Expansion across seas can be very advantageous and lucrative for many companies; however, there are many risks associated with doing business overseas, and companies that intend to expand internationally should be careful and strategic when doing so. Not only do companies run the risk of experiencing a product fail due to differences in cultures, they also face severe political and economic risks as well. There are three main political risks that can be encountered when moving business overseas which are: confiscation, expropriation, and domestication. Each of these risks can have significant adverse effects on a company that is trying to expand into foreign countries. Of the three, confiscation is considered to be the most severe political …show more content…
Economic risks faced by companies that want to expand their business globally are exchange controls, local content laws, import restrictions, tax controls, price controls, and labor problems (Cateora, Gilly & Graham, 2011). These risks can be just as harmful, in some cases, as the political risks faced. As implied by its title, import restrictions are limitations placed on certain goods being shipped in from another country. “There are especially tight import restrictions on goods with a potential to be hazardous” (Dugger, 2016). Many restrictions are placed on imports in order to protect and promote the domestic market within the host country. Tax controls are put into place primarily to generate revenue and operating funds. Unfortunately, many companies that attempt to expand their business overseas experience unreasonably high taxes. Elevated tax rates can also be seen as a form of protectionism in efforts to deter threatening foreign companies from entering their market, thus allowing domestic companies to …show more content…
Because the health of individual economies depends largely on the health of the global economy, sanctions are typically not put into place to debilitate a country’s economy; instead, they are generally used to coerce a country to comply with standards that the inflicting country believes are acceptable. Unfortunately, many times sanctions are ignored and the country will continue to do what it pleases. An example of this is the sanction placed against Russian banks, elite business men, and energy companies. “Since the introduction of Western sanctions in 2014, Russia has increased its efforts to lure China to participate in large energy projects” (Russia and China Continue to Forge Energy Ties, 2016). Instead of changing their actions to drop sanctions against them, Russian energy companies turned to a country that will allow their
Office of Industries, U.S. International Trade Commission.(2009).Export controls: an overview of their use, economic effects, and treatment in the global trading system. Retrieved from United States International Trade Commission http://www.usitc.gov/publications/332/working_papers/ID-23.pdf
In my opinion, there really isn't any reason to block/terrif imports unless they are illegal items. Some have good intentions but end up causing more harm. For example, the book says on page 427 that if there were a terrif on tennis shoes thus increasing the price of tennis shoes from $30 to $60, it would help the tennis shoe business. But, now there will be less demand for shoes because of the high price, and the company would have to lower the price to attract customers. It might even have to decrease the price all the way back down to $30. Since labor wages are a lot higher in America, they might not be able to afford to stay in business because of the lack of sales. The only way for this to be solved would be to move over to China, therefore
Many business owners and entrepreneurs are doubtful about the global opportunities available to their business. In other words, business owners don’t give consideration to the world markets, instead they tend think locally in terms of gaining customers. This doubt however is unfounded. The international trade commission reported that 70% of the world’s purchasing power and 95% of the world’s consumers are located outside of the United States, which means that there is a massive market that is currently untapped by 99% of business in America. In addition to doubt, there is the uncertainty about exporting to other countries, this uncertainty may stem from lack of knowledge about foreign trade and the international laws. A business owner may be uncertain about how, when, where, and to whom it is legal to ship their products. Although, this uncertainty is understandable it is not required for businesses that are conducting business legally within the United States, business owners should remain mindful of this so that they can push their uncertainties aside. The last factor that deters businesses from international trade is Fear. Fear that there will be unforeseen and uncontrollable issues with transporting goods such as: theft, loss, damages, diversions, and/or regulatory penalties that may be imposed on the business. Although, there is a
A proper discussion of the concept and legal nature of international sanctions can be achieved by a dual means: assessing the concept of international sanctions and comparing it to the legal regime that attempts to disregard national sovereignty and jurisdictional limit of the law. In order to understand the concept of sanctions this discussion analyzes previous writings by John F. L. Ross who questions the international nature of sanctions that often outlaw staying on the fence. The discussion further delves into the writings of H. L. A. Hart to assess the effectiveness of international law which is the legal basis upon which international sanctions can be based. The discussion concludes by questioning the efficiency of international sanctions
The firm expands its business globally in various regions to develop their business wherein the exposure depends on the size of the firm, country and industry affiliation. The industries are significantly exposed to exchange rate movements and trade by the share of imports and exports. Exports help in increase in the annual revenue by shipping the products from one country to other and when importing the products from other countries the country has to pay the import duty which includes the cost, insurance and freight (CIF) and taxes.
Firms exist with the purpose of create and deliver economic value (Bensaco et al 2010, p. 365); therefore, business that create better economic value than its competitors will attain an advantage position in market place. Companies might try to improve its sales (profit) through domestic expansion, product diversification or by internationalisation; this report will focus on the reasons of espressamente Illy to expand internationally; additionally, its sources of competitive advantage and, the analysis of three markets in which company want to participate.
When it comes to doing business internationally the decision making is more complex. There are many interactions between each country that need to be addressed. In order for a business to be successful in the international market they need to examine and analyze all the facets of their company. They need
To most of the world, sanctions are a mixed blessing. On the one hand, they reinforce trade rules and promote respect for them. On the other hand, they tend to undermine the principles of free trade and provoke a kind of ‘trade envy’(Charnovitz) in other international organizations.
A major challenge of doing business internationally is to adapt effectively to different culture. Such adaptation requires an understanding of cultural diversity, perceptions, stereotypes, and values (Hodgett &Luthans, 2005). Doing business overseas has its challenges as well as it rewards.
Our economic development will forever be defined as our ability to succeed internationally. PwC forecasts India’s real annual GDP growth until 2050 at 8.9 percent, Vietnam’s at 8.8 percent, and China’s at 5.9 percent. The list of fast-growing emerging markets goes on and on. The U.S. forecast is a meager 2.4 percent, comparable with most Western economies. The domestic companies that are likely to see incremental growth in the coming decades are those that are not only doing business internationally, but that are developing the strategic skill set to master doing business across cultures. Cross-cultural core competence is at the crux of today’s sustainable competitive advantage. For example, political environment will tell us, as to how and why political leaders control, whether and how of international business. Legal environment, both national and international will tell us about many kinds of laws by which business firms must work. The cultural environment will tell us about attitudes, beliefs and opinions important to business people. Economic environment will tell us about the economic system being followed by the host country, which may or may not be different from home country. It will also explain the variables such as level of development, human resources, Gross Domestic Per Capita and consumption patterns that determine a firm’s ability to do business. Geography will tell us about location, quantity, and quality of the world’s resources.
One of the most cited arguments for intervention is that of protecting jobs and industries from unfair foreign competition (Hill). While industries like aerospace are protected given their importance for national security, job protection appears as a result of unions and industries putting political pressure given the threat of more efficient foreign firms (Hill). Many countries achieve this by increasing the tariffs on imports of foreign products. What really happens when a certain industry is ...
In the time of globalization internationalization is becoming more relevant for company’s strategies. All companies look for the opportunities in expanding their markets. The main reasons for them are: growing further, creating shareholder value, accessing profit pool, tax barriers transposition, demonstration effects, diversification and sustaining long term competitiveness. Globalization created resources and organizations, which build a great supportive platform for companies to go abroad. Internet, WTO, low-cost communication technologies and increased knowledge about different cultures made the way of internationalization much easier and transparent. One more thing that helps companies to enter new markets is the same language. Nowadays English, Spanish, German, Hindi and Russian are wide used, so it is easier to communicate for companies from the same region.
a company can familiarize itself with cultural nuances which may impact the design, packaging or advertising of the product. Moreover, traveling abroad allows one to locate and cultivate new customers, as well as improve relationships and communication with current foreign representatives and associates
Modern society is dominated by multinational corporations. In the past 30 years there has been unprecedented development of transnational corporations (TNC), which is “any corporation that is registered and operates in more than one country at a time” (Transnational). Now, there are more than 63,000 TNCs, while there were only 7,000 in 1970. That is more than 900% growth in TNCs in only a few decades. Even more startling, 70% of all trade, includes at least one of these TNCs (Basic).
International Marketing, at its simplest level, involves the firm making one or more marketing mix decisions across national boundaries (Jobber, 2010). At its most complex level, it involves the firm establishing manufacturing facilities overseas and coordinating marketing strategies across the globe (Jobber, 2010). There are various reasons for going global, some of which are: to find opportunities beyond saturated domestic markets; to seek expansion beyond small, low growth domestic markets; to meet customers’ expectations; to respond to the competitive forces for example the desire to attack an overseas competitor; to act on cost factor for example to gain economies of scale in order to achieve a balanced growth portfolio. The methods of market entry that could be used are indirect exporting (for example, using domestic –based export agents), direct exporting (for example, foreign –based distributors), licensing, joint venture and direct investment. I found this par...