Political risk refers to those risks that host countries make pertaining political decisions that will affect the profits and goals of a multinational corporation. This kind of risk can be managed and understood with sensible forethought. Government relationships are whereby the government creates relations with other countries through doing business and also investment that improves the country’s economy. It will be talking about how multinational corporations face challenges in different countries specifically in Russia, China and Japan and how they manage those risks. The United States would face risks like terrorism that is a very threatening scenario. Terrorism is the use of intimidation or violence for political gain. Security concerns can be brought about by terrorism. Corruption is a fraudulent conduct by those in power. Dealing with permits is also another risk factor because it takes time. Forty-two different procedures is required and around one year to gather all the permits. Political environment is challenging as a result of lack of faith in the government policies.
The United States will face credit risk once they enter Japan due to the rapid rise in the spread in the country’s market. The spread is because of slow economic growth, financial market turbulence, increased bankruptcies and weak macroeconomic conditions which results in a decline in credit quality. Structural causes were also a cause to spread. Japan is not stable enough that would be a major threat to the US. Japan is also prone to a lot of natural catastrophes, earthquakes, volcanoes and tsunami. Political risks are also a factor due to riots and strikes which affect it negatively. The risks of these two countries are different in that Russia faces many challenges like terrorism, corruption, dealing with permits that take a long time. There is also the concern of political policies that is a risk. Japan faces risks of natural catastrophes, volcanoes, earthquakes and tsunamis. Political risks are also a factor. The similar risk that Russia and Japan face is political risks. Japan is because of the political issues with Korea. Russia is internally.
Question 2 Alliance is a union formed for mutual benefit of the two countries or corporations forming it. Alliance is a place where competition and collaboration takes place. Partners may vary from those who are former or current state-owned corporations or those who are influenced by the government. An alliance will be formed between US and China if they accept to share responsibilities and costs. Corporations of these two countries should share costs and risks when it comes to market rapid entry, reduce the time to market and share market complimentary and share products. Authority must also be balancing, for example, in order to create one big business. It is possible through allowing each of the partners to make a decision and not one company making decision for the other. If one company makes a decision, it will bias against the other firm thus bringing about conflict that will bring down the alliance between the two countries.
Cultural difference is a major factor that affects alliance between two different countries. The primary cause is long-term orientation and uncertainty avoidance. Culture affects the alliance, and it makes it very difficult to enter an alliance with a country instead they opt for a wholly owned subsidiary. Individualism, power distance and masculinity are cultural differences that can be managed and dealt with to better the alliance.Question 3 Coca-Cola has faced competition and will continue facing it from Pepsi Company Inc (PEP) which is the second world largest soft drink maker and Hangzhou Wahaha Group. Pepsi has opened up distribution with a tie up through Tingyi Cayman Islands Holding Corporation. Competition from China is slow due to weak profitability and low growth. China is not considered as an emerging market for many brands because it is still growing at a double-digit rate. Inflation can also be a factor due to loss of so many jobs by the citizens of China. Coca cola can manage risks by providing different flavors for the Chinese.
China prefers a healthier lifestyle like ready to drink tea and juices. It should also provide Chinese style beverages with traditional items like herbal and wolfberries. Coca-Cola should also look at the underserved markets to sell products because the young consumers purchase more than the old ones. Competition will always be there, but it can still compete with other corporations with the pricing and the of brands they offer. As coca cola continues to expand, it should always look at how things change. Development leads to change in various factors. As things grow so do people develop. Interests of the citizens can also change with time. Tastes may become different, and they will be learning a lot through technology so Coca cola should be able to cope with the emerging trends and tastes or likes of the citizens. In conclusion, risks are paramount for corporations because through the risks they can learn and also to improve the way of doing things. Different countries operate differently, and corporations should take keen note of that.
Work Cited
Daft, Richard L. Understanding Management. Mason, OH: South-Western Cengage Learning, 2011. Print.
