Kenneth R. Szulczyk
Strategy 6 : A business enterprise could locate a small piece of manufacturing within a
country. Subsequently, the business produces goods in facilities spread across countries.
Although this method increases the transportation costs, a company reduces its risk. If the
business loses its factory in one foreign country, then the business only loses a piece of the
business. For example, companies extract petroleum in Middle East and refine the petroleum
products in the U.S. and Europe. Refineries cost billions of U.S. dollars in investments, and
many Middle Eastern governments could nationalize the industries. The Middle Eastern
governments nationalized the petroleum industries in the 1960s when they created their state
petroleum companies.
Strategy 7: A firm could use intellectual property rights to protect its investment and assets
in a foreign country. For instance, a firm controls its technology by owning rights to patents,
trademarks, and brand names. In theory, a foreign government cannot operate the facility
without permission from the holders of the intellectual property rights. This strategy is effective
when a company continually upgrades technology. Even if a government stole the technology,
the technology becomes obsolete quickly. Although some countries do not enforce intellectual
property rights, countries such as the Europe Union and the United States are forcing countries
to comply with intellectual property rights and are cracking down on piracy and violations.
Strategy 8: A government could impose capital and exchange controls, preventing the
outflow of capital. Companies or investors can reinvest their funds within the country if they
cannot transfer funds outside the country and have no other options. Then they wait until they
can transfer its funds out of the country. Usually, international businesses do not invest in
countries with exchange controls, and the exchange control could hamper future investment.
For the last type, global specific risk originates at the global level. Firms have no control
over this risk, and it could be difficult to predict. For example, the terroristic attack on the
United States on September 11, 2001 raised awareness of terrorism. Unfortunately, terrorists can
attack multinational enterprises in any country because terrorists associate them with their home
country. Businesses do not have the resources to fight terrorism, and they must depend on
government. Nevertheless, terrorists are not the only global problems. Violent riots and protests
erupted in Greece, Spain, and the Middle East in 2011 as protestors and rioters destroyed
property and assets of multinational enterprises.
Just in time inventory system that many businesses have adopted forms another global risk.
Businesses hold low inventories because they pay costs to store parts and products.
Consequently, businesses produce parts just in time as they are needed. Unfortunately, just in
time inventory systems are susceptible to supply disruptions if parts come from many countries
around the world. For example, the United States government closed borders and grounded
airplanes on September 11, 2001, and Ford and other companies shut down because they could
not get parts. After a tsunami and earthquake had struck Japan in 2011, Japanese steel and auto
parts companies shut down, disrupting the parts supply for the Japanese companies.
Manufacturing plants across the world shut down because they could not get the necessary parts
from Japan.
Protests cause another global risk. For example, the protestors formed anti-globalization
movements against multinational corporations and governments because they are at the center of