Risks affecting SKs decision to open a new company in Bolivia - Free Essay Example

Sample details Pages: 5 Words: 1427 Downloads: 2 Date added: 2017/06/26 Category Business Essay Type Analytical essay Did you like this example? Report Introduction SK As a catering companies in New Zealand, has opened in several countries, the company now plans to develop business in the Bolivia, the report covers the following seven risk will face, including political, economic, cultural, demographic, nature, technology and competitive environment. 1,Political Risk: Risk Investment risk is the most difficult to predict and analyze, but also foreign investors most concern is political risk. Some developing countries and developed countries prone to political instability and regime change, the continuing ethnic conflict, even civil war or secession, the possibility of the existence of political risk is usually relatively large. In addition, the host of the political risk also includes the risk of expropriation of foreign investors, the risk of exchange restrictions, government default risk, the risk of delayed payment, the risk of changes in policies and so on. Bolivia pursues an independent forei gn policy of peace and non-aligned, and safeguard national independence and sovereignty, equality of all countries adhere to the peoples self-determination, non-interference in other countries internal affairs, peaceful settlement of international disputes, highlighting how far diplomatic and pragmatic economic diplomacy (Chinese Commerce Department, 2010). Legal risk is the risk of loss due to legal reasons to investors. Due to the different political systems of the world, economy, history, geography, education and cultural level, to take economic development strategy, industrial and technology policies are different; each countrys legislation on the treatment of foreign investment there will be some differences. At present, international and multilateral investment and investment-related economic activity is still no uniform international regulations. Thus, multinational corporations must face the risk of multiple legal environment brought about institutional differences. Bolivias foreign trade management system currently consists mainly government agencies, non-governmental organizations as well as supervision and inspection agency. Constitution and Trade is the core of the system of trade regulations in Bolivia, Bolivias foreign trade is the basic guidance and regulations, but also the main basis for the development of the Bolivian other trade regulations (Chinese Commerce Department, 2010). 2,Economic Risk: Economic risk refers to changes in foreign exchange rates on international multinational enterprises bring uncertainty. Many factors impact of exchange rate movements, such as the balance of payments, the relative inflation rates, interest rates, foreign exchange reserves. (Fengpin, 2010) Bolivian government to encourage foreign capital into the domestic market, to develop the appropriate legal and policy: to encourage and protect national and foreign investments; recognition of foreign and domestic investors in the treatment of rights, obligations and equal protection; sinks into free capital, Export; technology transfer fee, remuneration freely remit, there is no limit other commercial loans; currency exchange freedom; access port freedom; signed free-investment insurance contracts; dispute arbitration freedom (Chinese Commerce Department, 2010). 3,Risk Culture: Culture risk refers to differences in language, customs, values and attitudes, religion and other aspects of the host country to foreign investment enterprises impact of uncertainty. Mainly reflected in three aspects: First, consumers and their host country differences in consumer spending habits, preferences and purchasing power; Second, the differences in the different cultural backgrounds of employees and other aspects of the formation of values; Third, differences in institutional culture. Bolivia is a multi-ethnic country, mainly in Africa, indigenous peoples and European immigrants. About 95% of residents were Catholic, can be seen in the main town of the ch urch building and scales (Chinese Commerce Department, 2010). 4,Demographic risk ¼Ãƒâ€¦Ã‚ ¡One risk populations also exist in Bolivia is multi-ethnic, mainly indigenous peoples. According to statistics, a total of 37 within indigenous communities in Bolivia, Max Mara Aida Quechua people and the population, were 228.1 million and 152.5 million, Guarani man 62600. As a food and beverage industry, we must understand the local eating habits, most peoples diet is meat-based, mainly cattle, pigs, chicken and lamb dishes are common on the table tomatoes, potatoes, onions and lettuce (Chinese Commerce Department, 2010). 5,Physical/natural risk: Bolivia is located in the middle of South America, is one of the two landlocked countries in Latin America. Northern and eastern borders with Brazil, Argentina and Paraguay and southern neighbors, west and southwest connected with Peru and Chile, respectively. Spring and fall are the best time to Bolivia, warm spring, and rainfall is rel atively small, and low humidity. Pleasant autumn weather, rainfall is very low, suitable for travel. Bolivia is one of the three big countries planted in South America, so enjoy the U.S., EU and Japan and other developed countries to give preferential policies for its exports. Regional organizations and bilateral agreements also provide for Bolivian exports preferential treatment. Bolivia, Venezuela, Ecuador, Colombia and Peru (Chinese Commerce Department, 2010). 6,Technical risks: technical risk is the overseas investment enterprises within a limited time frame ability to successfully develop new products, the uncertainty. Foreign relevant statistics show that the success rate of new product development projects only 1/6, the successful development of new products into the market after the success of only 2/3. This fully reflects the greater technical development risks, the likelihood of this risk is not only from the technical success, but also from the economic aspect, that af ter the success of a new product is being developed, but also the ability to gain economic . It depends on the situation at the cost of the established market demand conditions, market demand,will receive income, the opposite will be a loss(Chinese Commerce Department, 2010). 7, Competitive risk: For now, the main foreign investors in Bolivia, mining and oil and gas investment in areas(Chinese Commerce Department, 2010) ¼Ãƒâ€¦Ã¢â‚¬â„¢such as food and beverage industry and therefore investment, mainly adapted to the local peoples eating habits, it is able to overcome the risk of competition, as opposed to a single local diet, the introduction of foreign-style diet, for locals, is a shock and temptation. Bolivia fisheries developed, you can use local resources, launch the product in order to reduce competition in this country and the local industry costs, on the one hand New Zealand their own special products, on the one hand there are local products. Conclusion For th e risks set forth above: 1, Changes in foreign exchange rates on international multinational enterprises bring uncertainty. Many factors impact of exchange rate movements, such as the balance of payments, the relative inflation rates, interest rates, foreign exchange reserves. Foreign exchange risk species are trading risk, currency risk and economic risk categories. (Wenqiang,2010) Risk of future revenue when the volatility of international companies suffered foreign exchange rates occur. It is a potential risk. Changes in future income depends primarily on the size of exchange rate changes on the cost of the products, prices, production and other effects of the size. Effects are long-term, for international companies, the ability to avoid economic risk is critical, it is related to business investment or operating results overseas. Meanwhile, the accuracy of prediction of the potential risks of this will directly affect the corporate financing, sales and production of strategic de cisions (Fengpin, 2010) Exchange rate risk management mechanism should be established in advance of changes in foreign currency market may appear to take appropriate countermeasures. 2, through the acquisition of Bolivias way, not only to the rapid increase in the short-term assets, but also direct access to key technologies, improve the technological innovation capability and competitive advantage, reduce investment costs, leverage existing business networks and social relations Bolivia local businesses, difficult to manage and reduce operational risks.(Wenqiang,2010) 3, you can study the Bolivian peoples preferences, production closer to the local people love the product, more effectively improve the companys corporate image and reduce the resentment of the local people.4 ¼Ãƒâ€¦Ã¢â‚¬â„¢Because of the large size of the SK company and strength. With combined strengths in the New Zealand market competition excellence. Can rely on its existing brand or technology, or a combinat ion of scale and other advantages of absolute advantage, concentrate on the Bolivian market, to create an international brand for the center. Promote enterprise-wide work. Ultimate strategic goal of becoming the world-renowned multinational companies. Brands such intangible assets. Allows businesses to add value beyond the value of higher than normal, creating huge commercial profits for the enterprise. Enable enterprises to achieve rapid and sustained development. Brand should remain in the world. When companies become world famous brand development, it means that the broader market, as well as a large number of loyal customers and good corporate image of the country. Chinas Haier Group is to implement a typical such transnational business strategy.(Fengpin,2010) References ¼Ãƒâ€¦Ã‚ ¡ Wenqiang,W.(2010).International Finance Theory and Practice.Chengdu,China:Southwest University of Finance and Economics Press. Fengpin,Y.(2010).Exchange Rate Risk Management in Enterpr ise.Hubei,China: Hubei Institute of Rural Finance. Chinese Commerce Department. (2010). Foreign Investment and Cooperation Country (Region) Guide à ¢Ã¢â€š ¬Ã¢â‚¬Å" Bolivia. Beijing, China. 1 148631433 Don’t waste time! Our writers will create an original "Risks affecting SKs decision to open a new company in Bolivia" essay for you Create order