Political, Economic and Social Risks of Developing Countries

Assess the significance of three factors which might limit economic development in the developing countries.

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.

A1. Global risks are usually predictable and have a high probability of occurrence but are often referred to as uncontrollable risks (Merna, 2008). Of the risks listed above, one that has more of a global aspect on marketplace activities is the political and regulatory risks. This would include potential losses from expropriation, nationalization, civil unrest, terrorism and significant changes to trade policy. Specifically,

Lastly, the Government is in charge of the laws and regulations that contribute to sustainable development such as how much resources companies can use and where they could get said resources. Furthermore, the Government will penalize or jail anyone that breaks the laws of the country.

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

Silence, rows of desks, and cold hard plastic seats. What’s the first image that comes to mind, a classroom. Close your eyes, imagine yourself sitting in this classroom, a clock keeps ticking, tick-tock, and a test with no instructions has been placed in front of you. You have fifteen minutes to perfectly complete it or you’ll fail. Now raise your hand if you felt your blood pressure rise, and anxiety develop. You felt the uneasiness, stress, worry, the emotions that consumes one in every five teenagers in America under our current education system. Hours of homework, extracurriculars, standardized tests, busy work, and tremendous amounts of pressure. This was the solution devised based A Nation at Risk, which told of America’s downfall as

When governments amongst nations conduct in international business, it exposes them to increased risks and costs through unfair trade and bribery in order to obtain a competitive advantage or power. Mercantilism explains why the government intervention of international business increases the chances of these risks. Mercantilism is the theory that explains, the government will maintain their economy and trade to promote their own domestic industry at the cost of the other country leading to unfair trade (Pettinger,2016). As all governments will not play by the same rules, there is an increase in risks such as unfair tariff policies or bribery in order to gain a competitive advantage. In fact, many governments across nations will use these unfair actions to gain an increase in power. Hill (2015) states that nations like China are striving for a more neo mercantilist policy (a more modern theory of mercantilism where economic power is the equivalent to a trade surplus) to gain a trade surplus. During most of the 2000s, their exports have been increasing whereas their imports have not grown because they have been limited by an import substitution policy. While China is able to benefit from the trade surplus, it is at the cost of another nation where the money that will be paid for those imports will decrease. Therefore, government intervention in international business increases risk like unfair trading to gain a competitive advantage. The government also increases the cost of

Assess the significance of three factors which might limit economic development in the developing countries.

All countries in the world have various political environment and regimes. Political systems differ in terms of the governance, power and the rule of law. A political regime can be defined as structures, activities and processes by which given countries in the world govern themselves. Political systems can be based on either collectivism or individualism. It is essential for business to look at a country’s political environment as a vital criterion in venturing or expanding the business or company to that country. This is because political systems differ and each has its own form of governance that impacts a business in terms of its growth. International companies carry out international manufacture and activity in that they

Developing nations are filled with hope and aspirations of one day becoming a wealthy, dominating, and influential country. These nations can sometimes be unsafe, difficult to live in, and hard for workers to earn good compensation for their labor. On the other hand, living in a developed nation has many upsides. Developed nations are wealthy, which in turn have good infrastructure, labor and worker laws, and have less crime.

For firms seeking to engage in international business, government intervention may increase both the risks and costs they undergo. With liberalised trade, firms

Developing country MNCs may have more experience as they used to doing so at home where home governments do not supply them goods. Therefore, MNCs may suffer for the ineffectiveness of the government which can lead to unexpected cost and also size of the operations being limited in the country. LDCs have lower government effectiveness which causes the government systems and establishments are slow and politically dependant, thus lead to lack of high quality of public goods.

Evans and Richardson (2007), contend that globalized economic environment is complex and changes from time to time and this places a heavy responsibility on multinationals and other business enterprises. They are forced to adapt in order to deal with these factors for the benefit of their organizations. A company cannot ignore political issues when assessing the business environment in which it operates because it affects government policies such as licensing, regulation and taxation, which have a direct consequence on the activities of a business enterprise (Evans, & Richardson, 2007).

Political environment is significant to do business in other countries. There are different factors of political environment. These factors can influence the government decision making and other activities. For foreign investors every country set some rules and regulations. Investor need to maintain these rules and regulation to do business on certain country. Political factors can influence the government to change these regulations. So investors need to know the regulations and get the proper knowledge about political environment.

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