Risk Resulting From International Business

Risks From International Business

What are some risks of international business that may not exist for local business?

There are many risks inherent in competing on a global or internal level compared to being a local business. As the chapter suggests, there is a much greater level of economic and socio-political pressure on governments to work together for the common good of the global economy. Despite these best intentions, global macroeconomic factors often cause nations to restrict or unnecessarily increase the cost of transactions and trade based on fear over the trading partner's economies. Such is the case for American companies attempting to gain sales within China, whose government holds nearly $1.1 trillion in U.S.-based debt. China and the United States are two of the more powerful economic forces in the global economy, and as their economies go, so goes the world. What this means for international businesses is that they are much more susceptible to economic, socio-political and potential treasury-based transactions over time. The local business gets affected by these factors on a much more microeconomic sense by seeing fewer dollars in their local economies. The international business needs to have a much more sophisticated and focused strategy for dealing with these contingencies and being able to navigate around them. The need for also gaining greater insight into anticipated strategy and policy moves is critical for an international business as they will most likely need to modify their supply chains, value propositions and approach to global sourcing and production. All of these factors need to take into account the core strengths of an international business and the potential threats over time to continuing operations. The threat of a lower credit ratings of the United States, which ended up happening last week sending the world's stock and equity markets into a tailspin, could not have been fully anticipated by even the most astute global planning department of an international business. The focus of global markets on solvency is making international business extremely difficult to stabilize today, leading to countries reverting to much more stringent levels of credit and payment globally. The net result is that international businesses need to work much more efficiently to gain new business by accelerating their new products and services to market

What does this chapter reveal about the relationship between an MNCs degree of international business and its risk?