International Risk
From
the e-Activity, I decided on choosing on Nike as my multinational company of
study. With investing in such a company and many other multinational companies,
there are many risks that are associated with this type of investing. To start
with, some of the risks that an investor might face include both national and
international competition. It is important to note that some national companies
might use some outdated technology to hamper their products so that they cannot
with Nike as a company. This means that these companies lower their prices on
similar products that Nike Corporation produces making the companies to attract
more customers compared to Nike as a company. This will result on loss of
revenue on the local market, a factor that may lead to the company incurring
some loses, something that will directly affect the investor (Charles and
James, 2012). Now this is something that also has an effect on the
international business as far as Nike as a company. This is where the company
can lose reputation if it does impress on its own backyard. It could scare away
investors a factor that makes the company to also lose revenue.
Another
risk associated with investing in the multinational company is the fact that
foreign exchange is most likely to go to the outside countries. This means that
the company will impose a burden to the limited resources of the developing countries.
The reputations of this is that there will be high form of commissions and
royalties that local business subsidiary will be required to pay to the parent
company. This means that there will be a high outflow of foreign exchange. It
is also important that these multinational companies can face some of the
issues that might cost the investor some investments as hence incur some loses.
For instance Nike as a company has incurred some lawsuits in the past,
something that cost the company some loses. It also affected the integrity and
reputation of the corporation, a factor that make some customers to shun some
of their loyalty and affiliation to the company (Nikebiz.com, 2013). This is something that directly translates
to the income generation index of the company, therefore incurring losses.
Lastly, investing in a multinational company requires that one has enough
information and expertise that is needed to make sure that they are sure off
the time to invest and the entire process required. It also needs one to have
experience that will make sure that one is able to avoid some of the issues
like legal issues while conducting investing procedures with the company.
Multinational companies are also run by complex structures that the investor
might not be aware of all of them; therefore it requires that someone be aware
of everything to avoid unnecessary confusion and mix ups.
References
Charles,
M. and James, C. (2012) International risk management: experiences and
practices Research study and report Indiana: Indiana University Press
Nikebiz.com (2013) Investors Cooperate-Social
Responsibility Available at <http://investors.nikeinc.com/Investors/OVERVIEW/default.aspx>
[Accessed on March 07, 2013]
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