Question

current challenges for Australian MNC investing abroad. Given the current U.S. trade protectionism policy, which creates trade frictions with China, Japan, the European Union, Canada, Australia and Mexico, please illustrate the main risks associated with an Australian MNC which plans to create a subsidiary in countries and regions such as the United States, China, Japan and the European Union (pick only one country/region to discuss).

Answer 1

Risk associated with an Australian MNC investing in China

1)Cultural Barriers -China has different culture as compared to western countries. The are very sensitive regarding their reputation .Chinese leaders and managers expect obedience without question.it is of particular importance to show respect as a Westerner doing business in China. It creates cultural barriers and communication gap between MNC and local people.

Cost of Doing Business- Cost of doing business in china is high as compared to some western countries due to imposition of additional operational cost in form of various taxes .

Economic Stagnation-  China’s economic growth has slowed. Its debt have been increased due to more expenditure in infrastructure which resulted into  costs have outweighed the benefits.Due to this resulted into slowdown on economic growth

The Role of government in business-China has planned economy closely tied with government. Most of the assets of china is owned by the government.This means for doing business in china MNC's have to negotiate with the government.Which can result into  slow down the pace of business ventures.

Corruption-Due to high involvement of government into the business there is High Corruption in china. Lack of transparancy results into risk to foreign investors.