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Political and economics risks of multinational corporations

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Reference no: EM13116329 , Length: 685 Words

The most popular way for international expansion is for a local firm to acquire foreign companies. One of the most benefits for international expansion is global distribution capability that helps expanding the market share. In the meantime, domestic trade is far less risky than International trade.

In International trade, the exporter is most often not familiar with the buyer, and therefore is not sure whether the importer is creditworthy. If inventory is sold abroad and the buyer refuses to pay, it may be impossible, for the seller to have any legal resort to receive any payment from. In addition, there is a greater risk of political instability.

1. Discuss how political risk differs from country risk and in what ways political events in a foreign country can affect local financial operations of an MNC.

2. Do you believe that there are financial and/or operational measures MNC can take to eliminate political risk related to foreign investment project? If not, in your opinion, can MNC at least minimize the political risk? Please discuss how.

3. What are the advantages and disadvantages of having a global distribution capability? Do you think that the advantages are more than the disadvantages? Please discuss

4. Do you believe that foreign investments exposing multinational corporation to political and economic risks? Please explain the rationale behind your discussion.

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