Doing business in third world countries

Economic risks and foreign investments

There are various cases where American based manufacturers opt to expand their businesses through acquisition of the competitor brands and entire investment and turn it around to use it for their own good. In this instance is the T-shirt manufacturing company based in the USDA opting to buy out the competition based in Bangladesh so that it can increase their volume of sales as well as expand the brand name. For this company to successfully expand the brand name in the Bangladesh economy, there is need to understand both the economic as well as the economic aspects that shape business operations within the new country.

Politically speaking, when a foreign company or corporate organization is taking over another company in another country, the political risks involved are numerous, firstly the laws and by-laws that regulate trade in different countries substantially differ hence the buying company needs to learn and internalize these laws in order to trade in a familiar territory, otherwise they may end up with a chain of litigations and fines. There is also the stereotype of lack of belonging to the foreign owned companies since the locals will be more loyal to their brands than foreign brands in most cases. There is also the challenge of the black-market and the mega cartels in most of the third world nations. These two factors will affect the smooth operations and profitability of the t-shirt company negatively yet it may not have any ready and easy solution to it. There is also the issue of counterfeits that are made and distributed almost unperturbed in the third world nations. This creates a polluted business environment that eats into the profits of the genuine clothes industry.

At the level of economic risks, it is apparent that the foreign markets have dissimilar market trends and seasons as compared to the American markets. Their predictability may also be difficult to achieve since with the weather changes and political happenings, the strength of their currencies fluctuate. The forces of production and factors affecting the distributorships are also significantly different in the third world nations. The issue of market size is yet another economic factor that can have a negative effect on the T-shirt brand since they may not be as big as to absorb the sale levels desired by the company that is buying out the competitor. The foreign nations also have a set of rules under which employees are o be employed and the subsequent remuneration which may differ significantly from the American system, it may turn out to be too high to realize any meaningful profitability or significant profit margins. There are nations that also have outright protectionist tendencies and this is biased targeting of foreign brands with unduly high taxes and tariffs. These taxes make it impossible to do business within these countries and this is a real economic risk that the international organizations intending to buy out competition in foreign nations must come into grasp with (Almotairi M., Alam A. & Gaadar K., 2013).