Risks Associated With Business Overseas Essay

Risks Associated With Business Overseas Essay

Length: 720 words (2.1 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

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 risk. Confiscation is “the seizing of a company’s assets without payment” (Cateora, Gilly & Graham, 2011). This can leave the company in a deficit which can destabilize their business. As defined by our textbook, expropriation is “where the government seizes an investment but makes some reimbursement for the assets” (Cateora, Gilly & Graham, 2011). This is a less severe risk; however, it is still detrimental and worth careful consideration of companies that look to expand their business overseas. Unfortunately, there are many cases in which a company has not been compensated for expropriation (Barratt & Roche, 2010). Without compensation for the loss of investment, the expropriation is then considered confiscation. Last is domestication “which occurs when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees that mandate local ownership and greater national involvement in a company’s management” (Cateora, ...

... middle of paper ...

...iness 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 practices.
It is vital for companies that intend to expand their business overseas understand the political and economic risks that are associated with the decision. Not only should they understand the risks, they should also attempt to create a plan for risks management by becoming familiar with the laws and regulations of the country in which they wish to move into. Though many of the risks listed cannot be completed avoided, there are ways in which a company should prepare to itself to fight against them.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Essay about The Cultural Challenges Of Doing Business Overseas

- Introduction There are many challenges to doing business in the U.S. and there are additional challenges that occur when the decision is made to do business in a foreign country. In this paper I will discuss the challenges Steve Kafka will face as he opens his business in the Czech Republic. Per the information given to me in the assignments, Steve Kafka is an American of Czech origin and he a franchisor for Chicago Style Pizza. He has decided to expand his business into the Czech Republic, knowing this is a risky decision....   [tags: International Business Trade Globalization]

Free Essays
1674 words (4.8 pages)

Globalization And International Business Context Essay

- Tirtha timalsina Globalization and international business context Globalization is the propensity of organizations, advancements, or methods of insight to spread all throughout the world, or the procedure of getting this going. The worldwide means global economy is in some cases referred to as a globalism, considered as a completely interconnected commercial centre, unrestricted by time zones or national limits. Due to the globalization nowadays international markets are growing rapidly and a lot of multinational companies are focusing their strategies to international customers....   [tags: Globalization, Multinational corporation, Nation]

Better Essays
980 words (2.8 pages)

Essay on The Ethical Behavior Of Business

- According to Luthans & Doh (2015), "the ethical behavior of business and general social obligations of companies have become significant concerns in the U.S. and worldwide". There was a time when scandals and unscrupulous business activities were ignored. However, with the efforts of nongovernmental organizations (NGOs), more attention is given to human and environmental rights. Global companies must take into account those risks associated with operating within international borders. International managers need to understand the political, environmental, ethical and legal issues that arise from their activities in a developing country....   [tags: Corporation, Multinational corporation]

Better Essays
1091 words (3.1 pages)

Financial Risks Associated With E Business Essays

- E-business is a platform to any existing business enterprise which provides a medium to operate all business processes (Grant, Kevin, et al..99). It is a risky business due to many uncertainties on the success or failure of the organization. Risks associated with E-business includes; Business risk: improper implementation of the e-business strategies can result in loss of good reputation and goodwill from consumers or vendors. The risk occurs due to market inflexibilities, and agility of a firm applying new trend in the industry....   [tags: Auditing, Audit, Management, Internal audit]

Better Essays
725 words (2.1 pages)

Business Summary of Best Buy Co. Inc. Essay

- ... The situation has changed slightly since last year from 62 to 61 to the dollar (Forex derivatives, n.d). At this juncture, there have been several analyses that evaluate why rupee needs to be strong, and if the appreciation would be in line with the exchange rate policy of India. Currently, there has been increased awareness on the hedging instruments that are available as well as clamor for new ones. It is not only the hedging tools range has been expanded further, but the members of the market that will also be able to hedge on the dynamic basis....   [tags: electronics, market, risk]

Better Essays
2256 words (6.4 pages)

Outsourcing business processes Essay

- Outsourcing Business Processes Summary This paper captures the most prominent services and issues associated with today's outsourcing environment. Outsourcing is the modern business term for having other companies accomplish basic business processes rather than doing them inhouse. While outsourcing has always been an important business option, modern technical capabilities are fast making outsourcing a critical requirement in competitive, cost conscious industries. However, our recent experience with terrorist challenges indicates that a second look is needed to ensure that outsourcing risks are still acceptable....   [tags: Globalization essays, research papers]

Better Essays
1994 words (5.7 pages)

The Challenges of Doing Business Overseas Essay example

- The Challenges of Doing Business Overseas Introduction Steve Kafka is an American business man of Czech origin and a franchisor for Chicago Style Pizza. Steve has determined he would like to extend his business into the Czech Republic. Steve will encounter cultural challenges and will have to overcome risks related to starting up a business in a foreign country. By looking at the major differences and incompatibilities between the U.S and the Czech Republic it will be identified what it will take to get the business to a successful start overseas....   [tags: International Business Culture]

Free Essays
1505 words (4.3 pages)

Essay about The Cultural Challenges Of Doing Business Overseas

- Steve Kafka, an American of Czech origin and a franchisor for Chicago Style Pizza, has decided to expand his business into the Czech Republic. He knows it is a risky decision; when he became a franchisor, he had to overcome a lot of difficulties. Steve anticipates he will face some of these difficulties again at the new location in Prague, Czech Republic. Although he was born in the United States, he has family and friends in the Czech Republic, speaks Czech fluently, and has visited the country of his origin several times....   [tags: International Business]

Free Essays
998 words (2.9 pages)

Essay about The Cultural Challenges Of Doing Business Overseas

- The Cultural Challenges of Doing Business Overseas Globalization and overseas business expansion has brought about the need for in-depth understanding of culture differentiation. When conducting or contemplating cross cultural business ventures, it is important to understand the culture before communicating one's desires. This paper will focus on the cross cultural challenges of doing business overseas, with special attention being placed on the Czech Republic. The Situation Steve Kafka, an American of Czech decent is contemplating expanding his franchise, Chicago Style Pizza, into Prague, Czech Republic....   [tags: International Business Culture]

Free Essays
1152 words (3.3 pages)

Cultural Challenges In Doing Business Overseas Essay

- The Cultural Challenges of Doing Business Overseas Many young American entrepreneurs are seeking to do businesses internationally. Some entrepreneurs want to expand their businesses and the others want to challenge their skills. When young American entrepreneurs launched their businesses overseas, they assumed that money would help them to overcome any obstacle because the value of U.S. Dollars is higher than most of the countries' currencies....   [tags: International Business Market]

Free Essays
1184 words (3.4 pages)