Question

Executives must consider the benefits and risks of competing internationally when making decisions about whether to expand overseas. Executives also need to determine the likelihood that their companies will succeed when they compete in international markets by examining demand conditions, factor conditions, related and supporting industries, and strategy, structure, and rivalry among its domestic competitors.

For these executives that may face many uncertainties in a global marketplace, assess the three possible risks that may be faced by decision-makes seeking to expand in global markets. Analyze all three risks listed below. In your own words, analyze what conditions may be present in a country that would cause concern for these decision-makers. Explain what political risks may be present. Describe the economic and cultural risks that may also be present. You do not need to select a country. Your responses to all three risks can be a general overview of potential problems that executives want to review and assess the potential negative impacts.

Political risk refers to the potential for government upheaval or interference with business to harm an operation within a country.

• In extreme cases, a company’s assets in a country are seized by the national government. This process is called nationalization.

Economic risk refers to the potential for a country’s economic conditions and policies, property rights protections, and currency exchange rates to harm a company’s operations within a country.

Cultural risk refers to the potential for a company’s operations in a country to struggle due to differences in language, customs, norms, and customer preferences.

Answer 1

The political risks which an organization can be affected through are:

• Laws relating to use or not using some materials.
• The current political party in power and rules stated by it, if any.
• Issues relating to political parties and trade unions in the country.
• Social issues in the country.
• Civil unrest in the country.
• Possibility of terrorism and war in the country.
• Micropolitical conditions like favoring local businesses.

Economic risks that can be present are:

• Changes in government policies and investment conditions.
• The condition of the economy and its rise or fall in the economy.
• Changes in the exchange rates in the country.
• The current price of your currency viz. the dollar.
• Possibilities of inflation in the economy.
• Possibility of collapsing of the current government.

Cultural risks that can be present are:

• Your business adapting to the local mindset of the people.
• Companies not able to identify the regional, cultural, and behavioral differences in international markets.
• Not able to understand the local ethical and cultural issues.
• Understanding diversity in cultures and how the localities treat that diversity in their country.

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