Country Risk and Strategic Planning Analysis






Country Risk and Strategic Planning Analysis

MGT 448
November 11, 2013



Country Risk and Strategic Planning Analysis
Globalization is more of a necessity than an option in certain markets because of the potential for growth, but before investing abroad, the associated risks need to be known and understood. A country risk analysis can be used to avoid making a decision to expand an organization into a region that may result in financial disaster. Risks that need to be considered include but are not limited to political, legal, regulatory, social, cultural, and technological. Market risks also need to be addressed. After measuring the risks, the planning begins. Regardless of the level of risk, strategic planning is a key component to the success of every organization rather operating domestically or abroad. The foundation of strategic plans involve defining the mission and objectives, performing a SWOTT analysis, choosing a strategy, selecting and justifying a suitable mode of entry for the global product or service, controlling and evaluating performance, and devising a contingency plan. After assessing the risks and devising a plan, the next logical step would be taking actions towards global expansion.
Political, Legal, and Regulatory Risks
Taiwan is considered a low risk in accordance with a country risk analysis, it is seems predictable and transparent in the legal system, and business infrastructure, and their financial system meets the necessary regulatory requirement for a global economy (Economist, 2013) as shown in table 1 Risk Rating. Taiwan’s relationship with China is considered low risk from a political view. The Taiwan government has privatized and deregulated much of the economy in seeking improvement with it relationship with China, where in China would greatly improve Taiwan’s economic projections (AMB, 2013).
RISK RATINGS Current Current Previous Previous
Rating Score Rating Score
Overall assessment A 20 B 22
Security risk A 11 A 11
Political stability risk A 20 A 20
Government effectiveness risk B 29 B 29
Legal & regulatory risk B 22 B 22
Macroeconomic risk A 15 A 20
Foreign trade & payments risk A 18 B 21
Financial risk B 25 B 29
Tax policy risk A 12 A 12
Labour market risk B 32 B 32
Infrastructure risk A 19 B 25
Note: E=most risky; 100=most risky.
The risk ratings model is run once a quarter.
(Economist, 2013)
Exchange and Repatriation of Funds Risks
The exchange and the repatriation of funds risk is denominated is U.S. dollar. The performance is affected in the movement in the exchange rates between the currencies that are held in assets and U.S. dollar. Those exchanges that are control by regulations have caused difficulties in the repatriation of funds. The Taiwan’s dollar may have shown gains on the speculation of the exporters in converting overseas revenue, but has seen little progress in government bonds (Wong, 2012).
Competitive Risk Assessment
The global recession that has affected many countries in Southeast Asia. Taiwan’s competitive risk is still in fluctuation due to the drop in export demand for the United States and other major trading partners. The tradeoff is Taiwan’s well-educated workforce and pro-business government. This continues to be an attractive region for investors due to low labor costs, natural resources, and the continual growth of it infrastructure (AMB, 2013).
Taxation and Double Taxation Risks
Taiwan’s companies continue to expand their operations on global scale. Taxation is greatly influence or control by China. Mainland China has amended their corporate income tax law, where there is a reduction in tax incentives offered to foreign organizations operating locally in Taiwan. Essentially, added income tax withholding on outward-bound earnings fee for the investment structure design. China has adopted different tax policies to be used to help balance trade with countries like the United States, for example, export rebates, and non-tax measures on bond payment of material (Go, 2013). What the outcome is foreign income from Taiwan’s companies is taxable in that country with double taxation being relieved or forgiven by foreign tax credits.
Market Risks (Four Ps)
The market risks involve the four Ps, which include product, price, place, and promotion. The products Apple continues to push are the iPad and iPhone. The products must be carefully crafted to appeal to a mass audience especially with the amount of other competition such as Samsung, Google, and Microsoft. Apple continues to stand out in the technological market and stand behind its quality products. The price of Apple’s goods could be a possible barrier. They are quite expensive because of their standard of quality. However, discounts are made available when the purchase is combined with a wireless carrier’s telecommunications contract. The place Apple sells its products is worldwide for maximum profit. Strategically making Taiwan its manufacturing base has allowed its