Business Development in a Global Market Essay

Strategic planning is essential prior to any individual or company deciding to engage in international business whether as direct/indirect investment or through trade. An evaluation of risks should be considered and strategies developed accordingly prior to any potential investment in a foreign country. One such risk which requires consideration is political risk i.e. "governmental or societal actions and policies, originating either within or outside the host country, and negatively affecting either a select group of, or the majority of, foreign business operations and investments."

The political risk of investing in developed countries is roughly comparable with the risks of investing in the developing countries.

Political factors is an external environment in which a business functions. This is a type of external constraint for a business and are related to actions of governments. This factors can affect how the business operates. Political factors include politicians, who make important decisions. These can be done at national level at the UK

However, the investment was not without risks. There are four types of risks in international business called cross-culture risk, country risk, currency risk and commercial risk. Cross-cultural risk refers to a situation or event where a cultural miscommunication puts some human value at stake. Country risk describes the potentially adverse effects on company operations and profitability holes by developments in the political, legal, and economic environment in a foreign country. Currency risk is the risk of adverse unexpected fluctuations in exchange rates. Commercial risk refers to potential loss or failure from poorly developed or executed business strategies, tactics, or procedures (Boter & Wincent, 2010). Investment in Rulmenti Grei, Timken might face the salient risks of political and economic instability. Romania’s economic growth was slower, inflation was higher, and the labor force was more volatile. Furthermore, there might be a risk of re-nationalization. It is said that economic risk analysis tells corporate leaders the ability of a particular country to pay its debt while political risk analysis tells them whether that country will pay its debt. Political risk measures the stability of individual countries through the

Which is cost difference determines the patterns of international trade. Absolute advantage is trade benefits when each country is at least cost producer of one of the goods being traded. In the 1800s, David Ricardo developed the theory of comparative advantage to measure gains from trades. This theory is based on comparative advantage and it states each nation should specialize in production of those goods for which its relatively more efficient with a lower opportunity cost.

As G4S works in many companies, Geo political risk is immense and it includes political volatility, revolution, terrorism, military intervention and insurgency

Political factors relate to way in which changes in the government and government policies can influence the business.

The need for a solid market entry decision is an integral part of a global market entry strategy. Entry decisions heavily influence the firm’s other marketing-mix decisions. Company can enter International Market with many ways, some of them are as follows:

One of the first steps in managing political risks is to analyze the political environment for risks to the business. According to Luthans, the analysis of risk can be done with two types of political risk analysis, Macro and Micro Analysis. Macro Analysis is an analysis of political ideas and decisions that will impact all businesses in a country and Micro Analysis is an analysis of governmental regulations and policies that affect a specific sector of on economy or market such as the auto industry (Luthans, 2015). However, there are other risks that can be more difficult to analyze such as terrorism especially in today’s political unrest. Some major corporations have spent thousands of dollars on macro and micro analyses just to have a world event disrupt or completely destroy operations. Tata motors dealt with political battles as well as a terrorist event.

This dissertations presents concept of political risk in the context of Efficient Market Theory (Hypothesis) and State capitalism. The paper explores the link between the three ways of insuring political risk to economic theories. Using case study of a multinational firm the political regime and its effect has been explored on business situations and how it can be managed. Political risks are the threats arising for a business due to the actions of a host government. Multinational firms in particular face political risks due to expansion of their businesses to developing countries. Author has explained and examined how political risk management has been developed in the contemporary history. A comparative analysis of concepts that deal with political risk under the contexts of prevailing ideologies; political and economic constructs has been conducted.

After sifting through the leads and finding the right ones to investigate management must formulate an international marketing plan. This further helps management in locating potential markets for their products. The first step is to use secondary research to find out what the sales potential is in a given market. Asking the questions of need, demand, and support gives one a starting point for research. If we were a company that sold pants we might want to ask the following questions. Is there a need for pants? Is it cold enough there to wear pants? Do people that demand the pants have money? These are the questions that one should ask of potential markets. Table 1-located at the end of the paper-shows the statistics that are needed for a general market picture. After gathering the information from the secondary research, the picture of a potential market becomes more evident. However, to make the picture clearer, one must conduct primary research. This research outlines the specifics of the potential market that directly pertain to the product. Robert Douglas' book, Penetrating the International Market, addresses the issue of locating potential markets in greater detail.2

1. Political risk and country risk are challenges that must be strategically considered by multinational firms. What is one real-world firm that deals with political and country risk?

Companies can decide to go global or to enter international markets for various reasons, and these different objectives at the time of entry that enable the business to produce different strategies and the performance goals, and even forms of market participation.

Generally, countries experiencing high political risk tend to discourage FDI inflow. However, the ranking of political risk among the list of the other FDI determinants remains unclear. According to ODI (1997), countries with rich natural resources do not seem to require any further incentive to attract FDI. As seen in politically unstable countries (eg. Nigeria and Angola), their extractive industries that generate high returns seem to compensate for political instability. This gives an idea that the foreign company will continue to invest as long as they overcome some of the political risks and being able to operate profitability without excessive risk to its capital and personnel. In some studies, specific proxy variables such as

Four types of political risk factors must be examined in assessing the climate for investment in any given country. They are: