Free Online Course in International Business
Task
Assess political and economic risks and cultural issues of the target country to
establish the financial costs and viability.
Introduction
This section will provide the introduction to the risks and cultural issues
involved in international trade. While the same risks of slow payment found in
domestic transactions carry over to international sales, there are many
additional risks in the international arena that we don’t normally find in
domestic business. International business requires a series of screenings that
overlay finance, marketing, personnel and production which are the four basic
areas of business. These four areas need to be evaluated from many perspectives
which include the following: competitive, distributive, economic, financial,
labor, legal, physical, political and technological. All of these perspectives
seem to be understood and expected in any business environment but in the
international arena the sociocultural and socioeconomic impact on these areas
are not as easy to assess. Three screenings that most companies overlook are the
sociocultural forces, the competitive forces and the final selection with a
personal visit. The concept of "country related risks" will be introduced so
that a distinction can be made between the risks associated strictly with a
customer’s unwillingness or inability to make payment and the impediments to
payments caused because of the political, economic, and cultural components that
are a part of international or cross border transactions.
Some of the causes of the political and economic risks will be introduced along
with some of the causes of culturally created risks.
To have a thorough understanding of this area you will need:
• Knowledge of political and economic risks causing late and/or non-payment from
overseas markets (e.g., cancellation/failure to grant U.S. export license, civil
unrest, foreign currency delays/shortage)
• Knowledge of cultural issues of buyer’s country which may impact payment
methods, money transmission methods, language used, credit control procedures,
level of governmental control, corruption issues, and sources of finance
• Knowledge of resources for determining risk (e.g., U.S. government
organizations, credit bureaus, websites)
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