Anytime businesses choose to operate or expand internationally, they face certain and specific risks. These international business risks can be determined by some different factors including country history, cultural values, mores, geographical traits not to mention legal precedents of chosen international location. The company or firm must consider all of these factors before making a good and final decision to move abroad. The firm must always take into account their competitive advantage at home and compare that standing ahead of entering the international business realm. They must remember that risks are always by the dimensions and stability of the firm’s competitive advantage.
Primary International Business Risks
You’ll find six primary international business risks that happen to be most often faced by firms considering entering the international business realm. Again, they are always tied closely to the firm’s competitive advantage. A firm’s competitive advantage is broken by “type”, “scope”, “transferability”, last but not least “translate-ability”. All of these factors get into levels of low risk to high-risk and would be wise to be considered inside the plan.
When doing this risk analysis, S.L.E.P.T. will come in very handy. SLEPT means Social, Legal, Economic, Political, and Technological. In this case, the firm must go through the inherent risks within the firm like a wholly-owned operation, a joint venture, a franchise, licensing issues, and exportability. On the other side with the coin, they’d also have to look at marker risks, ownership risks, intellectual property risks, currency risks, and finally political risks.
I’ve chosen to break this international business risks post into separate posts in the series to learn effectively to check out and ensure it is more concise and for the point. They will include everything from political perils associated with corruption, unstable institutions, and red-tape. I will be also considering currency risks, intellectual property risks, ownership risks, last but not least market risks and many types of which they involve.
It should be understood these risks are not the only risks that the firm may face when thinking about, expanding, and starting to do business internationally. There are certainly other risks that absolutely should be analyzed through the firm. The firm must be extremely thorough in doing their due diligence analysis before entering any country with all the intent of establishing themselves there. Before making any major and “life-altering” decisions, the business should be aware of how much risk that’s currently and already present there, and above all, simply how much of the inherent risk is the firm happy to take upon it and assume.
I would like to simply state possibly the obvious but some which need to be stated and restated more often than not so that it’s importance sinks in. And that simply that settling on entering a country is usually an incredibly, very serious decision that could and definitely will make or break a firm, therefore, this decision-makers must tend not to skimp about the analysis involved. Due diligence is of utmost importance here.