International Management 7e (Deresky) - Ch.1 : Discussion and Analytical Questions

As previously identified, there are also “non-legal/extra-governmental” political risks which could bring unexpected upheaval to foreign firms. Macro political risks such as the threat of violence, corruption, war or military coup, political instability and terrorism are all direct threats to foreign investors.

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The Great Depression started in 1930 and lasted until 1939. It can be regarded as the worst depression the world has ever seen in the history. Spread across various nations, the Great Depression badly hampered each and every aspect of the economic, business, political, and social life. The most affected regions due to this economic slump were North America, Europe, and other industrialized Western countries. Among various other reasons, economists, researchers, and historians cite the 'Black Tuesday (October 29, 1929)' as the biggest cause of the Great Depression. It was the day on which the stock market crashed. A massive number of individuals, business corporations, and banking companies had invested huge amounts in stocks. In order to survive from heavy loss, everyone hurried to sell its stocks, but there were no buyers. The banks went bankrupt and further increased panic among individuals and businesses. In order to safeguard their remaining money, these individuals and businesses rushed to withdraw their deposits from their bank accounts. These heavy withdrawals further caused various commercial banks to shut down their operations due to bankruptcy.

Choose one current event. Describe the event and discuss the economic implications of this event. What economic effects might this have at the individual and societal levels?

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

Political risk is any governmental actions that diminish value of the firm operating with the boundary or influence of that government

1. What is the significance of determining whether a country follows the rule of law?

2. Describe the risk associated with making an investment in an international growth fund. Identify the risks that would be common to domestic an international funds, and those risk that would be unique to an international fund.

1. To qualify as a multinational corporation, a firm must meet all of the following criteria except:

It is important to indicate that a country risk analysis is not static. As factors of the analysis change within the country, the risk of investing in that country also changes. These analyses are fluid and are always fluctuating. Changes can be indicative of deliberate governmental action taken by the country while other times the risks may change because of an action other countries have taken. The purpose of this paper is to create a risk analysis for the Republic of Nicaragua and to explain the

INTERNATIONAL MANAGEMENT: CULTURE, STRATEGY, AND BEHAVIOR, EIGHTH EDITION Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020. Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Previous editions © 2009, 2006, and 2003. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited

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?

2. Several types of risk are present in the American economy. For each of the following, identify the type of risk that is present. Explain your answer.

Subject : Appraisal of a MNE's recent market entry (2007-2010) ( 1. Firm Motivations for internationalization 2. Entry Strategy 3. Corporate Strategy)

THE POLITICAL ENVIRONMENT: The critical concern Political environment has a very important impact on every business operation no matter what its size, its area of operation. Whether the company is domestic, national, international, large or small political factors of the country it is located in will have an impact on it. And the most crucial & unavoidable realities of international business are that both host and home governments are integral partners. Reflected in its policies and attitudes toward business are a governments idea of how best to promote the national interest, considering its own resources and political philosophy. A government control's and restricts a company's