Free Essay

Global Regulations

In: Business and Management

Submitted By farudalonto
Words 924
Pages 4
Alonto, Faruddin
MGMT 460.99 - IBM

July 12, 2016
Government Policies, Development, and IBM

Globalization continues to open gates of opportunities for most countries. In my opinion, this is gearing towards lessening the gap between the classifications of the country’s global economic status. This reality encourages more and more businesses to expand to other markets where they see would generally increase their profits and revenues. After all, most people do business with one mindset: minimize cost, and increase/maximize the profit.
Risks from Foreign Government Policies
It is generally true for a fact that most businesses’ next step is to expand to other markets to increase profits. However, expanding to other markets is not as easy as it sounds. There are many risks that affect decisions of businesses to invest in a foreign country. The greatest risk international businesses face is government regulation
(Deresky, 2014). Businesses have to follow foreign government policies before they can start doing international business. Although following government policies may sound as easy as checking boxes, foreign government policies tend to change, either favorable for international business or not. For example, countries that have democracy as their political system change government administrations and possibly the policies, every once in a while.
Government policies and regulations usually are not just two sides of a coin.
There can be many possible government policies that can be implemented that can also lead to many possible countermeasures for an international business. This makes the risk so high on the list, according to Deresky (2014). A clear example is the recent exit of Britain from the European Union (EU), or more famously known as the Brexit. Most businesses did not expect the sudden leaving of Britain from the EU. As an effect of
Brexit to other countries like USA where the two are huge trading partners, the stock market of the latter significantly dropped with Dow Jones industrial average dropping almost 4% (Mui, 2016). This is something of a risk for them brought upon by the government decision.
Still, the government regulations have the absolute decision to trade and business policies, even with external events like acts of nature or terrorism. Take Japan for example. A huge earthquake hit Japan on 2011 that devastated most businesses.

Alonto, Faruddin
MGMT 460.99 - IBM

July 12, 2016
Government Policies, Development, and IBM

The first instinct of government is to implement a policy that will guide everyone and prevent panic from people. Because of this all, including international businesses, will follow certain restrictions. Limited use of electricity and water and releasing oil reserves are among the few regulations and policies that were implemented by the government following the 2011 earthquake (Law of Library of Congress, 2013). 9/11 attacks on the
World Trade Center last 2001 is also an unforeseen event that took a toll on businesses, both local and international. Significant decrease in the stock market and federal reserves, and volatility of currency hurt the businesses (Neely, 2004). It may be inferred that some wanted to pullout their international business from the USA. There was also increase in tax to compensate for war preparations should it happen. Of course, even international businesses are to pay these taxes as part of operating in the
USA (Blimes, 2011). This just increases the cost for them in doing international business. Developing Countries
Most developing countries are dependent on their huge trading partners, like
China, Japan, USA, and Britain to name a few. An event whether external or internally caused and followed by a government mandated policy will have an effect on their trading countries, even international businesses established there.
Heavily

dependent

international

businesses,

especially

from

developing

countries, cannot afford to ignore the probability of changes in government policies.
Managing these risks may not be easy as it especially if for instance, international is doing so well but due to some event with government policy leave them no choice but to withdraw their investments. It can also be the other way around with business not doing so well and forced by the government to stay and spend a huge amount of money.
Ultimately, whatever may happen to a country, the government will be ready with a response of to avoid confusion and provide guidance to everyone. Managing countermeasures for instances like this is difficult. This is why, as shown in Deresky’s work, the greatest risk to FDI decisions is government regulation.

Alonto, Faruddin
MGMT 460.99 - IBM

July 12, 2016
Government Policies, Development, and IBM

Bibliography

Deresky, H. (2014). International Management: Managing Across Borders and Cultures
(Eighth Edition). New York: Pearson Education Limited.

Mui, Y. (2016, June 24). Dow drops more than 600 points as Brexit raises risk of global recession. Retrieved
July
10,
2016,
from
The
Washington
Post:
https://www.washingtonpost.com/news/wonk/wp/2016/06/24/brexit-raises-risk-of-globalrecession-as-financial-markets-plunge-worldwide/

Law of Library of Congress. (2013, September). Japan: Legal Responses to the Great
East Japan Earthquake of 2011. Retrieved July 10, 2016, from Library of Congress: http://www.loc.gov/law/help/japan-earthquake/ Neely, C. (2004, Mar/Apr). The Federal Reserve Responds to Crises: September 11th
Was Not the First . Federal Reserve Bank of St. Louis .

Blimes, L. (2011, September 5). The Economic Fallout from 9/11. Retrieved July 10,
2016, from Power & Policy | A blog about the use of American power in the world, written by scholars at the Harvard Kennedy School's Belfer Center for Science and
International Affairs: http://powerandpolicy.com/the-economic-fallout-from-911-powerpolicy/#.V4QkqZMrKRt

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