Risks of International Expansion Given

Risks of International Expansion Given the accelerating pace of globalization, there continues to be an accentuated focus on the risks of global expansion. What's emerging is a set of best practices specifically defining how companies are attaining growth globally while anticipating and taking into account the risks associated with pursuing global expansion. In conjunction with globalization of business operations, there continues to be an increasing number of theoretical and market-driven frameworks for organizing and quantifying the risks of global expansion. Dr. Michael Porters' Determinants of Competitive Advantage is one of the most well known frameworks where the political, economic, competitive, and role of substitute goods are taken into account in defining the risks of entering global markets. Dr. Porters' analytical frameworks have successfully lead to the development of entirely new approaches to managing cultural, political, geographic, and economic risks through the use of techniques to find which risks are the most strategic. The work of (Ghemawat 2001) extends Dr. Porters' analytical frameworks with framework by creating a methodology that seeks to quantify the extent of differences across these four strategic risk areas, then makes recommendations on which nations have the highest market potential and lowest relative risk. The work of (Ghemawat 2001) then is an optimization of risk assessment, taking into account cultural distance, Administrative and political distance, geographic distance, and economic distance. Cultural risks include the similarity or distances regarding religions, social norms and ethnicity. Administrative and political distance risk is most seen from the standpoint of legal and financial institutions, the monetary systems and political associations and the role of foreign governments in defining the barriers to entry for foreign businesses. Geographic distance risks have more to do with the physical distance and varying climates. The geographic distance set of risks also capture the lack of potential infrastructure due to remoteness. The economic distance risk assessments include the different information or knowledge process workflows throughout a culture and the blind-spots this causes for many companies in creating the strategies to move into another company. There are many risks also present in the economic distance of given foreign nation, emanating from the differences in consumer incomes and wide variations in costs and quality of natural, financial, and human resources. In assessing the risks of global expansion, it is critical to consider the use of analytical frameworks to organize and communicate the risks during the strategic planning process. The many risks associated with global expansion need to be considered relative to market opportunities and the attractiveness of entirely new segments for a factual analysis of new country development can be accurately launched and supported.