Rare Earthquake: Future-Proofing MSMEs Amid Geopolitical Shifts
The Rarely Known Backbone of Modern Technology
From the smartphone in our hands to electric vehicles, wind turbines, industrial robots and defence equipments—Rare Earth Minerals (REMs) are the less-known enablers of the modern world. Despite their name, these elements are reasonably abundant, but extracting and refining them is highly specialized and geographically concentrated.
Among the handful of countries that produce rare earth minerals, China is the undisputed leader, commanding over 60% of global production and processing over 85% of the world’s supply. This concentration has made the global economy vulnerable to any policy shift by Beijing. While Africa and Norway also have REMs , they are yet to be explored fully.
So, when China recently announced a curb on rare earth mineral exports, the tremors were felt not just in political corridors but across boardrooms, factory floors, and supply chain control towers around the world.
From the CNBC‑TV18 interview with Rahul Bharti from Maruti Suzuki aired this morning, the company is evaluating alternative suppliers and strategies to mitigate any long-term impact, aiming to keep the launch timeline intact, but the commercial rollout of the e‑Vitara may be postponed depending on how China’s rare-earth magnet restrictions evolve.
When the winds of change blow, some build walls, others build windmills – Chinese Proverb
The Policy Shift: What Happened?
In 2024, amid escalating geopolitical tensions and an increased focus on technological self-reliance, China introduced new export restrictionson specific REMs used in high-tech and green energy applications.
We have heard of the ‘Butterfly effect’ – a butterfly flapping its wings in Brazil could, in theory, cause a tornado in Texas over a period of time. But, the Dragon effect is immediate.
These restrictions affect minerals like gallium, germanium, neodymium, dysprosium, and yttrium, which are critical to industries ranging from semiconductors to magnets in EV motors. In short, the 17 elements from the periodic table, periodically assume significance in the wake of such a geo-political move.
Impact on Global Business and MSMEs: A Layered Disruption
Let’s analyze the impact through two distinct lenses:
1. Larger Enterprises
- Supply Chain Recalibration: Tech giants, and their contractors must now find new sources or invest in local processing capacity.
- Increased Costs: Sudden scarcity leads to price volatility, impacting profit margins and forcing redesigns of product specifications. Requires redrawing House of Quality (HoQ) prepared at the start as part of Quality Function Deployment.
2. MSMEs (Micro, Small and Medium Enterprises)
- Dependency Risk: MSMEs, especially in sectors like electronics assembly, and precision tools, are price takers.
- No Buffer: MSMEs have limited ability to stock inventories, bank on diversification, or negotiate contracts favorably.
- Business Disruption: Project delays, contract penalties, and customer base erosion become immediate risks.
Taking risks is the way to growth, else growth will be at risk
-A quote from ‘Father of Your Team’, Amazon US, #1 New Release in Office Management
Strategic Tools to Prepare for Disruption
1. Jostle the PESTLE Analysis
A powerful lens to assess macro-environmental risks. More importantly, three market factors in this framework namely Political, Environmental and Legal can no longer be narrowly assessed at a regional or national level. The business environment in which your organization operates is more susceptible to impact from any political decisions bound to be abided by suppliers in your supply chain.
2. SWOT Analysis – Spice it up with a quantitative flavor
While the Entrepreneurial ecosystem in India is its Strength, the lack of local processing infra for some of the supply chain components is a Weakness.
With the growing Govt incentives for MSMEs being an Opportunity, the Global policy uncertainty is showing signs of being a Threat.
How can a static and conceptual tool look SWOT help when our companies have to prioritize and perform course correction to remain relevant?
I propose this approach to leverage SWOT for boardroom decisions. Opportunities and Threats can be ranked depending on the intensity on 3 parameters – Relevance , Urgency and Feasibility. The product of ratings (can be 1,3,5) of these 3 parameters for each opportunity and risk can drive the basis of prioritization of our strategic growth roadmaps.
3. Risk Management Framework in Finance: TARA Matrix
Image courtesy: https://www.consuunt.com/tara-framework/
- T (Transfer): Partner with vendors who have diversified sourcing. The philosophy – ‘Why take the hit when someone else can take it for you?’
- R (Reduce): Modify designs to use fewer critical minerals. The philosophy – ‘I can’t make your pain disappear, but I can make it hurt a lot less.”
- A (Accept): Plan financial buffers for temporary cost escalations. The philosophy – ‘Bring it on. I am prepared to take it.’
4. Jugaad Innovation: Frugal, flexible, and fast adaptation—uniquely Indian and extremely valuable in such scenarios. Of the six underlying principles of Jugaad innovation defined by the authors Navi Radjou, Jaideep Prabhu and Simone Ahuja , seeking opportunity in adversity is the way to go.
Signals Indian Businesses Should Watch Out For
- Export Policy Updates from China, US, and Australia
- Subsidy Announcements and related developments for local REM mining and refining
- Trends in REM recycling. Recovering REMs from certain waste sources may be difficult today but not undoable. So, watch out for and partner with any start-up that is pioneering a circular economy for REMs, where they efficiently recover and reuse REMs from waste streams.
Alternative Strategies to Cushion the Impact
1. Diversify Your Supplier Base
Look beyond China—Australia, Russia and the US may be ramping up production considering their Rare Earth reserves. Consider dual sourcing for critical components.
2. Form Strategic Alliances
Consortium of MSME companies can share resources, develop collective bargaining power, and co-create alternate solutions. They can together pool in money for R&D on local alternatives
3. Scenario Planning Workshops
Don’t you test your emergency response procedures in your BCP plan through table-top exercise (TTX)? Similarly, simulate geopolitical disruptions and test the resilience of your business model. Use tools like Probability Decision Trees and derive Expected Monetary Value(EMV) in each scenario.
எய்தற் கரியது இயைந்தக்கால் அந்நிலையே
செய்தற் கரிய செயல் – Tirukkural 489
Translation : Do not hesitate to seize opportunities that are RARE. Use it to achieve tasks that are otherwise harder.
So, the Rare Earth Minerals crisis is a rare opportunity to be seized and leveraged.
Strategic Takeaways for Indian MSMEs
- Global disruption is local reality. Every policy change abroad can have broader impact your business.
- Risk isn’t just about mitigation; it’s about monetization. If you can plan early, you can seize emerging opportunities.
- Being small doesn’t mean being helpless. Strategic thinking isn’t the luxury of large corporations—it’s the lifeline for MSMEs.
How SUCCESS PILL Can Help MSMEs stay Resilient
At Success Pill, we recognize that MSMEs face the double burden of resource constraints and high exposure to global volatility. Our growth strategy consulting is tailor-made to:
- Map your supply and revenue dependency zones
- Identify low-hanging diversification opportunities
- Create alternate monetization paths
Whether you’re navigating the turbulence of rare earth curbs or planning for long-term self-reliance, Success Pill helps you turn external shocks into strategic pivots.
Let’s not just survive the storm—let’s engineer a new course.
Ready to build a business that’s shock-proof, scale-ready, and strategically smart?
Success Pill is your partner for growth with foresight.
Reach out. Let’s make strategy your strongest resource.
Venkat Kumaresan, CEO and Founder – Success Pill | Business Scaling Strategist | Author