Why do Businesses Thrive in some Places/contexts and not in others?

A true successful business does not only stem from a unique product or immense organization within a team. The success of any business depends on a blend of factors within and external to the organization itself, that is the strength of its management, innovation and strategy, in conjunction with the economic environment, government policy, infrastructure and culture. 

Consequently, there are two opposing perspectives, while some business academics attribute success primarily to the decision making and internal structure of a company, others assign the bulk of success to location and circumstances. The reality is that success for any business lies in a synergy between both the company's inherent qualities and its external context. Firstly, the success of a business is fundamentally linked with its internal components. The competent leadership, a clear strategic direction, and a culture of innovation are significant in enabling firms to excel, even when faced with harsh external conditions. Examples of such companies, which successfully overcome unfavourable conditions through adaptation, technological investment, or product differentiation, serve to indicate that firms are not completely at the mercy of location; management capability can counteract some of the limiting factors presented by a poor location. This view is limited, as, however able the management of a firm, such a business would likely fail in the presence of such limitations as insufficient consumer demand, the poor quality of its infrastructure or the rigidity of government policy. 

Secondly, the existence of favourable external conditions seems the essential foundation upon which successful businesses can and do operate; demand from consumers, government policy and the quality of infrastructure play crucial roles in a company's success. Furthermore, global connectivity, political stability and access to international markets further compound the long-term prospect of businesses operating in favourable regions. In essence, the factors of location create a scenario wherein businesses, irrespective of their internal qualities, are far more or less likely to succeed. 

The United Arab Emirates perfectly exemplifies the significant role played by external factors; it has created a supportive environment for businesses to operate. Its diversified economy enables success in a wide array of industries, ranging from tourism to finance and technology, while high levels of income are translated into high consumer demand. Likewise, its government has established favorable policies such as very low rates of corporate taxation, and zones where foreign ownership is not limited in any way that facilitates rapid business start ups by enabling quick access and minimal challenges. The UAE has world-class infrastructure, a key factor that is crucial for the effective running of businesses, for example, Dubai's International airport serves as a global business hub for international trading and its proximity between Europe, Asia and Africa has helped make the country an easily accessible market to nearly two thirds of the world's population. All of these external conditions are favorable, to the extent that they promote and enable business to excel in the UAE regardless of its inherent qualities, although high running costs and the intensely competitive environment of the UAE may hinder success. 

Consequently, businesses in this location can only succeed if their strategy and capabilities allow them to cope with the stringent demands of its environment, indicating the interdependent relationship between internal and external factors. It is a combination of business capability and the external environment, therefore, that enables firms to thrive or stagnate; leadership is important for effective running of the company but it needs a favorable external environment in order to exploit this capability, as seen in theUAE, which shows that external success alone cannot be the deciding factor between whether or not a business can succeed.