Wednesday, April 2, 2014

Sustainable Ukraine

Lesyk Cenko
Sustainable Ukraine

With the readings from this week focusing on the challenges facing companies in a global environment, I thought the events occurring in Ukraine could serve as an interesting analysis of challenges facing nations in the same regard.  After seizing control of Crimea and the Ukrainian Navy, Russia has recently confirmed that they will ‘employ every weapon in its economic arsenal to ensure its neighbor’s road to financial recovery is as painful as possible, even when paved with billions of dollars in Western aid.’  After their overthrow of the corrupt Ukrainian government, Ukraine is on the brink of bankruptcy and on March 27th, the IMF extended a two year financial bailout package of $14-18 billion.  In response, Russia has stated a possible 80% raise in gas prices for Ukrainians and could implement a trade ban between Russia and the Ukraine, which accounts for 25% of Ukrainian exports. 

The McKinsey Quarterly article describing how corporations should account for global trends in defining corporate strategies.  The top five emerging trends stressed the importance of large customer bases in emerging economies, a shift in economic activity to regions, greater access to information, larger talent pools of qualified labor and increasing constraints on resources.  The article also recommends that companies focus on secondary and tertiary effects on their decisions and occurrences in the global landscape.  Since Ukraine is so highly dependent on Russian gas, as well as exporting goods to Russia, Ukraine would do well to break away from their dependency on Russian gas.  This could be accomplished through the development of an international institute that focuses on developing next generation energy technologies (wind, solar, microalgae, batteries, etc). 

If Western companies were to invest in the creation of a sustainable business entity in Ukraine, helping them to become the worldwide leaders in an emerging industry, it would be a much more beneficial long term strategy than implementing a short term monetary solution.  Focusing the development of green technologies will help to reduce Ukrainian’s dependence on Russian gas and oil.  Ukraine could also pull from the worldwide labor pool of qualified personnel, has access to the most recent publications, can design low cost products for emerging markets, and focus these efforts in a single region. 

The competitor analysis article stresses the importance of not only knowing who your competitors are, but to determine what their goals are.  Russia clearly wants to decrease economic ties between Ukraine and the EU, and is using Ukraine’s current dependence on Russian economies to make the transition difficult.  Ukraine’s current economy is designed for Russian consumers, and if they are to adapt to the changing landscape, will need to target the EU consumer base, as well as others in developing nations.  Currently China is positioned as the leader in solar panel technologies, but Ukraine is in a better position to land future contracts with the EU.  Also, if Ukraine focuses on low cost technological advancements, they can market their products in the Latin American countries as well.  Porter’s five forces also play into this strategy, as Ukraine can become a new entrant in a field with low competition, few suppliers, high barriers to entry (technological advancement and manufacturing needs), low bargaining power of consumers, and although there are multiple energy substitutes, divesting their resources amongst multiple sources of energy would minimize this risk. 

The article on the five crucibles of innovation over the next decade also supports the concept of Ukraine investing in future green energy technology development.  The great rebalancing indicates that if Ukraine were to develop low cost alternative forms for energy, they could tap into the emerging markets of Latin America, which has a very large consumer base.  As third world economies develop, and people move into cities, the need for clean sources of energy will be apparent (China has stations with bagged air being distributed to people because their air is so polluted).  Creating a hotspot for green technologies could help to recruit some of the best minds, and increase productivity of innovation and development, satisfying the second crucible.  The global grid provides Ukraine with an ability to draw upon multiple resources to institute this plan, while enabling them to share and acquire relevant information.  Crucible 4, pricing the planet is self-explanatory, and Ukraine will be able to become an innovator in a future industry to diminish the dependence of people on fossil fuels.  The fifth and final crucible, the market state, plays perfectly into this situation of a national crisis that is on the forefront of international policy.  Ukraine is currently in great need of help, and western nations who want to diminish Russian power and influence are coming to their aid.  Finding a silver lining and developing a sustainable program which makes Ukraine a stronger nation before the Russian invasion is the perfect way for the international community to have a positive impact on future development of green technologies, while showing the Russians that their tactics will fail in the face of innovation. 

Developing sustainable energy technologies to supplant traditional fossil fuels in third world countries would create a better environment for future generations.  Instituting this initiative in the Ukraine will help to crease a sustainable growth in their GDP, while targeting emerging customers.  This also diminishes Russia’s influence in the region and creates stronger ties to developing countries who could benefit from the advancement of this technology.  Finally, this can provide the western nations with a competitor to Chinese green technologies, pushing the innovation and development of this market further, sooner, at a reduced cost.  Although Ukraine is in great need of economic help to stabilize their economy, reducing their dependence on fossil fuels while developing products for future generations of customers will serve a greater purpose.  Instead of feeding Ukraine in this time of need, we should be using this opportunity to teach the Ukrainians how to fish.


http://www.reuters.com/article/2014/03/28/ukraine-crisis-economy-idUSL5N0MP1VL20140328

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