Unformatted Attachment Preview
GLOBAL RISK ASSESSMENT
Global Risk Assessment
Harold Osborne
Ken Cromer
MGT/448
April 25, 2017
GLOBAL RISK ASSESSMENT
Contents
Car passenger – Germany Market ................................................................................................................ 4
Introduction .................................................................................................................................................. 4
Mission and Objectives ................................................................................................................................. 4
Regional analysis .......................................................................................................................................... 4
i.
Alliances ............................................................................................................................................ 4
ii.
Physical environment and effects on trade ...................................................................................... 5
iii.
Political, Stability ............................................................................................................................... 5
iv.
Economic Stability ............................................................................................................................. 5
v.
Finance options available.................................................................................................................. 6
vi.
Competitive risk assessment ............................................................................................................ 6
vii.
Social ............................................................................................................................................. 6
viii.
Health ............................................................................................................................................ 7
ix.
Environmental conditions ................................................................................................................. 7
x.
.Terrorism threats ............................................................................................................................. 7
Country risk analysis..................................................................................................................................... 7
GLOBAL RISK ASSESSMENT
i.
Political stability ................................................................................................................................ 7
ii.
Finance options available.................................................................................................................. 8
iii.
Physical environment and its effect on trade ................................................................................... 8
iv.
Cultural considerations ..................................................................................................................... 8
v.
Social ................................................................................................................................................. 9
vi.
Organization and product analysis ................................................................................................... 9
Description of the organization ........................................................................................................... 10
vii.
Product needs assessment of the target country ....................................................................... 10
Description of product to meet the need ............................................................................................. 11
Taxation and double taxation risks ..................................................................................................... 11
viii.
Entry strategy .............................................................................................................................. 11
Conclusion .................................................................................................................................................. 11
Specific risks and how I would manage these risks ................................................................................ 11
References ................................................................................................................................................... 13
GLOBAL RISK ASSESSMENT
Car passenger – Germany Market
Introduction
Introducing new passenger car as a new business in Germany risk is an unavoidable aspect
that every business organization must be aware of to ensure that the continuity and profitability of
the business. Risks must be managed appropriately to control the negative consequences. The risk
need to also be felt and to exploit openings for the growth, development and success. To acquire
insight on potential risks, the assessment must be done carefully to come up with facts.
Mission and Objectives
The mission of a passenger car in Germany is to ensure that people in Germany are offered
the best means of traveling within the country. Its objective is to give the customers complete
means of transport as they handle their business and personal activities.
Regional analysis
i.
Alliances
Once risk is identified appropriate management strategies can be employed to eliminate or
reduce the effects they might have to the business. Risk management is therefore concerned with
confidence building to gain competitive advantage through minimizing failures and ensuring that
the risks or threats do not tamper with the objectives of the business.
The fact that there are so many automotive businesses operating in Germany, this creates
competition for any business venture and therefore strengths and weaknesses of competing
businesses must be assessed carefully.
GLOBAL RISK ASSESSMENT
ii.
Physical environment and effects on trade
Developed countries are slowly switching from manufacturing to service related industry.
Despite the enormous returns that manufacturing brings to a country, most of them are aware of
the pollution and health implications associated with production. On the other hand, developing
nations see the void left in the manufacturing sector as an avenue to generate more revenue and
improve their GDP. On of such countries is Germany.
The region of Germany faces rising temperature and frequent heat waves which due to
climate change which hinder productivity and hence low sales more frequent weather extremes
surrounding the region have an indirect effect on the profit of most products including automobiles.
iii.
Political, Stability
In the establishment of a global business venture there are lots of risks that must be accessed
to ensure that the business is profitable and viable. Risks that relate to the political, legal, and
regulatory risks must be checked. In Germany automotive company’s compliance has become an
integral part of the transparent management of most companies.
iv.
Economic Stability
Recent cases of data scandals and bribery made the businesses aware of the benefits that
accrue to compliance to the laws of the country. This has made much emphasis to be placed on
compliance issues, ethics in business and the corporate force of responsibility for business owners
on how the business serve the society.
Germany is politically stable but the cost of operating businesses there is a little bit higher
than most investors would expect. The regulatory risks in the country are high with consideration
on the many sectors which are off the economy yet they have become more oriented to the market.
GLOBAL RISK ASSESSMENT
There exist lots of restrictions with massive bureaucracy which makes approval for conducting
business unpredictable and therefore preparation must be done carefully to avoid legal problems.
To avoid landing into legal problems the legal, financial base and the reputation of business
ventures must be conducted with diligence. The employees to be hired should be taken through a
pre-employment screening process too.
v.
Finance options available
Exporters and importers in Germany are faced with lots of currency risks in making deals
with Germany. Foreign exchange risk is also known as FX risk and is the financial risk experienced
in cases where monetary transactions are dominated by other currencies apart from the main
currency of the company. It also exists in cases where some of the business departments in foreign
countries maintain their finance statements in some other currencies different from the reporting
currency.
vi.
Competitive risk assessment
Competitive risk assessment is a crucial part of the industrial corporate strategy, especially
in automotive where the leading companies in the world are based in Germany. In consideration
of the competitive factors of a country, while making the investment it is necessary for a business
firm to make decisions wisely. The fact that there are so many automotive businesses operating in
Germany, this creates competition for any business venture and therefore strengths and weaknesses
of competing businesses must be assessed carefully.
vii.
Social
`The region is culturally diverse and thus the passenger car would have a wide range of
diverse customers. The population is well educated, love to work, hence there will be a need for
GLOBAL RISK ASSESSMENT
the car passenger. However, there is a low birth of rate and the existing generations like to drive
existing brands which they get used to it and no hassle for changes.
viii.
Health
Healthcare expenses are low in the region due to employers and big companies provide health care
packages for their employees. This lead to a spare income that can help in the car passenger selling
market.
ix.
Environmental conditions
Due to the vast number of industries in Germany, the country is facing increasing cases and
pollution levels. Different types of pollution cases are present in China namely problem with
energy consumption, water pollution and air pollution (Chen et al, 2013). The problem of energy
consumption remains worrying. Hence, there will be a need of car passenger.
x.
.Terrorism threats
We hardly can hear of any political conflict in the region and there is a high level of security
that maintain individual welfare. The security agency is working hard to tackle any terrorist
threats with a high level of intelligence.
Country risk analysis
i.
Political stability
Germany is a politically stable country with democratically elected governmental leaders. The
automotive industry in the country are conducted regularly and the transition from one government
GLOBAL RISK ASSESSMENT
to the other is smooth and peaceful. Germany has rare cases of civil wars or cases of ethnic disputes
that can affect its stability. (Kourtit, et al, 2013)
ii.
Finance options available
In Germany, investors and business people who export or import goods or services face FX
risks which bring them severe monetary consequences. The risks may be solved through the
introduction of FX risk management tools which include FX options which can help in the
reduction of loss risks and currency fluctuations. In cases where money is to be converted into
another country’s currency while venturing into a business venture with the Germany, the
exchange rate of the currency will cause a value to decrease.
iii.
Physical environment and its effect on trade
Besides the food risks that can affect the car trading, Germany has the likelihood of its
government being against any violent or unconstitutional means including terrorism and
politically-motivated violence. Economic conditions Germany has numerous industries which
have increased the emission of Carbon dioxide into the atmosphere hence causing global
warming. The high demand for more energy to maintain a large number of manufacturers has
also resulted in the utilization of energy from exhaustible resources (Chow, 2015). Due to this
approach, experts are afraid that there may arise a shortage of energy in days to come. Hence,
there is a need to car passenger that can help in saving energy and Carbon dioxide emission
rate. Physical environment and effects on trade. (Description of the German automotive
industry critical 2007).
iv.
Cultural considerations
GLOBAL RISK ASSESSMENT
The business adheres ethics and social responsibility that given a standardized culture of
how trading are governed. Besides of existing large number of competitors can affect the
selling price of the car passenger. Social, ethnic and cultural risks come along with ill
consequences like fraud, corruption, unethical behavior, racism and nepotism. Business ethic
laws in Germany legal system is ill designed with the risk of investors. In attempts to avoid the
ethical breaches that the company might cause, all the companies that venture into operations
in the country must engage in ethical programs with due diligence on all partners, vendors and
the investment targets. The people of Germany are not held by any closed cultural system like
the Arabs. It gives access to an open and free society where investors can set up and run
businesses. Interactions with the local citizens are not hard.
v.
Social
With the recent economic recession that has affected the german market particularly the
automotive has led of individuals losing their jobs. Besides, there is a poor distribution of
income within the country that can affect the selling price of the car passenger. Social,
ethnic and cultural risks come along with ill consequences like fraud, corruption, unethical
behavior, racism and nepotism.
Health The requirement for full coverage of employees is a risk to business considering
that when one of the sales team is hurt or killed in the course of duty would involve the
public prosecutor
vi.
Organization and product analysis
GLOBAL RISK ASSESSMENT
Description of the organization
MOTOVISE Company would be selling passenger cars with headquarters in Munich. It
will operate two other branches in Hamburg and Cologne each headed by a managing director
and each will have sales representatives
A. The CEO will be based in Munich and will oversee the overall organization
Business ethic laws in Germany legal system is ill designed with the risk of investors. In
attempts to avoid the ethical breaches that the company might cause, all the companies that
venture into operations in the country must engage in ethical programs with due diligence on
all partners, vendors and the investment targets. The people of Germany are not held by any
closed cultural system like the Arabs. It gives access to an open and free society where
investors can set up and run businesses. Interactions with the local citizens are not hard.
(Kourtit, et al, 2013)
vii.
Product needs assessment of the target country
The expansion of businesses to a global scale is good but it comes with costs that are accrued
to it. The passenger car in Germany business venture should be in a position to consider the
complexity of issues surrounding the United States and Foreign Tax in Germany. Some countries
possess a territorial system of taxation which impose no additional tax costs in home country or
any business activity profits outside the country unless if the profits or earnings are sent to the
home country. Germany tax rates are relatively low which makes it a good venture for investment
GLOBAL RISK ASSESSMENT
Description of product to meet the need
Toyota Highlander Hybrid 2016 model 7-passenger car with a 3.5-liter V6 engine It has
economical gas mileage and it’s a battery-assisted vehicle when making a cut and a 280
horsepower. (Kan, H., Chen, R., & Tong, S. (2012).
Taxation and double taxation risks
.Tariffs can be defined as hurdles in the business and the business enterprise should ensure
that they are adequately solved. The posing of tariffs protects local industries from facing
competition from the threat of new entrants and therefore they are used to protect the local
companies. Non-tariff barriers affect market access negatively together with the profitability of the
company. The effects of the non-tariff barriers place companies in a state of risk. Some of the nontariff barriers in Germany include Tariff Quotas, Governmental Procurement, technical barriers,
export constraints and quantitative restrictions.
viii.
Entry strategy
Marketing is meant to inform and attract customers to enjoy the passenger car being
offered, maintain them and grow profits from their offers. Marketing helps in the development of
passenger cars that can satisfy needs of customers and it is therefore important in increasing
competition to lower price attracting more customers
Conclusion
Specific risks and how I would manage these risks
GLOBAL RISK ASSESSMENT
Germany can change its policies from time to time and this can have a negative effect on
foreign company’s investment plans. Some of the changes are in form of trade barriers which are
made to limit or eliminate international trade. Through the use of tariffs, the government of
Germany might ask additional funding for a company to be allowed to venture into business in
Germany. Therefore businesses that operate suffer from difficulties that arise from political, legal,
economic, security and operational issues. Some of the companies fail while others succeed. Some
of the other difficulties that might be experienced in venturing into a business in Germany is
language barrier where some of the local languages are hard to understand and therefore a local
translator will be a requirement.
All the political, legal and regulations set in Germany should be complied through
observing the laws, policies, regulations and the recommendations that have been recognized by
the company. All the ethical and social culture issues should be observed to ensure that the business
doesn’t go against the social norms of the country.
Firewalls, Encryptions and access control techniques are chiefly used to protect data from
any external threats that can result from reliance on the use of internet and other technological
innovations. For the passenger car in Germany to remain profitable and establish itself well, it
must embrace technology well completely. It should also hold to an assurance that its personal
information is well managed. Cyber security in Germany is well taken care of as it involves all
business processes as well as the networked infrastructural environment. The risks associated with
cybercrime are serious and therefore appropriate plans must be kept in place by the passenger car
venturing in Germany. (Schroll-Machl, 2011).
GLOBAL RISK ASSESSMENT
References
Description of the German automotive industry critical analysis of the. (2007). Place of
publication not identified: Grin Verlag.
Kourtit, K., In Nijkamp, P., & In Stimson, R. J. (2013). Applied regional growth and innovation
models.
Schroll-Machl, S. (2011). Doing business with Germans: Their perception, our perception.
Göttingen: Vandenhoeck & Ruprecht.
Chow, G. C. (2015). .Germany's economic transformation. John Wiley & Sons
Kan, H., Chen, R., & Tong, S. (2012). Ambient air pollution, climate change, and population
health in Germany. Environment international, 42, 10-19.
Running head: GLOBALIZATION
Globalization
Harold Osborne
Ken Cromer
Course name:
April 03, 2017
Globalization
2
Contents
Introduction ..................................................................................................................................... 3
Globalization theories ..................................................................................................................... 3
Pros of globalization ....................................................................................................................... 3
Cons of Globalization ..................................................................................................................... 5
Globalization effects on communities ............................................................................................ 6
Globalization effects on organizations............................................................................................ 7
Role of government in promotion of global business ..................................................................... 7
References: .....................................................................................Error! Bookmark not defined.
Globalization
3
Introduction
Globalization refers to the integration of the entire globe regarding financial, economic,
trading and communication. Globalization allows people, goods, and ideas to spread through the
whole world, which leads to increased integration and interaction amongst different cultures of
the world, economies, and governments. Globalization intends to set both local and nationalistic
business dimensions which result in interconnected and a free environment which people freely
transfer goods, services, and capital beyond national borders.
Globalization theories
According to Pérez, and Andrade-Eekhoff, (2003), Ricardian model is an example of the
trade theories supporting globalization. According to the model, globalization occurs as a result
of international trade between two nations. The trade between the two countries occurs because
of the different production technologies and is very advantageous to the people. A specific factor
model is yet another theory which aimed at illustrating the trade effects in an economy whereby
a production factor is unique to a given industry.
Pros of globalization
Tilly and Welfens, (2014)argued that those that supported globalization felt that they
made the world a better place, apart from solving deep-seated issues related to poverty and
unemployment. The first benefit of globalization is free trade that eliminates tax barriers and
tariffs. However, other nations still practice the tax barriers in various parts of the world.
Globalization supports free trade around the world that is responsible for increased
economic growth, for instance, people would get employed, companies would become
competitive, and prices of commodities would reduce because of many companies offering the
same products to the customers.
Globalization
4
According to Pérez, and Andrade-Eekhoff, (2003), globalization drives competition
amongst nations, which is responsible for reduced prices of goods. However, the success of
competition does not yield much success because given countries alter their currency because it
would work to their advantage.
Poor countries also grow economically, through the infusion of technology and foreign
capital, which in turn increases their chances of prosperity. The global business dimensions
create an environment where respect for human rights and democracy flourish among nations.
Globalization and democracy work hand in hand.
Tilly and Welfens, (2014)argued that globalization resulted in the development of
markets that avails products to consumers from different nations, and their goods also get
markets. Globalization led to the development of world powers unlike the case of
compartmentalized powers. Increased spread of information, ideas, and goals amongst different
economies, similarly, different cultures come together. The report argues that different nations
learn the cultures of the various countries. Nations, through their governments, come together,
with the intention of resolving their economic and ecological problems as they share the same
financial interests.
Nations outsource labor from other countries, while other countries market and showcase
their skills. Although the receiving nation might benefit, the giving country could face pressures
related to wages, and brain drain issues.
Tilly and Welfens, (2014)argued that shared technology between the technologically
advanced countries with the developing countries enhances progress amongst the nations. The
Globalization
5
report found that small nations benefited from technologically advanced nations like Japan and
America. However, countries like China turned into competitors.
Cons of Globalization
A trending notion that globalization propelled the already wealthy nations to become
wealthy, whereas the developing nations remained poor. The managers at the top enjoyed the
fruits, whereas the workers that performed the actual plans suffered a lot.
Although globalization aims to eliminate trade barriers, individual nations still get locked
out of the trade because of trade barriers. Individual taxes and import duties are relatively
expensive for countries to participate in the business activities fully. The US does not put VAT
on imports, whereas other 161 nations excessive VAT, such as Europe which is 21.6%.
According to Pérez, and Andrade-Eekhoff, (2003), the big and developed countries face
problems because some of their jobs get transferred to the developing countries. Nations like
China became the beneficiaries of the jobs which got moved from the rich countries like
America. The developing countries enjoyed the labor input to the wealthy and developed
countries.
In other cases, growing nations offer relatively cheap labor, forcing the rich countries to
reduce the pay scales of the people in the advanced countries like America. Fear results among
the white-collar workers because government institutions no longer credit them as important. Big
multinational companies, on the other hand, prefer generating their services from the developing
nations.
Multinational corporations, on the other hand, may utilize tax havens and avoid paying
taxes to their governments. Unfair working conditions, social injustices and lack of
Globalization
6
environmental concern are some of the key issues raised from globalization. Multinational
companies that invested in other nations bothered about the caring for the environmental and
natural resources in given countries.
Tilly and Welfens, (2014)argued that production of goods and products in other nations
in the name of cheap labor puts the patency of the items getting stolen and imitated. Many firms
go to courts each day claiming that their technologies have taken by other nations. Diseases also
spread through globalization, for instance, HIV spread through the world because of increased
mobility of people.
Globalization effects on communities
Globalization affects people at the individual level, for instance, foods that people eat,
and religious views and clothing of the individuals. The location, income and the level of
educational attainment determine the impact standards of a person. Globalization not only brings
the world together, but it gets also blamed for widening the gaps between the rich and the poor in
the society. Globalization favors the educated and wealthy individuals, who reside in the rich
nations like America.
According to Pérez, and Andrade-Eekhoff, (2003), individuals from the developing
countries remain disadvantaged compared to the people within the developed countries. Cheap
labor gets found in the developing countries, yet they have nothing to show. The third world and
developing nations are the most underserved regarding technology. The supply of internet and
computers to the developing countries does not yield much because they don’t have access to
ready education facilities and means of utilizing the services.
Globalization
7
Globalization interfered with the local cultures in various communities. Traditional
norms get replaced by the American culture, and the youth become relatively westernized, from
their dressing to general lifestyle. Communities no longer eat their favorite traditional dishes but
prefer the junk and westernized foods. The dressing style of the contemporary communities
disappears, and people adopt the westernized culture, with women preferring trousers and
skimpy clothing that don’t cover their entire body parts, in what people refer to like fashion.
Youths became relatively Americanized and dropped their initial norms.
Globalization effects on organizations
Tilly and Welfens, (2014)argued that the first impact of globalization is market
expansion. Businesses no longer deal with domestic customers but depend on the entire globe as
a source of clients. The auto industry is an instance of a sector whose markets heavily relies on
the international markets. The fall of communism positively influenced the nations that initially
got controlled by communist markets. The business profits of the nation increased substantially.
Cheaper resources reached all countries instead of relying on their expensive and
inadequate raw materials. Most countries prefer producing their products in the people’s republic
of china because it results in reduced costs and increased efficiency of production. The benefit
translates into reduced prices of commodities and increased profit margin. Labor outsourcing is
standard, which lets nation take advantage of labor from other countries. Reduced labor reduces
the costs of production and in turn, increases the profit margins of the nations.
Role of government in promotion of global business
States created infrastructures and facilities attracting foreign investments. Local
governments engage in given services aimed at the provision of services that supports the
business activities of the foreigners. For instance, the government engages in the provision of
Globalization
8
clean water, electricity and security agencies. States also perform actions aimed geared towards
safeguarding the nation against financial crisis. The result is growth capacity of the firms that
invest when banking sector get assured of adequate financial services in the country.
Governments that encourage transparency in its dealing with international investors increase
their chances of growing and ultimate development.
Governments of developed nations work in partnership with developing countries to
create improved working standards and stringent labor services, which aims to prevent the
nations from getting exploited. Governments work towards protection of infant industries and
promoting them with financial assistance through their development till they reach international
status.
States also perform research and developments acts to fully make use of the opportunities
within its capacity in manners that favor both local and foreign investors. The government must
also come clearly in addressing the challenges that face the individuals and business people in
most of the towns, and industrial setting.
Globalization
9
References
Pérez, S. J. P., & Andrade-Eekhoff, K. (2003). Communities in globalization: The invisible
Nahual. Lanham, Md. [u.a.: Rowman & Littlefield.
Shenkar, O., & Luo, Y. (2008). International business. Thousand Oaks, Calif: Sage Publications.
Tilly, R. H., & Welfens, P. J. J. (2014). Economic globalization, international organizations, and
crisis management: Contemporary and historical perspectives on growth, impact, and
evolution of major organizations in an interdependent world. Berlin: Springer.