Before any company begins to expand their business into another country, they should prepare a risk assessment of the areas of interest and begin to narrow down choices based on their positives and negatives. By identifying those positives and negatives, it allows the company to weigh their overall outcome and where they could afford to take the risk. To Just dive into an unknown country without assessing the economy and current security risks of setting up shop in that area could harm the future of the company greatly.
Some areas that a company would want to look into would be the current economic state of the country. They would want to know how the current population is holding up against poverty and how the unemployment rate is affecting that poverty rate. They would also want to take into consideration any environmental concerns and how that might play into any unwanted expenses later down the road. One of the places currently being assessed as a possible expansion location would be Brazil. The country is absolutely full of culture and plenty of inspiration from the locals and history.
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When a company looks to expand to Brazil, they are drawn by their low labor costs. The country’s two major security issues would be that of transportation theft of supplies being shipped as well as the environmental changes that they experience throughout the year. Both factors can cause great harm to the company. The increase in cargo thefts has being causing problems for companies who are shipping goods internationally. This is a huge problem because “logistics pose the biggest challenge in Brazil due to infrastructure limitations” Boar, web).
Those infrastructure limitations are, in part, due to the environmental hazards that the county experiences through all seasons of the year. “Most natural disasters are not a major concern, although significant flooding does occur during the rainy season” Boar, web). The drainage system is most likely not as effective as it is in most parts of the United States causing problems for individuals and business with the amount of mudslides they experiences as well as the overall damage one can do too building. The second country being looked at is Russia.
While there is a high crime rate in Russia, “thieves target cell phones, Blackberries, Amerada, and similar high value items” (Synchronous, web). Also common is theft of an individual’s credit or debit card through internet and ATM fraud. These crimes, however, are Just the most frequent petty crimes. One of the highest security risks of expanding to Russia would be that of industrial espionage. “Many people in Russia are highly trained in gathering information, especially through unprotected computer networks” (Synchronous, web).
For the company to expand to Russia and not fall, they would need to put a lot of their funding into the most highly effective security system n order to keep their information and production out of the wrong hands. An increase in their security system would be the use of high-tech cameras and monitors as well as a surveillance system to monitor all actions and movements in the building. The use of security guards would also be more effective as well as proper hiring techniques of background checks as well as drug and credit card be the increased rate in organized crime that the country is experiencing.
An expansion into Russia would bring on the violence and unwanted danger of organized crime that floods the area. Organized criminal groups target businesses and are known to demand protection money under threat of violence” (Synchronous, web). This threat forces the company to pay a portion of their revenue in order to gain protection from any further harm against the company. Not only does this pose harm against the future of the company, but it also poses a threat against the company’s employees and their wellbeing.
The company can increase their security and surveillance but it most likely will not do any good due to the available resources that their organized crime groups have on weapons and other technologies. The third country up for consideration is India. Like Brazil, India has many features about them that are highly inspirational when it comes to the beauty of the country. However, there are some security issues that should first be addressed before expansion would start. First, it should be brought to the attention of the risk assessment team on the civil unrest and uncertainty that strikes the county on a daily basis.
While the United States has their own fill of protests and riots, India has an escalated number that cause issues will all forms of transportation and interrupt ally functions due to their size and the effect it has on the country. When these protests begin to escalate to high warning levels, the company can be affected by the issuance of curfews and travel restrictions that their government places into effect as a way of reducing the protests and riots. This could cause problems for the company and quite possibly halt productions for days at a time.
A second issue with expanding to India would be the international terrorism threats against the country. Insurgent groups, while operating mostly in remote locations, have posed threats to Westerners in the area and their common routines, as well as government officials, buildings, rail lines, and foreigners (Synchronous, web). While these areas have been targeted, safe locations and border lines have been made known to keep those visiting or now living in safe areas of the country.
Proper escape routes would be beneficial knowledge for a company or any individual incase any real threat was posed in the area in which they are located. While China may be a frontrunner’s for selection because of their low labor costs, there are a couple security issues that old first need to be addressed before the move would be made official. First, like Russia, China has a major security concern with economic espionage and the issues it is causing their country.
If the company were to expand to Chine, the individuals going over “should be particularly mindful that trade secrets, negotiating positions, and other business sensitive information may be taken and shared with competitors, counterparts, and/or Chinese regulatory and legal entities” (Synchronous, web). Although the company would be protected by law in the United States for their taunts and trademarks, those rules may be different in Chine and the future of the company could be at stake if their process is leaked to other competitors on the black market.
Chinese law should be carefully looked at and examined to find all possible loop holes so that the company can patch all possible loose ends. The second security risk of expanding to China would be the transportation and industrial accidents that occur too much in the country. While procedures and rules are placed be applied for the same machinery in China. Proper training and education is also cost likely lacking due to the language difference between the American company functioning in a Chinese speaking country.
Since the production rates are increased in China, “trucks are often overloaded, and drivers are poorly trained” on how to operate those vehicles (Synchronous, web). This has caused for an increase in motor vehicle accidents as well as an increase in damaged goods. If proper training was given, the overall outcome of cost spent vs….. The number of goods actually being transported without being damaged would be more beneficial for the company as a whole. While each area poses a threat to the company in some way or another, the most beneficial area to expand the manufacturing company would be the route of India.
Although India is experiencing issues with the amount of disturbances through riots and protests, the increase in security that the government has taken charge with has brought down the number as well as brought down the amount of damage that those groups have caused. With the company’s main focus being the manufacturing industry, they will benefit most from expanding to India due to it being the “United States thirteenth largest trading partner and seventeenth largest import market” which opens plenty of doors for the company to benefit from by expanding their sales through Indian’s trading partners Boar, web).
While Brazil might have seemed like the main catch, it’s a close second due to the challenge the company would have with the issues they have in logistics. Unless the company wishes to place more money into advancing the process of logistics tracking to ensure the safety of their goods while in transportation, they would be at a loss if the program had failed. While environmental hazards are high in Brazil, environmental hazards are a common threat is any country in the world.
The overall threats of the location are not extremely bad to deter away from expansion, Just at this point in time they are not right for the company. The third best choice would be China. Although extremely low labor costs are a huge benefit for the company, as well as China being the United Stated second largest trading partner, the problems surrounding the economic espionage would be a huge downfall for the company.
Intellectual property theft could destroy the company if property security measures were not set in place to ensure the safety of the company’s information and secrets. If the company wished to take the risk as trying out a top of the line security system fully established with top of the market monitoring system and the most highly recommended security staff they most certainly could; however, they need to question whether the spending of that amount of money is overall worth it with the other added costs they will incur with production.
Lastly, Russia poses the most risk for the company to move due to the amount of influence that the organized crime groups have on the country and their surrounding businesses as well as the industrial espionage that affects the country. Inadequate IP protection and enforcement, extensive corruption, inadequate rule of law, lack of transparency, presence of large state owned or controlled enterprises in strategic sectors of the economy makes doing business in Russia a little more challenging and risky’ Boar, web).
While espionage can be handled internally to some extent by the money if the funding is there, without the help of the government having control of it can do all they can to protect their information and daily production but without a sound and firm government they will be left in the dark to keep their company afloat n the country. All security measures should be taken with great concern do to the unfamiliarity of the new surroundings and daily occurrences in the new area.
Each new employee should be screened with the highest level background checks as well as an interview process to make sure that they are hiring the best individual for the Job. A security procedure should also be set in place for all possible environmental, as well as local, issues that could possibly arise that would affect the daily production of the company. A full functioning alarm system should also be installed at the facility fully quipped with a monitoring system to protect the inside and outside surroundings of the building.