Adapting to Uncertainty

This profile showcases a company that has been faced with an extremely volatile business environment. Overcoming challenges has given the leadership key skills to speed a company with a long history to a new high-growth phase and take advantage of the industry transformations.

Company Introduction

Groupe Socota is a diversified group based in the western Indian Ocean. The company was established in 1930 in Madagascar as a trading house. Operations have since expanded to include vertically integrated textiles and clothing manufacturing units, aquaculture production and seafood distribution, agricultural development and real estate.

Socota’s fabric and garment divisions in Madagascar employ over 7,000 workers. Key markets in the mid-end fashion range are Europe, the United States, South Africa, China and Australia. Capacity and employment are expected to grow by 30% in the near term.

Socota’s shrimp farm in Madagascar was the first to be certified under the organic “AB” label. The farm has over 1,000 employees and its main market is Europe. Seafood distribution activities stem from a joint venture with an established high-end French distributor.

Socota’s agriculture division was created recently. Development in Madagascar of value-added crops for food, biomass and essential oils is in the pilot stage, with significant growth prospects.

Socota’s real estate division in Mauritius is developing land and space on a smart city concept. It recently launched the first biotechnology park in the region, with the next phase focusing on the construction of a residential belt.

Case Study: Adapting to Uncertainty

Socota’s distinctiveness stems from the capacity the company has shown over recent decades to reinvent itself in response to successive political and regulatory shocks and respond to the opportunities presented by regional and global markets. In the process, Socota has evolved from a textile manufacturer feeding the domestic market in Madagascar to a diversified enterprise oriented towards exports in Europe, America, Asia and Africa. Socota’s sectoral diversification and participation in global value chains have achieved both economic and social upgrading in one of the world’s poorest nations.

The challenges Socota has had to confront are multifaceted. First, there is the dimension of domestic uncertainty and infrastructural deficiencies generated by Madagascar’s recurrent political crises, underdevelopment and geographic isolation. Adverse consequences have included: nationalization followed by re-privatization; the sudden loss of markets subsequent to disorderly domestic policy reorientation and later the revocation of trade preferences; high fiscal and legal unpredictability; and substandard global connectivity.

Second, there is the dimension of international change. Beyond heightened competition on world markets, this has included a fundamental reorganization of sourcing networks since the turn of the century; a trend reinforced by the global financial crisis. In textiles and clothing, for example, the sourcing decisions of lead firms have shifted from the pre-eminence of cost differentials to more elaborate buyer-supplier relations, with key considerations such as lead times, flexibility and the delivery of services and supply chain logistics.

Socota’s resilience, its ability to adapt to uncertainty and change, has been built on long-term vision and the following foundations.

Responsible leadership: Long-standing investment in socially and environmentally responsible production processes has cultivated employee engagement and become a factor of differentiation in positioning the company on international markets. It has delivered a sense of purpose among managers and employees in difficult operating circumstances. In addition, sound industrial relations create a line of communication that facilitates adaptation and organizational change.

Human resources: Sustaining competitiveness implies a continuous and deliberate process of workforce development, not least in a low-income country with limited human capital formation and poor business and infrastructural conditions. This is an ongoing effort and one that will define the agility and future growth potential of the firm – i.e. the recruitment, identification and training of talented individuals.

Knowledge transfer: Socota’s internationalization and diversification in high-growth markets have been successful due to the absorption (adoption and adaptation) of know-how with regards to technological change, consumer preferences, international standards and management practices. One way in which this has been achieved is by entering into partnerships. This dissemination of knowledge has enabled Socota to innovate, develop differentiated products (in textiles, seafood, agriculture, real estate) and make strategic adjustments when necessary in response to risks and new market opportunities.

In conclusion, despite its long history and size, a trait Socota has acquired from having to regularly adjust to a moving environment is entrepreneurial drive.

Peer CEO Advice

• Socota has been fortunate to inherit a legacy of values which, in a domestic environment marked by a considerable degree of uncertainty, has enabled the firm to succeed in uniting personnel and management around certain core principles – primarily, a sense of the public good and the importance of customer satisfaction.
• In all of our ventures we seek to develop strategies that are consistent with local expectations in terms of social progress and responsive to the demands of highly competitive, fast-evolving world markets. These principles will remain vital to our resilience and continued agility.

<< Back to Hypergrowth Profiles