Question

Instructions- please describe how you feel about the following statement without plagiarizing;

What are the top 3 risks to your business expanding globally?

The three important factors to evaluate before expanding any business globally or in foreign countries are economic risks, political risks and corruption.

1. Economic risks include devaluation of foreign currency due to different exchange rates or restriction by foreign country on money transfers therefore lowering the initial invested capital; inflation is another economic risk, inflation creates low profit margin for businesses because of low currency exchange rates.

2. Political risks can have a negative impact on the business for example, government coup, civil wars, social unrest and terrorism, all are threats a business entity can face in a foreign country.

3. Corruption come in two forms, private corruption and public corruption; private corruption involve private individuals or groups who extort businesses demanding protection money for example organized gangs; public corruption involve illegal payment to government officials for example to obtain government contracts or to get government approval to conduct business (Gaspar, Kolari, Hise, Bierman, & Smith, 2016, p. 148).

4. Legal risks can occur when a country's legal system fails to protect intellectual property rights or fails to implement adequate safeguards in case of contract violations; lack of safeguards can contribute to other businesses or firms break contracts or steal intellectual property rights of other businesses or trading partners.

What can you do to reduce those risks?

The first thing to do is put in place a strategic plan to research the stability of currencies around the world and select those countries with stable currencies.

Secondly, purchasing political risk insurance from private insurance firms through the World Bank is one way to safe guide U.S. business interests in foreign countries.

The U.S. government agency, the Overseas Private Investment Corporation (OPIC) is one agency task with selling insurance to interested businesses, this insurance protects against political risks including revolution and any political violence in countries where U.S. has bilateral investment treaty OPIC-supported Emerging Capital Partners, based in Washington DC, OPIC has “invested in a variety of businesses in Africa, including the Java House coffee chain, which was founded by an American entrepreneur and expanded into 41 coffee shops and restaurants in Kenya and Uganda” (OPIC, n.d.)

Is global expansion a good option for your business? Why or why not?

Expanding my business in the global market is an option I will definite pursue, I am strategically focused in East Africa as niche market; cosmetic industry has shown continuous market growth globally with prediction of ever growing demand for natural and organic skincare products according one research analysis “the facial skin care segment held the largest cosmetic skincare market share in 2018, accounting for over 59% of the market; this product segment is expected to dominate the global market throughout the forecast period of 2019 – 2023” (Technavio, 2019).

Answer 1

1. Economic risk, political risks and corruption can be considred as the major challenges for the business organization which cannot be controlled by them through their internal operations. These risks can impact the profit margin as well as the smooth functioning of the organizations.

2. The management of the organizations has to anticipate these risks through research and has to formulate strategies accordingly. The outcome of the research will yield information regarding, political, economical risks of the market which can be utilized as the source for the formulation of the strategies.

3. Global expansion can certainly benefit the organization as it provides an open market and many target audience. This can enhance the reputation, brand image and hence the profitability of the organization.