Essay 4) What are the additional risks that international corporations face compared to local corporations? How can they eliminate them? A successful business is beneficial and generate more revenue to expand in other parts of the world but on the other hand local businesses have to take in to account many risks to cross national border. Culture is the top challenge for a multinational firm that comprise people behavior to react to new things or services and ability to adopt. Second risk is language barrier for negotiations and communication. In the world of multinational business Political risk is another factor that effect company’s overall structure owing to events like war, terrorism, sanctions and unstable government and corrupt leaders of a country. A country’s unstable exchange rate and economy can play a key role to the lose of revenue of multinational business. People of a country can be identified on the basis of culture, namely, how is their common and professional life and what standards they have. For international business it can be demonstrate by understanding consumer behavior, how they react to new things. For instance, in terms of local citizens Starbucks did not researched properly Australians behavior as a result billion dollars coffee company almost failed. Starbucks just implemented traditional United States coffee model to Australia, they rapidly opened cafes in almost every state of the country in response of fast expansion citizens considered it common they did not had pleasure of want to purchase only Starbucks instead of others in addition they served simple American surgery coffee menu and not introducing local taste high suger is not appeal Australians and last but not least their products was quite expensive as compared to local cafes hence, Australians preferred to buy from local one where they can chat spend quality time and relax instead of expensive and fast coffee from Starbucks (Turner, 2018). To Introduce products on international level a company should follow rule of test and trail gradually and not to transfer home country’s exact business model to targeted country, first they need to experiment cultural behavior and reaction to newly launched products. Secondly, on professional level culture can likewise collapse that can lead to many risks. In business to business transactions behavior of the people from different parts of glob is diversify. To take example of countries like Pakistan, India, Bangladesh, etc., in business dealings and meetings people do not care about deadline and time, it is really common here to arrive to meeting room 10-15 minutes late or cancel meeting and postpone to another date, on the other hand countries like Japan quite strict to business related events, they feel disrespectful and may lead to cancel deal of arriving business partner not on time. To avoid such situations, multinational corporation provide work shop to their employees and send them to that country to understand and explore social and professional life in friendly manner before meetings and dealings. Language barrier is another problem for multinational firms for their business dealings, meetings, colleagues and customers (Burman, 2017). In terms of customers for instance, company advertise a product or print desired slogan on packaging but citizens unable connect with it, sometimes they understand in local language in wrong way and product do not perform very well in market, it is mainly because some words or sentences have different meanings and company have limited knowledge of local language. On the other hand, on professional level when companies communicate across the border with each other they frequently face difficulties in terms of language. For example, in face to face meetings and conference calls they unable to understand main purpose very well alongside online writing emails can also be a challenging part that lead to misunderstandings and inconvenience and can result unpredictable mistakes. It can be overcome by investing on employees to learn language of that country, as English is an international language and almost understandable first they should learn it in a user-friendly simple manner rather then directly learn new languages, for example, if a person directly learn German it can help him in Germany and Switzerland but what about other countries like Portugal, Czech republic and other countries of the world apart from it in today’s digital era we have internet that assist to translate any language documents or sentences from one language to other, wherever possible, to hire a translator and interpreter that can assist of translation of official documents, in addition hand gestures in common communication reduce cultural language barrier. Survival of multinational corporation is more tough in a country without knowing language in depth or techniques related to it to handle. Thirdly, a state can face both external and internal political issues namely corruption, terrorism, unstable government, foreign sanctions, war, weak foreign policies lead to lose of revenue of international organization. Challenges will be at peak for investors in a foreign sanctioned country, live example is Iran, owing to nuclear experiments they are highly under pressured by USA, although they have mutual nuclear deal but still due to sanctions oil exports Are quite low at the same time 1 USD = 42,350 Iranian rial, for exchange rate a firm bear huge amount of lose. For corruption and unstable government our home country Pakistan is best example, from freedom not a single prime minister complete full 5 years and before current government in almost 10 years heads of the state were full of corruption they just making assets abroad and not even take in to account foreign investment to make friendly laws and gravitate them, terrorism like 9/11 is also a considerable events because of this Afghanistan suffer for long time that leads to a dangerous country for multinational corporation. To eliminate such type risks foreign enterprise firstly to avoid countries suffer from these issues and invest in a safest country, in terms of ongoing business a company should create good relations and corporations with the government of country to understand each other point of view, to avoid lose company can get insurance policy. These are unpredictable problems that hurt firm profitability hugely. Exchange rate risk is unpredictable can result in lose and profit of foreign company, currency of a country fluctuate over the passage of time it goes up and down in relation to another that effect estimated profit. For instance, Pakistani vehicle company want import parts from Europe for €10,000 on the date of contract €1=150 PKR but after manufacturing and delivery 3 months goes on but then owing to devaluation €1=200 PKR enterprise will pay extra money from its expectations that leads to low profit at the same time if the currency gain from €1=150 PKR to €1=100 PKR payment will be less. To handle such situations domestic company should buy foreign currency immediately after contract international company. To conclude, businesses are expend to earn more money, it has advantages but at the same time some risk related to it should be take in to account, such as culture challenge and can be under control by experiment in market gradually, represent itself local rather then international to launch products according to there needs and test. Without knowing language in depth multinational firm can face numerous difficulties, it can be tackled by using Internet web sites translator, hiring interpreter to translate official documents and learn language of close colleagues and business partners but first to learn English at user friendly level. There are some countries they suffer from political problems like corruption, conflict, terrorism, sanctions, first of all these countries need to be skip completely besides make good relations with heads of state and insurance are tactics to overcome. Currency exchange rate risk is pay receive money from abroad for goods contracts currency changing over the period of time that leads to lose, best method to handle is to purchase foreign currency as soon as contract is made. International corporation have benefits but to run it these risks should be take in to account.
