Suppose you get a job at Aoki Corporation, a firm that manufactures glass for industrial and consumer markets. Aoki is a large firm but has little international experience. Senior managers are considering a plan to move Aoki’s manufacturing to China, Mexico, or Eastern Europe and to begin selling its glass in Latin America and Europe. However, they know little about the country risks that Aoki may encounter.
Describe how each of the following factors might contribute to country risk as Aoki ventures abroad:
foreign investment laws, controls on operating forms and practices, and laws regarding repatriation of income, environment, and contracts.
Answers
Answer:
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Answer:
Laws governing international investments vary widely from country to country. Foreign investment laws, tax policies, and government regulations might make Aoki Company difficult. Foreign investment rules of the countries where Aoki intends to do business must be researched in detail.
Explanation:
For instance, some nations have policies that limit foreign investment in certain sectors or necessitate joint ventures between foreign and domestic corporations. Penalties, fines, or even investment loss might result from a failure to comply with these regulations.
Management of business structures and procedures: the many forms and processes businesses might take vary from country to country. Aoki Company must consider the target nations' cultural and legal norms. Certain nations may have stringent labour rules, environmental restrictions, or business training requirements. Securing the necessary licences and licences to operate in these new markets might provide additional difficulties for Aoki. That's why it's so important to study the local laws and customs that might affect business in the target markets.
Income repatriation rules determine how money earned abroad may be returned to the nation of residence. Currency fluctuations, local taxes, and regulations on the repatriation of revenues are all potential problems for Aoki Company. The corporation must be familiar with and follow the applicable requirements in the target countries regarding cash transfers. The risk of financial loss and legal complications increases if repatriation requirements are not followed.
Both environmental laws and business agreements might be different from one nation to the next. The environmental laws of the nations in which Aoki Company intends to do business must be considered. The corporation must also consider how differences between law and culture may affect the validity of contracts. The danger of contracts not being legally binding in certain countries is substantial for Aoki's business. Hence, before expanding into new areas, the firm should get legal guidance and read the contracts carefully.
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