Four risks and examples in international PDF

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Four risks & examples in international business YoonJi Chang 장 윤지, 201302964 1. A situation or event where a cultural miscommunication puts some human value at stake (differences in language, religion, customs, lifestyles, mindsets) Examples) #1 There was a case of international company, Montblanc reinforcing publicity of its mark when it exported its fountain pens to Middle East countries. At the initiatory stage when Montblanc entered Middle East market, it couldn’t make good sales records because of cultural miscommunication. The star-shaped logo of Montblanc is quite similar to David’s star of Judaism. And because of this, many Muslims had resistance about it. So, the company made advertisement consistently so that it could surmount cross-cultural risk. The advertisement said the star shape is representing permanent snow of Mt. Montblanc rather than David’s star. #2 The misuse of religious iconography can damage a company's image with those customers. During the 1994 World Cup, bottles of Heineken beer displayed the flags of all the participants in soccer's biggest tournament, including Saudi Arabia. The country's flag shows a verse from the Quran, Islam's holy book. The Quran forbids the use of alcohol, so thousands of Muslims registered complaints with the brewer for displaying the verse.

2. Potentially adverse effects on company operations and profitability holes by developments in the political, legal, and economic environment in a foreign country (Government intervention, protectionism, barriers to trade, mismanagement, lack of legal safe guards, property rights) Example) The former national airline of Switzerland, Swissair, used to be so financially stable that it was known as the “Flying Bank.” Founded in 1931, Swissair epitomized international transportation until the late 1990s, when the airline’s board decided to follow an aggressive borrowing and acquisition policy called the Hunter strategy. Then, the terrorist attacks of September 11, 2001 put a void in the company’s plans Swissair found itself hamstrung with debt. Unlike some other airlines, however, Swissair could not handle the financial hit. Mismanagement and bad ideas— trundling large sums of cash to purchase fuel at foreign airports, for example —left the airline gasping for oxygen. In 2002, Switzerland was embarrassed to lose its national icon for good.

3. Risk of adverse unexpected fluctuations in exchange rates (Currency exposure, assets valuation, foreign taxation, inflationary and transfer pricing) Example)

Despite rising sales revenues, BMW was conscious that its profits were often severely eroded by changes in exchange rates. The company’s own calculations in its annual reports suggest that the negative effect of exchange rates tota led €2.4bn between 2005 and 2009. BMW did not want to pass on its exchange rate costs to consumers through price increases. Its rival Porsche had done this at the end of the 1980s in the US and sales had plunged. BMW took a two-pronged approach to managing its foreign exchange exposure. One strategy was to use a “natural hedge” – meaning it would develop ways to spend money in the same currency as where sales were taking place, meaning revenues would also be in the local currency. However, not all exposure could be offset in this way, so BMW decided it would also use formal financial hedges. To achieve this, BMW set up regional treasury centers in the US, the UK and Singapore.

4. Firms potential loss or failure from poorly developed or executed business strategies, tactics, or procedures (weak partner, operational problems, timing of entry, competitive intensity, poor execution of strategy) Example) KFA (Kingfisher Airlines) acquired Air Deccan, a low-cost airline in 2007. Five years of operations is a key criteria for an airline to fly internationally. Hence, KFA acquired Air Deccan’s international flying rights and simultaneously entered the cheaper market segment. After the merger, first signs of trouble cropped up. As per a Business Today article, it became the largest Indian airline with 27.5% market share, and domestic travel increased by 30%, however it didn’t make profits. Despite the fact the its main rival – Jet Airways – continuously showed profitable quarters. KFA showed growth in numbers while having lost the strategy. With the merger, it lost its brand image of a premium business class airline. It expanded with the speed of a jet without building a base and resolving the post merger challenges. This set the course for a bumpy ride

http://voices.yahoo.com/international-business-strategy-management-the-6824830.html Cross-cultural ) 1. http://smallbusiness.chron.com/examples-company-failure-due-cultural-mistakes70712.html 2.http://kin.naver.com/qna/detail.nhn?d1id=6&dirId=61302&docId=152807703&qb=6rWt7KCc6riw7JeF7J20I OusuO2ZlCDssKjsnbQg65WM66y47JeQ&enc=utf8§ion=kin&rank=2&search_sort=0&spq=0&pid=R0MUV c5Y7usssaIIbrwssssssuK-227522&sid=U0OXoXJvLDwAAAe9DAU Country) http://www.businesspundit.com/the-25-worst-business-failures-in-history/ Currency) http://www.ft.com/cms/s/0/f21b3a92-f907-11e1-8d92-00144feabdc0.html#axzz2yHFrQewA Commercial) http://soniajaspal.wordpress.com/2012/03/14/risk-management-failures-in-kingfisher-airlines/...