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Assessment 5

Discussion 1

Subway including other international fast food companies such as Burger Kingare, Lotteria, and KFC among others is quite at the center of a number of risks by conducting their business on overseas markets compared to the domestic or rather the local market. The most significant risk may arise as a result of legal/political and foreign exchange factors. Legal and political risk may rise as a result of different political factors and policy changes that may affect the normal functioning of this business (Doz, 2017). Examples here may include instances of political instability or the formulation of such laws such as expropriations in the host country which may affect the standard functioning of multinationals. One thing about such legal frameworks is that they can sometimes lead to the seizure of properties under the multinational companies. The resultant effect of such formulation is adverse financial performance which may consequently lead to the closure and collapse of this corporation.

Still on legal and political factors, the foreign countries may settle on product transfer that is subject to the monetary transfer policy as a way of benefiting the local corporations. In such a circumstance, the government is more likely to handle currency conversion. The delegation of currency conversion to the government could also be due to the result that the government has low reserves of strong foreign currencies and needs to boost its domestic currency and market. The main detrimental effect of such a policy is that it could make it difficult or otherwise bar the different MNC the liberty to expand their business in these foreign markets (Doz, 2017).

When it comes to the issue of Foreign exchange, this factor may lead to financial risks and insecurities as a result of highly fluctuating and unpredicted disparities regarding the exchange rates in the foreign currencies. The results of such variations include rickety loses or gain in resources which may consist of economic exposure, transaction exposure and translation exposure. Economic exposure may be realized as a result of increased fluctuation which impacts on the anticipated future cash flows. The economic exposure is often associated with long term impacts and may affect factors such as sales and costs. Economic exposure for MNCs such as Subway may be quite difficult to tame or rather to address because of its unpredictable nature; something which tends to counter the business’ monetary forecast and growth. However, it would be quite easier for Subway to cope with translation exposure under the condition that they convert the foreign currency financial statements into the currency that is used by the parent company.

Discussion 2

Operating a business in foreign markets can sometimes be quite a daunting task. It could be quite complicated, frustrating task to do. To address this in a better manner, it would sometimes be proper to opt for partnerships. It is, however, important to note that even though partnership has significant success rates, collaboration could sometimes be problematic. There are different problems of collaborative arrangements that might be occurring at different times. One of the problems that may be occurring in such context includes the conflicting interests of the individual partners. Another problem is that the two partnerships may be operating on different administrational approaches which do not seem to marry quite well.

Different insights by the two partners can also be another problem. This may appear in different forms. As explained in the sections below:

  • Subsidiary performance- the more significantly a subsidiary operates or rather informs a non-variance, the more likely-hood that intervention will not hold.
  • Distance- the more there is distance between the conglomerate, the more the mental and physical variances.
  • Environmental stability, associated changes and Communication systems- the higher the uncertainty harbored in the foreign markets, the higher the likelihood of the utilization of standardized performance as well as deregulated process control.

Another thing is that the changes or even the conflict between corporate and cultural factors may lead may also escalate to various problems which might affect collaborative arrangements. The cultural change may occur at the corporate level due to the need to establish changes in different areas such as managerial style, operating processes, and employee relations. This may be a requirement to affect to be effected as a whole or partially (Doz, 2017). In most cases, however, this is often partial. At the national level the change might be driven or rooted on different factors depending on the host nation. For example, in most of the Asian countries, performance is often determined based on strategic factors. In the European countries on the other hand, performance is largely based on different issues such as productivity, and societal considerations among others. The American countries are somewhat money or value oriented. This is because performance is largely tied on issues concerning earnings and market shares among other associated benefits.  Also, though not to a greater extent, the partner’s financial muscles which somehow equal to contribution in terms of assets may result to problems as a result of supposed strain on the collaborative arrangement.

 

 

References

Doz, Y. L. (2017). Strategic management in multinational companies. In International Business (pp. 229-248). Routledge.

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