258 Part 2: Strategic Actions: Strategy Formulation
conditions; the country’s situation and government policies; and the firm’s unique set of
resources, capabilities, and core competencies.
FEMSA, the large multibusiness Mexican firm, has been expanding its operations
into multiple countries in recent years. Most of its expansion has been into other Latin
American countries (where it better understands the culture and markets). A recent
acquisition in Brazil has capped a series of acquisitions to become a powerhouse in bot-
tling and distribution. In fact, FEMSA is Coca-Cola’s largest bottler worldwide, includ-
ing some operations in Asia. Its most common mode of entry has been acquisitions.
It has considerable experience with acquisitions given that a large amount of its domestic
growth has also come from acquisitions.^1068-5 Risks in an International Environment
International strategies are risky, particularly those that would cause a firm to become
substantially more diversified in terms of geographic markets served. Firms entering
markets in new countries encounter a number of complex institutional risks.^107 Political
and economic risks cannot be ignored by firms using international strategies (see specific
examples of political and economic risks in Figure 8.6).8-5a Political Risks
Political risks “denote the probability of disruption of the operations of multinational
enterprises by political forces or events whether they occur in host countries, home coun-
try, or result from changes in the international environment.”^108 Possible disruptions to
a firm’s operations when seeking to implement its international strategy create numer-
ous problems, including uncertainty created by government regulation; the existence of
many, possibly conflicting, legal authorities or corruption; and the potential national-
ization of private assets.^109 Firms investing in other countries, when implementing theirFigure 8.6 Risks in the International EnvironmentRisksPoliticalEconomic- Political
- Economic
- Debt of various countries
- Uncertain prices for critical commodities
- Successes and failures of privatization and firm restructuring
among Eastern European countries - Increased trend of counterfeit products and the lack of
global policing of these products - Failure of countries to pay debt obligations and the
devaluation of their currencies during a global crisis - Challenges for China in implementing the World Trade
Organization agreements - Global military engagements (e.g., Afghanistan, Iraq, Libya)
- Potential nationalization of invested assets
- Political instability in Middle East
- Northeast Asia security instability
- Unknown outcomes of the Arab Spring (2011)
- Protectionist political trends as the economic
downturn worsens