The Political Risks Of International Business Environment

2064 Words Sep 27th, 2016 9 Pages
First of all, doing international business can involve various factors of risks which are different from those encountered domestically and generally increased by the actions of government across nations which are:

Political Risk
"Traditional political risk theories often focus on a developing host country government 's ability to intervene in the activities of foreign multinationals in the extractive or infrastructure sectors. This results in inadequate understanding of (1) how a government 's motivation to intervene is influenced by the broader societal context, (2) the importance of multinationals ' political risk at home, and (3) the increasing political risk faced by high-tech and service firms" (Stevens, Xie, & Peng, 2015). Political risk generally occurs when there is a major political instability result from the government’s actions at the export destination which could cause drastic changes in a country’s business environment that would affect the profit and goals of a business enterprise. This type of sovereign risk could include changes in government policies, defaults on payments, or in extreme cases, revolution and civil war.
This risk greatly increases the cost and risk of doing international business with an example of the interactions of Google and Yahoo with the Chinese government that created political risk both in China and despite being powerful firms from powerful home country, Yahoo and Google wound up experienced more political risk than less…
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