international businesses

1. Various risks of
internationalsing
By
Thabiso Mphuthi

2. Four risks in internationalisation
• Gross-cultural risk
• Country risk (political risk)
• Currency risk (financial risk)
• Commercial risk

3. Gross-cultural risk
A situation of cultural misunderstanding putting some human values at stake.
• This are unique values transmitted from one generation to the other.
• This values can be mind-sets, lifestyles, cultural and language differences,
decision making styles and ethical practices.
• Example: a South African doing a business with Chinese people who have a
different decision making style compared to south African.

4. Country risk(political risk)
Is potential adverse effects on company operations and profitability caused by
developments in rules and regulations of the foreign country.
• It is based on the intervention of a foreign government posing limitations to
how should businesses operate.
• Restrictions that government implement to regulate commercial activities.
• Example: unstable political systems.

5. Currency risk (financial risk)
Risk of adverse fluctuations in exchange rates.
• Currency exchanges difference due to not having one common value of
money.
• Currency risk occurs as international transactions are conducted in more
than one country.
• Example: increasing tariffs charged to countries out of state member
economic bloc.

6. Commercial risk
Firm’s potential loss or failure from poorly developed or executed business
strategies.
• Managers making poor decisions when selecting business partners, timing of
entry market and pricing their products.
• They may be high costs in changes that are added in international businesses
than in domestic/host countries.
• Example termination of business partner performing poorly may be
expensive in a business abroad.