Rising political unrest and social conflicts in world countries create an unsettling and uncertain environment for decision makers and it always proves to be a tough nut to crack on the lines of strategic decision making in the best interest of the organization. Political and social uncertainties are among the prime concerns in dealing with environmental uncertainty as it directly impacts the economic climate in which the organization functions. Hence an outlook on the future scenario is as much important as the strategic decision in itself. As much as the world market is opening up and the earth is becoming a global village, there are always ups and downs in the socio-political scenarios of the countries. With the market more intertwined now, ripple effects are also found to occur because of these uncertainties. Given the extreme uncertainty involved there is a strong need for systematic approach to decision making process. The agility involved in socio-political uncertainties makes it one of the prime areas of research in decision making under uncertainties. Political decisions have far and wide impact on the economic climate as it is capable of changing prime business enabling parameters such as taxes, trading norms and foreign direct investments while social uncertainty have impacts such as consumer behaviour, market competition and employee behaviour within organization.
When it comes to dealing with uncertainties, the concept of one size fits all is seldom used as each situation is unique and is often dealt with a combination of analytical and intuitive methods. “Sometimes the best view of the future requires an odd pair of bifocals: quantitative modelling and scenario planning” (Kennedy & Avila, 2013). “If done rigorously, quantitative modelling is an unquestionably useful and necessary decision-support tool for short- and medium-term market and operational planning” (Kennedy & Avila, 2013). However, when it comes to investment decisions in scenarios of extreme uncertainty this method does not provide a complete picture. Under conditions of extreme uncertainty, Elmassri, Harris & Carter (2016) found that non-financial considerations and objectives take precedence over the technical ‘accounting’ measures, for example net present value (NPV) in Strategic Investment Decisions (SIDs). A comprehensive review on decision making under political uncertainty is currently lacking and calls for a review to be conducted.
The primary aim of this paper is to conduct a systematic review of scientific publications in the area of strategic management and decision making under socio-political uncertainty. The aim of the paper is to answer the research question: What is the impact of socio-political uncertainties on the decisions of investment and expansion strategies of an organization? Hence the discussion will be limited to the investment and operating strategies and the impact of political uncertainty on these strategies.
The reminder of the paper is structured as follows: First, a brief overview of the political and economic scenarios in two world countries namely, Brazil and Egypt, is outlined. Second, the methodology of the systematic review as applied in the paper is described. Third, the review of the study involving an automobile company operating in the uncertainty of Brazilian environment and investment decisions in the post-revolution Egypt are discussed. Finally, the results and future scope is discussed in the end of the paper.
1 A brief Overview of the political uncertainties
Organizations have to cope with social and political uncertainty in the countries they operate in. It could affect the ease of doing business, cost structure, labour market and consumer behaviour among other factors. These factor lead to uncertainity in decision making and thereby in strategic management. The study deals with scenario in two countries, a) Brazil, and b) Post-revolution Egypt.
Brazil is the largest country in the South American continent and it is the eight biggest economy in the world. However the growth of Brazil was stubbed when it found itself caught in a mix of political issues. Organizations were struggling under the challenging conditions in Brazil, and the circumstances seemed to only grow more uncertain as politicians debated over the merits of economic liberalization at a time of chronically high inflation and stagnant purchase power (Kennedy & Avila, 2013).
The nation was caught in the debate of politicians who wanted the country to open up its economy to further growth as many of the developing nations had already done while the opponents were of nationalist and populist interests who wanted a slow and gradual change ensuring consumer protection and labour interests. Usually the political scenarios are such that there are two contrasting ideologies and school of thoughts and their respective ideas of driving the economy. However as Kennedy & Avila (2013) states:
Neat ”left” versus ”right” divisions didn’t exist here, and many businesspeople, government officials and politicians found themselves agreeing with elements of both perspectives. Given this dynamic situation it was impossible to see where the nation was headed.
Organizations operating in Brazil were all caught in this unpredictable politico-economic backdrop where it was impossible to find the direction of future prospects and what it would mean to market offering, pricing, distribution, dealership, exports and labour factors.
Egypt, one of the powerful countries in the African continent has had a tough time in the recent past cumulating to the 2011 revolutions that saw the country engulfed by various political, economic problems. Elmassri et al., (2016) explain the cause of the political unrest as:
Economic and social inequity around income differentials, low living standards, a declining GDP and increasing unemployment existed within a repressive political regime that stifled opposition, prevented free elections and freedom of speech, falsified parliamentary elections, liberally employed ‘state of emergency’ laws and was characterised by police brutality.
Mubarak handed over the power to the Supreme Council of the Armed Forces, signalling period of transition and reform. Despite measures taken to set up caretaker cabinet, the Government could not meet the expectations of the people and wide spread unrest and tension continued to rattle the country.
The revolution had a dramatic effort on Egypt’s economic performance. Tourism revenues decreased by 60 per cent compared with June 2010 levels (Elmassri et al., 2016). The Central Bank of Egypt made an announcement that the foreign currency reserves had dropped to ‘critical level’ (declining from $36 to $14.8 billion by the end of 2012) and that they might be insufficient to cover imports beyond three months. The Central Bank spent in excess of $US20 billion in foreign reserves to shore up the economy during the revolution (Egypt Independent, 2013).
Social expectations post-revolution were In an environment of continued strikes, diminishing production and growing inflation, the caretaker Government called for cooperation and ‘co-production’ (Dryzek, 1994; Ackerman, 2004), asking for the cessation of strikes and demonstrations, emphasising a need to turn the ‘wheels of production’ to improve the economy, create jobs, increase exports and raise standards of living.
The uncertainty only worsened over time and businesses were hugely impacted by it as the political unrest negatively impacted economically and socially. Two years post-revolution, the country was in a state of flux, as three governments (the first and second caretaker and Morsi’s government) had taken power and each introduced their own social, political and economic reform. Egypt was in a position of deep instability (Elmassri et al., 2016).