The World 's Total Global Market

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

DQ 1: Summarize the most important benefits and risks associated with diversification into global markets.

Theodore Levitt is often considered to be the first to recognize the trend towards globalization and states that: “companies must learn to operate as if the world were one large market – ignoring superficial regional and national differences…” In addition, he argues that the companies that do not adapt to the new global realities will become the victims of those that do.

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

Beath, A., Frauscher, K., Jarvis, M., & Reis, J. G. (2008). The Investment Climate in Brazil, India, and South Africa: A Comparison of Approaches for Sustaining Economic Growth in Emerging Economies. Washington D.C., United States: World Bank Publications.

Inflation risk have very important implications for the portfolio management, cost of capital of a firm, asset pricing and currency hedging strategies, as any source of risk which is not compensated in terms of expected returns should be hedged. Therefore, it is very important to examine whether inflation risk is priced in international stock

building strategies to invest in the emerging markets of the Exotican continent, with the primary

To be more precise the investments from eh developed countries with their investment in the emerging of developing countries are from the big Trans national corporations that have stronger foothold in world capital markets. Thus any kind of investment either through opening of wholly foreign investment venture or joint ventures with domestic companies of the developing nations help in greater valuation of the companies world stock market increasing overall capitalization.

Investment universe is more expansive, diverse and complex, with markets and securities reacting very differently to global forces

Investing in emerging markets offer tempting advantages to investors. The volatile economies of countries considered to be in this category have a potential for extraordinary returns. A caveat to investors considering opportunities in emerging markets are the presence of unstable governments, the chance of nationalization, poor property rights protection, and large swings in prices. Emerging markets are far from a sure thing. But, despite high individual risk, emerging markets can reduce portfolio risk. The volatile economies of these countries have such low correlations compared to the domestic market that they actually provide the greatest degree of diversification.

We see drastic changes in the world: the transition process from an industrial to a postindustrial economy has restructured everything. Such rearrangement of economic and social power is influencing society as well as business. The new market prevailing under globalization has changed the nature of business and the old ways of doing business no longer work. Only a worldwide corporation can adapt to this powerful socio-economic megatrend.

Developed economy investors are no doubt investing heavily in emerging market countries thanks to their promising profit. However, the questions they have to face is, whether investing in emerging market countries are risky or not? This question will be revealed by this research paper, which is based on facts gathered from reliable sources.

The idea of investing in the stock market is at times challenging. Heightened activities witness the stock market itself. These activities gained the investor’s interest increasingly. The stock market patterns have changed due to the current globalization and integration of the subsequent markets. Just to name some of the global markets are New York Stock Market, Hong Kong Stock exchange among others. Sometimes these market patterns have changed due to politico-economic backgrounds (Hamid Faruqee, 2008, p. 154).

climate in these countries. Higher savings and investment rates eventually help in boosting GDP. This is another reason why GDP is growing faster in the emerging world than in the developed world.

India has an amazing rate of growth which has reached to 9% in 2007. The average rate of growth is 7% since 1994. This is an important evidence of the stable development of Indian economy. Also unlike to other developing countries India managed to have a very low rate of inflation which has remained close to 4% since 2000 and has not fluctuated much then. India seems to be one of the safest economic environments for investment when compared to other Asian countries. Moreover India’s imports almost tripled between 2001 and 2005 from $50.1 billion to $138.4 billion, while exports more than doubled, from $43.3 billion to $99.7 billion. Another import point that should be noted