CASE STUDY – POLITICAL STRATEGIES
A firm in the agriculture industry started expanding to a post-Soviet country. It did not export to there, but decided to produce locally and deliver its semi-processed goods also to neighboring countries. Initially, the business was located in a rural region and only rather small, producing solely for the regional market. The regional administration seemed uninterested in the endeavor. Over time, however, production and demand grew. The small business became successful, generating a sizeable profit. The management decided to increase its investments and enlarge production, and to differentiate its products by enhancing the value-adding processes. In addition, the firm was also wanted to serve local communities by providing employment and education opportunities to the region’s population. When it started implementing its expansion plans, the regional administration did not issue the necessary permissions and began to effectively disturb the firm’s production through power outages and unusually frequent controls of the technical and safety regulations.
The firm’s management could not make sense of these administrative actions and turned to LM Prisk to solve the issue. We analyzed the country’s decision-making and legislative processes as well as the formal and informal institutions and regulations. The country was characterized by state capture at national and regional levels, leading to corruption, favoritism and nepotism, and institutional ambiguity. Based on the analysis, we designed a strategy aimed at raising the firm’s bargaining power with the regional and national administration by entering into coalitions with business associations and diplomatic bodies of the firm’s home country. The strategy was additionally designed to raise awareness of the problematic situation by addressing specifically the country’s national authorities and governing bodies, and also aimed to increase pressure by questioning the country’s reputation as a welcoming business destination for international investors.
These combined strategies triggered a negotiation process between the firm and the national and regional authorities, resulting in the regional administration being forced by the national rulers to stop interfering negatively with the firm’s operations and begin supporting its expansion process. In the end, new jobs were created, which supported the authorities’ stance, and the firm subsequently expanded its operations in the region.