Question

Consider this: your company supplies automotive body parts to major automobile companies in the U.S. Many of your main clients sell their products in new emerging markets and have successfully internationalized their operations. You feel compelled to follow your major clients, and therefore your company is considering expansion into the emerging markets in Asia and South America. You are part of a team that is going to present a strategy for managing political risks in potential markets.

Clearly explain in Points the main methods of managing risks. Provide examples to support your answer

Answer 1

The main methods to eliminate the risks related to market expansion in foreign countries is to select a country which has stable political situation. Also, it would be prudent to select a partner which is a local party in that country. By doing this, we would have reduced exposure of our business to foreign political situation and also could leverage local knowledge of the partner.

So initial market entry could be done through exports and distribution through a partner and once experience has been gathered in operating in that country, we could set up independent operation in the country.