Making Geopolitics a Business Capability

Geopolitics now shapes decisions in the boardroom. US-China strategic competition, wars in Europe and West Asia, sanctions, tariffs, export controls, industrial policy and the scramble for critical technologies have changed the conditions in which companies invest, produce and compete.

Mumbai-based Gandhar Oil Refinery illustrates how quickly a distant geopolitical disruption can become a business problem. Within months of its strong stock-market debut in November 2023, Houthi attacks in the Red Sea were disrupting shipments and raising freight costs, affecting the company’s performance. The conflict was geographically distant; the exposure travelled through the commercial networks on which the company depended. Geopolitical exposure, in other words, is determined not simply by where a company sells or produces, but by what it depends upon.

The question is what companies do with that awareness. What should senior managers be asking?

• Does geopolitical change alter business decisions—where companies invest, which technologies and suppliers they rely on, and how they organise production?
• Where are the firm’s critical dependencies and hidden chokepoints? What is it prepared to do when those dependencies become vulnerable? Which are important enough to justify paying a resilience premium?
• How can these responses create competitive advantage rather than merely protect the firm from disruption?

Geopolitics is becoming structural

Answering those questions requires moving beyond the way geopolitics has traditionally been treated within the firm. For a long time, firms could treat it largely as part of their non-market strategy—managed through government relations, regulatory affairs or political-risk functions, often episodically when a crisis demanded attention. That distinction is becoming harder to sustain. Strategic competition is increasingly conducted through trade, technology, finance and supply chains. Tariffs, subsidies, sanctions, export controls and investment restrictions now shape where firms invest, which technologies they can access and how supply chains are organised. Geopolitics is becoming structural to the way markets themselves operate.

The challenge for corporate India is, therefore, building organisational capability to understand where geopolitical exposure actually resides.

One response I have encountered in conversations with managers is that geopolitics matters primarily for companies with a substantial international footprint. But as the Gandhar Oil Refinery case demonstrates, a company’s market footprint and its geopolitical exposure are not the same thing. A predominantly domestic-market-oriented Indian firm may have no overseas manufacturing footprint, yet depend on imported machinery, components, raw materials, technology, digital infrastructure or suppliers whose own dependencies stretch across borders.

When politics changes the business equation

The first change is in the investment equation. Companies still weigh market size, production costs, infrastructure, skills, suppliers and expected growth. But these calculations are increasingly overlaid by political geography: national-security concerns, investment restrictions, technology controls, industrial policy and the durability of market access.

Apple is instructive. Its expansion of manufacturing in India does not mean China has suddenly become economically unattractive. China retains manufacturing scale, specialised skills and a supplier ecosystem that is difficult to reproduce. US-China tensions have compelled Apple to diversify production towards India and Vietnam. Yet that diversification encounters another geopolitical constraint: India-China tensions can complicate the movement of Chinese equipment, technical expertise and supplier capabilities needed to build a deeper manufacturing ecosystem in India. India has made impressive gains in electronics manufacturing under the Production Linked Incentive (PLI) programme, but Apple’s experience points to a harder problem: shifting factories is not the same as shifting ecosystems.

Companies increasingly need to ask: what geopolitical assumptions must remain true for this investment to succeed?

Geopolitical rivalry can therefore both compel diversification and constrain a firm’s ability to execute it. Alongside commercial viability, companies increasingly need to ask: what geopolitical assumptions must remain true for this investment to succeed? Responding to this changed business equation requires more than geopolitical awareness. I propose a simple 4S framework for translating that awareness into capability: See where the firm’s exposures and dependencies lie; Secure what is critical enough to protect; Shape the firm’s footprint and organisation to preserve strategic flexibility; and Seize the opportunities that fragmentation creates.

Ideas in practice: The 4S framework

The 4S framework is deliberately sequential. Firms cannot secure what they cannot see; securing critical dependencies may require reshaping the enterprise; and reshaping should ultimately create the options needed to seize advantage from fragmentation. The framework turns geopolitical capability from an abstract aspiration into a set of managerial disciplines.

See: Map critical dependencies

Changing the investment footprint does not necessarily remove the dependencies beneath it. Diversification is an understandable response to geopolitical uncertainty: add suppliers, shift some production or reduce exposure to a particular country. But it can create false comfort if companies do not understand what they ultimately depend upon.

Multiple suppliers do not necessarily mean independent supply chains.

Supplier diversification itself can be deceptive. A company may source chips from several leading manufacturers and conclude that it has reduced supplier concentration. But if those manufacturers depend on ASML for the EUV lithography systems required for leading-edge chipmaking, diversification at one tier leaves a critical dependency at another. Multiple suppliers do not necessarily mean independent supply chains. The same problem occurs when ostensibly different suppliers depend on a common specialised material, technology, machine or upstream producer. Changing suppliers—or even countries—does not necessarily change the underlying dependency.

A CEO friend captured the problem in a phrase that has stayed with me: one can’t lead in today’s geopolitical world if one can’t see. For firms, that means looking beyond conventional supplier mapping. Strategic dependencies need to be examined across supply chains, technology, data and digital infrastructure. The legal boundary of the firm is rarely the boundary of its dependencies.

The challenge is to distinguish routine dependencies from strategic chokepoints. Four questions help:

• How critical is it?
• How concentrated is supply or control?
• How readily can it be substituted?
• How long can the company operate without it?

A dependency that is critical, concentrated, difficult to substitute and time-sensitive demands greater managerial attention.

Reliance Industries’ battery ambitions illustrate the problem from an Indian perspective. Its efforts to establish advanced battery manufacturing have encountered tighter Chinese controls over technology and know-how. Having sophisticated manufacturing equipment is not the same as possessing the technology and ecosystem required to use and develop that capability independently.

The same distinction matters for India’s global value-chain ambitions. Moving final assembly to India is valuable, but it does not automatically transfer the machinery, technological know-how, components and supplier capabilities that constitute the wider production ecosystem. India’s larger opportunity is to acquire more of the capabilities behind the production that is relocating here. Geographic diversification is not necessarily capability diversification.

Secure: Decide what is worth protecting

Once a company identifies its critical dependencies, another question arises: how much should it spend protecting them?

Toyota’s response to the 2011 Fukushima earthquake offers a useful lesson. The disruption prompted it to map vulnerable components more deeply, identify critical items and strengthen continuity arrangements. When the global semiconductor shortage struck years later, these measures gave Toyota greater protection against the initial disruption than many of its competitors. But Toyota did not abandon lean production. It selectively protected dependencies where disruption could impose disproportionate costs. Efficiency remained important; resilience was added where the consequences of failure justified the expense.

Resilience is not free. Inventory ties up capital, redundant suppliers add complexity, spare capacity reduces utilisation and localisation can sacrifice cost advantages. A firm cannot maximise efficiency, speed and resilience while simultaneously minimising cost. The managerial question, therefore, is not whether resilience is desirable, but where it is worth paying a resilience premium.

Some Indian companies are beginning to make such choices. Tata and JSW, for example, are investing in battery and EV research to develop in-house capabilities in areas where technological dependence could become strategically consequential. Building capability may cost more than buying what is readily available, but in critical areas that investment buys optionality. The response will differ across industries; the principle is to identify what matters enough to protect and what premium the organisation is willing to pay for that protection.

Resilience should be an allocation decision—one that weighs costs against the consequences of disruption—not a slogan.

Shape: Redesign the footprint and organisation

Moving factories is not enough.

Securing critical dependencies may require more than buffers or alternative suppliers. It can mean reshaping where and how the firm operates. Once firms decide that their production footprint creates excessive exposure, the temptation is to think primarily in terms of relocation: move production, add another country or find another supplier. But changing geography does not by itself create a more resilient production system.

Japanese electronics manufacturers illustrate a more nuanced response. Firms such as TDK and Tamura have long relied heavily on production in China, but US-China trade tensions are prompting them to build additional capacity elsewhere. Tamura is bringing some production back to Japan while expanding outside China, while TDK is beginning battery-cell production in India even as its main battery production bases remain in China. The objective is not necessarily to exit China, but to create alternative production routes and reduce excessive concentration.

Apple’s expansion in India illustrates a more differentiated production architecture rather than a simple China exit. For India, the opportunity goes beyond attracting factories. Tata Electronics’ growing position in Apple’s Indian ecosystem points towards the larger prize: moving from assembly towards components, manufacturing knowledge and deeper technological capabilities—and becoming a harder-to-substitute partner in global production networks.

Redesigning the footprint, however, is not only a manufacturing decision. It can also require redesigning the enterprise. A multinational operating across the United States, China, Europe and India increasingly faces different rules governing technology, data, investment and market access. It must decide which activities still benefit from global integration and which require greater regional autonomy. The objective is selective differentiation rather than wholesale decentralisation: retaining integration where it creates advantage while allowing greater autonomy where political and regulatory divergence demands it.

What combination of locations, capabilities and organisational arrangements gives the firm acceptable cost, market access, resilience and strategic flexibility?

This challenge will become increasingly important for Indian companies as they internationalise. Operating globally requires not merely presence across markets, but the ability to function across political environments that may impose conflicting expectations. The question is therefore no longer simply where should we produce? It is: What combination of locations, capabilities and organisational arrangements gives the firm acceptable cost, market access, resilience and strategic flexibility?

Seize: Turn fragmentation into advantage

Reshaping the enterprise should do more than help it withstand geopolitical disruption. It should position the firm to seize the opportunities that fragmentation creates. Much of the corporate discussion of geopolitics understandably begins with risk, but a purely defensive view misses the opportunities created when global production, technology and capital are being reorganised.

The real test is not simply how much production relocates to India; it is where Indian firms eventually sit in the value chain.

India is well placed to benefit. Companies are looking for additional production locations, governments are encouraging more diversified supply chains, and industrial policy is redirecting investment. But the real test is not simply how much production relocates to India; it is where Indian firms eventually sit in the value chain. If critical technologies, equipment, components and production knowledge continue to come from elsewhere, India may gain jobs, exports and manufacturing scale while remaining dependent on more valuable capabilities controlled abroad. Those gains, however, should be a starting point rather than the endpoint.

The opportunity is therefore to accumulate capabilities rather than merely receive diverted production. This does not mean pursuing self-sufficiency. Eliminating every external dependency would be prohibitively expensive and often counterproductive; access to foreign technologies, suppliers and partnerships can itself strengthen competitiveness. The strategic objective is to be deliberate about dependence.

That means knowing which dependencies strengthen the firm and which create vulnerabilities; developing alternatives where concentration becomes excessive; preserving international partnerships where they enhance competitiveness; and building capabilities where criticality, concentration and geopolitical exposure justify the investment. This is where preparedness can become advantage. Better supplier visibility can improve procurement. Alternative production locations create flexibility. Technological capability strengthens bargaining power. Optionality allows management to move faster when competitors are constrained.

At that point, geopolitical preparedness begins to look less like the cost of insuring against disruption and more like an investment in competitive capability.

Building the geopolitically capable enterprise

Some of corporate India’s leading companies are already responding through diversification, localisation, technology investment, international partnerships and changes in their global footprints. The purpose of pointing to Apple, Toyota or Japanese manufacturers is not to contrast enlightened foreign companies with unprepared Indian ones. The useful question is what capabilities enabled those responses, where Indian firms are already developing them, and how they can become more widely embedded.

These capabilities cannot reside in a geopolitical-risk function alone. They connect strategy, procurement, finance, technology, manufacturing, government relations and ultimately the boardroom. Geopolitical capability, in that sense, is an organisational capability.

Mitsubishi Corporation offers one example of what this can look like in practice. Its CEO Katsuya Nakanishi describes an approach grounded in personnel working across countries and cultures, an accumulated organisational sense of risk, and the ability to develop multiple scenarios under uncertainty. This also informs portfolio choices: Mitsubishi had long regarded the Middle East as unstable and built its energy portfolio primarily elsewhere, including LNG supply from Canada. The company did not predict the latest Middle East crisis; it had developed the capacity to operate under geopolitical uncertainty.

But the implications extend beyond individual firms. The choices Indian companies make about dependencies, technology, production and partnerships will shape not only their own resilience, but also India’s position in a reorganising global economy.

For India, the stakes are therefore larger. The architecture of globalisation is being reorganised at precisely the moment when the country aspires to occupy a more important position within it. Government policy can attract investment, offer incentives and build infrastructure. But how deeply India eventually participates in global value chains will also depend on the capabilities its firms build. The opportunity is not merely to receive production diversifying from elsewhere, but to occupy positions that become progressively harder to substitute.

The firms that succeed will not necessarily be those that predict the next geopolitical crisis correctly. They will be those that see their exposures early, secure what matters, shape their organisations accordingly and seize opportunities faster when conditions change.