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Four Major Risks in International Business

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Four Major Risks in International Business

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In this essay I will be discussing the main risks in international business and give the examples in order to understand them better. There are four major risks needed to take into consideration in conducting businesses in an international environment: Commercial Risk, Cross-Cultural Risk, Country Risk and Currency Risk. Specifically, I will give several examples to clarify these risks as below.

First and foremost, the currency risk is considered as one of the most notable risks while conducting the businesses, especially on a cross-border scale. To be precise, when Graceland Fruit, a dried-fruit manufacturing company with a headquarter in Frankfort; Michigan (The USA) exports its products to Japan frequently and all transactions are made in Japanese currency, yen. Therefore, when a fluctuation in exchange rates happens, accurate values of the company’s revenues or profits will definitely be affected.

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Secondly, the cross-cultural risk rises as an important issue while doing the international businesses due to differences of customs, habits, languages, lifestyles, etc., among countries all around the world, hence, this risk is able to impact significantly on entire business processes in the international environment. For instance, an exchange-card protocol between western countries, particularly the United States, and oriental nations, especially Japan. Apparently, while Japanese people highly appreciate this culture in a business environment by simultaneously bowing and presenting cards to opposite persons, the American people do not pay high attention to this culture and their gestures in exchanging cards are less polite than styles of Japanese ones.

Thirdly, the country risk has another meaning, political risk, and this term is highly considered as crucial matters in the business environment. Specifically, it reflects how regularly and significantly national governments affect their economic performances, leading to efficiencies of those economies. For instance, China, a communist-party nation, frequently intervenes in national business activities, thus, there are numerous considerable issues for international companies while conducting businesses in this country due to high controls from authorities.

Last but not least, the commercial risk is also relatively critical and happens in the international business whenever the firms lose their business strategies or their performances are getting worse. To be precise, an acquisition of Kingfisher Airlines with Air Deccan in 2007 is a prime example in this case. The Kingfisher Airlines lost its reputation in a business-class airline segment in Indian market due to an integration, and the company had no strategies to tackle problems accompanied with this situation.

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