Nicole is the CEO of a small business which is looking to expand globally. She wants to move her business to a European country and feels that is where the product will be most profitable. What are three challenges that Nicole needs to analyze for the area in which she is considering expanding her company?

Question

What will be an ideal response?

Answer 1

Political Risk: Nicole needs to look at the stability of the country's government. Potential problems could be new regulations on advertising to a governmental take over of assets. Nicole's export market, requirements to reveal trade secrets or demands for in-country work can all be effects of the political regime.  For Nicole's choice of Europe, she could anticipate a more stable political situation than many other areas of the world.
Economic Risk: Governmental management of economic funds is important with two of the most serious problems being inflation and fluctuations in exchange rates. This risk is especially serious for small companies that are just getting established in international markets. To protect against exchange rate shifts, these businesses should take preventive measures such as contracts in U.S. dollars or using other financial strategies that minimize risk. Nicole would have to deal with the euro and the conversion to U.S. dollars.  Depending on where Nicole wanted to place the business, economic risk could be greater in some countries in the European Union than others.
Ease of Doing Business: This challenge includes the difficulty of starting a business, getting credit, and enforcing contracts. The World Bank's Ease of Doing Business Index should be consulted to determine countries with greater regulatory conditions. For Nicole, most western European countries have "least challenging" designations than other areas of the world.