As national companies face steep competition in their home countries in recent years, the need to go abroad to build a competitive edge is now on the rise. Some government entities in such countries welcome such decisions of foreign business and often times encourage business to choose their countries by relaxing their tax systems and other attractive measures to lure foreign companies to establish locations in their countries. Many a times, some companies relocate or open branches in emerging markets through means like Turnkey projects, Strategic Alliance, and Joint venture. All these mode of entry simple help business enter a market for the first time to build relationships. However, these methods sometimes provide companies some sort of protection and minimize the potential risk associated with doing business abroad. Over the past two decades, the most thought about of such risk is the “Expropriation Risk”- which simply means the likely hood of a foreign government seizing the assets and resources of a foreign company. With international trade laws and regulations, such risk is not as prominent as it was. Instead it has been replaced by “Policy Risk”- The risk that a government will discriminatory change the laws, regulations, or contracts governing an investment—or will fail to enforce them—in a way that reduces an investor’s financial returns is what we call “policy risk.
According to the Harvard Business Review, although the data on policy risk are less clear-cut than the hard numbers on direct seizures, press mentions of policy risk indicate that it has risen dramatically as seizure risk has fallen. Even though there are business laws and contractual agreements surrounding every business activity, any business that befalls such maneuvers by foreign governments turn to have limited options since the traditional contract laws and mechanisms that applied in their home countries often times does not apply in foreign countries because of the political situations and the less than perfect democratic systems. Therefore, business looking to do business abroad must adopt a strategic risk management capabilities and political-management strategies that limits foreign government entities’ incentive to divert investors’ returns. As your business deliberates on going into emerging markets, you should remember that managing uncertainty will help avoid loses but having a strategic long-term risk mitigating plan would be a source of competitive advantage in addition to a means of avoiding losses.
Management theories and the concept of business management mutate in accordance with changes in the global market. Managers and entrepreneurs together agree on that fact that business practices change almost every decade. Business culture in the US in the 60s through the period of the Vietnam War changed drastically after the Cold War. The 80s through the 90s presented different business environment and organizational climate, and consequently, the millennium and the emergence of globalization presented a new culture and business practices, i.e., Diversification—this may be explained in other words as the act of introducing different varieties of workers based on gender, race, culture and color into a working environment to accomplish a common goal. Diversification is a simple process, however, its implementation is anything but simple. Managers in corporations in recent years have had problems managing a diversified group of workers. This may not necessarily mean managers are not capable of managing their diverse groups of workers; it may mean managers need a carefully crafted approach to their managing style when it comes to overseeing a well-diversified work group. Globalization and the turn of the millennium have had a cross-cultural influence on most management and leadership styles in domestic and international corporations around the world. This is more eminent in the western countries where immigration has given way to a diverse cultural groups working together to promote the business goal. In today’s economic environment, more businesses are seeking other opportunities across their shores and at the same time these corporations are also attracting foreign talents to contribute to their corporate ventures. Globalization has created a global demand for talented and well educated individual from all parts of the world to share and contribute their knowledge and ideals to transform local and national companies into global companies with culturally diverse work groups. Diversification does transform a work place by way of creating a thriving workforce with different ideas and perspectives on issues that pertain to the growth of the company as a whole. A well-diversified company benefit in many ways, such as workers being able to tolerate different background of workers based on a mutual respect and the attainment of company goals and values. On the contrary, there may be some down sides to this perspective. Such transformations sometimes do create an environment whereby lower and upper management personnel strive to find ways by which they can manage these individual workers of different cultural and management backgrounds effectively and efficiently. This however, does not mean that diversifying the work place is a bad thing. According to the Wharton Article, “the goal is to understand the meaning of diversity in the work place and learn from the most effective diversity programs—even as it is clear that what makes a company truly diverse has become increasingly complicated over the years. Most agree that an effective diversity program is one designed to reduce racial and gender inequalities in the American economy…” (p1) . Over the past decade, most local companies in developed economies have experienced a cultural change with respect to management styles. Before this massive impact of globalization and migration, companies in their local markets were accustomed to a definitive style of management which conforms to the cultural patterns of their local market. In today’s economy, global social change and multi-cultural influences are impacting the fundamental change in organizational values and a sense of diversity within a local or multinational company. Irrespective of the kind of company or organization whether local or global, there is always the need for an organization to adopt and grow with currents trends not only with its current or potential customers but also with its employees through cultural and ethnic diversity─ the fact is that, the working environment is constantly changing; which makes it more eminent for corporation to adopt and restructure their management policies to accommodate these swift changes in their internal or external environment. Wharton, “Diversity in Corporate America: Still a work in Progress” Upenn.edu