Question

Increased global interaction has been promoted by advanced technology in communication, ideas and culture, which largely encourages and facilitates international trading. Businesses go abroad in seeking better financial incentives, stronger networks, and markets of opportunities. But at the same time, the complexities in terms or risks involved in international operation are more than domestic firms. Respond to the following in a minimum of 175 words: Discuss how to manage cultural risks and other factors related to a foreign operation of a multinational business. Is cultural, business, or political risk more challenging to overcome than one of the others? Why or why not? How should American standards influence multinational businesses?

Answer 1

Globalisation is an important factor, with the expansion accros the world there is no physical barrier. All the credit goes to the technology developments which facilitates smooth functioning of business operations & savings of cost and time.

Why any business wants to go global??

Answer is here, Any business which is planning to go global is eyeing on entering into new markets, high sales, high profitability, enlarge customer base, explore untapped markets, to be existed .

However there are complexities in terms of risks involved in international operation are more than domestic firms.

Such as The first and foremost is Foreign exchange risk. Foreign exchange rates are in flux constantly there should be a proper policy in the company to cover such risks. Due to receivables and payables company is ought to convert its currencies and make payments or receive is exposed to conversion risks. However if a trade is done within the country a company shall not be exposed to such risk because the same currency is used to buy and sell with out paying any conversion costs and volatility in the currency.

Second is Country risk. Any country is exposed to political, social, economical risk which is unpredictable. Any business entering into any country shall do a thorough homework on the political stability, laws and regulations of such country is necessary. If a country has very good external environment a business will go long else will end. However at the same time domestic country is not new to any business legal risks can be avoided since laws and regulations of home country is not new to any business. Its like planning a trip at known places is better than unknown places where risk is not defined.

And last but not lease Cultural risk. This refers to failing to understand local business practices, failing to understand ethical and legal issues. Being cultural sensitive is very important. It is the ideas, customs & behaviour of a particular person or society. So understanding of all those and adapting to them is very important to succed in any international operation.

How to manage cultural risk and other factors related to a foreign operations of a multinational business?

Here it is, First we need to understand what is culture risk. It means company's operations in a country to struggle because of difference in language, customs, norms and customer preference. For example A laundry detergent company in Arab promoted via advertising by showing dirty clothes on left, box of detergent in middle, clean clothing on right. Since reading an Arabic language is from right to left. The product failed due to lack of understanding of country culture. Another example where a company is promoting meat in a county where population of Vegetarian is higher. Managing cultural risk addresses to change attitudes and responses to the identified and assessed risk. Adapting to its local business practices, recognising regional difference in cultures, adopting to management practices across different cultures, understanding local legal and statutory requirements.

Cultural, business or political risk all are equally challanging. Due to its own various factors. Every risk has its own issues. Cultural , business or political risk all of these are equally important to understand. If any one risk is not properly treated business will fail eventually.Therefore treating all the risks are important.

American standards shall have positive influence on businesses, these multinational business having its presense all over the world will carry a good status of America if such good standards are due to american standards influence.Integrity, Honesty, treating equally, being non biased etc