Managing *Embracing* volatility and uncertainty
It would not be unreasonable to claim that we are living through very uncertain times. As the world recovers from a global health pandemic and navigates recent and ongoing conflicts, the terms “stability” and “certainty” are seldom used to describe the current state of affairs. Most of us are experiencing the after-effects of these events in the form of record-level (above 10%) inflation rates, soaring energy prices, higher tax rates, and shortages caused by supply chain disruptions.
“Uncertainty” as we know it, however, is but a fraction of what people must navigate in the vibrant country of Argentina. Famous for its landscape, football, tango, wine, and premium beef, this country has unfortunately grappled with economic challenges for several decades. Once one of the world’s largest economies, a set of complex and interrelated historical events associated caused it to become the focus of studies that try to comprehend “the Argentine Paradox”. Argentina has seen the world’s highest inflation rates in history; this year alone, inflation in Argentina is expected to reach almost 80% as the government continues to strive to reduce its budget deficit. As one can imagine, businesses would need to take drastic measures to remain afloat amidst these turbulent circumstances, and the term strategy takes a whole new meaning.
The MBA Discovery Expedition
On Friday 25th June 2022, the IMD MBA cohort, led by MBA Dean Omar Toulan, headed to Buenos Aires on a discovery expedition to experience first-hand how businesses manage volatility and uncertainty. One of the key areas that Professor Toulan advised us to pay attention to was on how institutions work together. With this focus in mind, expedition started with a deep dive into the economy, history and finance of Argentina from former Central Bank President Guido Sandleris and Vice President Lucas Llach. Sebastián Etchemendy, Political Science professor at Universidad Torcuato Di Tella, and Sergio Berensztein, President and Director General of Berensztein, both shared with us further insight into the political context and the influence of Peronism throughout Argentinian history.
Throughout the week, the cohort was divided into smaller groups to visit various companies, some of which we studied in our prior classes at IMD, to investigate how they navigate volatility and uncertainty. Collectively the cohort visited Carrefour, Finning, Thomson Reuters, PWC Acceleration, Guru Group, McKinsey, Nestle, Amaggi, Globant, Grupo Penaflor, Mercado Libre, La Martina and Ternium. We were astonished at the resilience shown by these companies, and the contradictory dynamics between customers and suppliers. One manager told us that customers would screen out suppliers if the customer could not pay ahead of order fulfilment. Over the 10 days that we were in Argentina, the peso lost 5% of its value compared to the US dollar.
One of the most memorable visits was to Arcos Dorados’s McDonalds restaurant in Barrio 31 where we were greeted by Gabriel Serber, Paula España Meradi, Joaquín Maria Altgelt, Jeronimo Alvarez Morales, and Victoria Paviotti. As part of efforts to integrate this community into the wider Buenos Aires, the city decided to build a McDonalds restaurant nearby to offer the locals formal employment and education opportunities facilitated through Arcos Dorados. As we walked through the streets of Barrio 31, we experienced a very different side of Buenos Aires, one that clearly sees a lot of poverty, but also surprisingly operates informally as its own ecosystem with local restaurants, shops and cafes. Through government and NGO efforts, we saw initiatives to introduce electricity and clean water to homes, and to relocate communities into newly built social housing.
In a similar theme, we also visited Cooperative Bella Flor, an organization whose members took the initiative to grow small scale recycling efforts in search for food into a large-scale recycling facility for the city of Buenos Aires. We felt humbled to be greeted by the members of Cooperative Bella Flor who offered us delicious empanadas.
In the spirit of entrepreneurship, we were fortunate to meet four local entrepreneurs on our final day at LaMaquinita who shared with us their experience of starting businesses in the local economic and political climate.
We concluded the trip by presenting our team projects and attending a closing dinner at El Obrero restaurant. Together with my classmates Geoffroy Dehen, Mikel Iriondo, Peter Theisen, and Svyatoslav Khalatov, we investigated how the automobile sector in Argentina navigates challenges posed by inflation and import restrictions. One surprising revelation was that new vehicles are sold to people based on a lottery system due to a general shortage of supply, which also means that used vehicle prices match those of new vehicles.
A birthday celebration
Of course, how could we ever visit Argentina without playing football with the locals, experiencing an asado and watching a tango show?! I couldn’t have thought of a better place to celebrate my birthday. Thank you IMD for such a wonderful experience!