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Management for Political Risk

1- Political risk is the risk that a firm's host government intervenes in the economy as to adversely affect the firm.

What are the ways in which the host government can do this?

2- In developing a global business venture, one should never assume that the culture of the target country matches that of your own country, with respect to the product you plan to sell in that country. In other words, is satellite radio really important to the majority of the people in India?

What do you think?

Solution Preview

1.Political risk in a country takes many forms. For some leaders the pushing of currency up and down or into unstable territory is a way to gain more power, by throwing off the economy. Raising taxes on companies from outside the borders is a way to raise money at the expense of companies. Increasing tariffs on exports or imports used and needed by companies is another way for a country to provide risk to a company. The most devastating is when countries nationalize an industry or company.
Each of these poses potential risk because they interfere with the profit making function of a company. Some of these are temporary measures, some are political power issues that have either nothing to do with the company, but affect the company adversely. Tariffs and taxes on specific industry and company resources are directly related to the company or industry. These can be the most risk because they can occur during times of shipment out of product or after resources are supplied and ...

Solution Summary

The solution examines management for political risk. The ways in which a host government can intervene in an economy is analyzed.

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