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Global Expansion of Business and Political Factors

Political Issues

When planning to expand internationally, the political issues to consider are at the micro-level and macro-level. These include an assessment of the political systems of each of the countries for investment, their political structures, and major political risk factors. Political issues are vital components in influencing company executives in making informed decisions regarding the political influence on business investments. In some countries, political interferences bear a strong relationship to the way business firms run their activities. On the other hand, political risks are related to the stability or instability of a country.

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If a country is susceptible to high political risks, there are possibilities of investment losses occurring due to political instabilities thus affecting return on investment. In addition to that, the possibility of political influence in changing legislation and other laws may impact adversely on the investment environment (ISA Products and Services for International Business, n.d). In addition to that, political risks may also take a military dimension and affect the international relationships between countries.

Economic Issues

Micro and macroeconomic issues as discussed hereafter. These issues include an evaluation of the GDP of the target country, the levels of wealth of the citizenry of the proposed country, the industrialization of the country, financial incentives that may be available from the government, international trade and trade agreements, and labor-related economic issues. In addition to that, the demographic distribution of the population and environmental laws can be regarded as other economic variables to consider (ISA Products and Services for International Business, n.d).

Addressing Political and Economic Issues

Political issues can be addressed through several strategies. These include identifying and creating the position of a risk officer to evaluate political issues and conduct other political risk management responsibilities. The risks are evaluated on the macro and micro levels where political uncertainties are evaluated for each of the target countries where investment opportunities have been identified.

It is important, therefore, for the risk manager to calibrate political risks against the firm’s risk appetite to enable the firm to decide on an approach of entry into the new market. One approach that has widely been banked on is to avoid investing in countries whose political risks are high. However, some researchers note that contingency plans can be implemented to allow firms to invest in a country with high macro-level risk without a loss (ISA Products and Services for International Business, n.d)

At the micro-level, political risks can be mitigated by public insurance firms that provide insurance covers targeting specific business activities. On the other hand, private insurance firms can be relied upon to provide insurance against portfolio investment where the possibilities of breaches of contract are likely to occur. In addition to that, the investment firm should engage experts to identify appropriate policy investment schemes for the firm. The firm needs to diversify its risk mitigation approaches by investing in hedges.

On the other hand, economic issues can be addressed by conducting a forecast on economic variables that influence the GDP of a country and the demand for painting services. That should also be based on global economic trends and available data, besides pegging the findings on the firm’s business goals, objectives, and vision. It is also important for the firm to conduct a thorough investigation of economic variables from reliable databases using Information Technology as a tool that provides real-time information, besides banking on experts to make informed decisions.

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Another economic model to adopt is to evaluate demand and supply and the entry-level into the new country given the likely possibility of sparking rivalry from other firms that are already operating in the new environment. Therefore, an entry-level strategy has to be formulated so that the firm realizes its business-level objectives in line with its vision (International Business, 2007).

Another approach is to create local leverage with the communities where the business activities are to be conducted by integrating corporate social responsibility activities. These could help endear local community members into accepting the business organization as their own. In addition to that, the company has to identify other companies that have expanded internationally to learn from their experience.

Importance and Implications to France

The above issues have are important to France since international relationships of France with other foreign countries are a determinant in creating opportunities in overseas markets. On the other hand, implications on France are that the government has the likelihood to gain the reputation of a better investment destination therefore attracting foreign capital investment. In addition to that, good political capital results in goodwill and inspires investor confidence.

Another Company

One example of a company that has expanded internationally from its local setting is Starbuck. The company had its humble beginnings in Belgium as a coffee bean retailer in 1978. By first entering the Asian market it sustained its position based on the experience and culture of the market. The company strategically produced a variety of coffee brands tailored to meet each market’s needs as a success factor (Rahman, 2011).

References

International Business (2007). Baker university school of professional and graduate studies. Web.

ISA Products and Services for International Business. (n.d). Country Analysis International Research Market Intelligence. Web.

Rahman, S. (2011). Starbucks. How Starbuck expanded Internationally, Foreign companies, Foreign Opportunities. Web.

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StudyCorgi. (2021, April 29). Global Expansion of Business and Political Factors. Retrieved from https://studycorgi.com/global-expansion-of-business-and-political-factors/

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