient in this new business environment has become a game of taking advantage of, defending against, or working around new rules and regulations.

As the generative AI (GenAI) map takes shape, the US and China are asserting their dominance. Tech companies from these GenAI superpowers have built a substantial lead in the creation and large-scale commercialization of top-performing large language models (LLMs). Another group of countries – the “GenAI middle powers” – is emerging (e.g. the EU, UAE, Saudi Arabia, Japan, South Korea), however, each with distinct strengths that may enable it to compete at a regional, and even global, scale as a supplier of the technology.

Relying solely on GenAI supplied by companies in the US or China could pose serious challenges, with local regulations, data requirements, and the availability of LLMs all subject to shifts in government policy. Although a more multipolar supply of GenAI increases complexity, it would also create critical optionality. CEOs need to understand this dynamic and be able to navigate the evolving geopolitics of GenAI.

The fragmented global landscape presents significant uncertainty and risk for businesses. However, CEOs can proactively prepare their organizations to thrive in this challenging environment. These are not optional strategies but critical no-regret moves for navigating a multipolar world:

In a multipolar world, resilient, adaptive leadership is the foundation of success. Building geopolitical muscle isn’t just about managing risk; it’s about leveraging global shifts to create opportunities. Corporate leaders who embrace this approach will position their organizations to thrive amidst complexity and uncertainty.