You are the CEO of a company that has to choose between making a $100 million investment in either Russia or Poland. Both investments promise the same long-run return, so your choice of which investment to make is driven by considerations of risk. Assess the various risks of doing business in each of these nations. Which investment would you favor and why? Outline why the culture of a country might influence the costs of doing business in that country.
Illustrate your answer with examples. A visiting American executive finds that a foreign subsidiary in a poor nation has hired a 12-year old girl to work on a factory floor, in violation of the company’s prohibition on child labor. He tells the local manager to replace the child and tell her to go back to school. The local manager tells the American executive that the child is an orphan with no other means of support, and she will probably become a street child if she is denied work. What should the American executive do? What are the potential costs of adopting a free trade regime? Do you think governments should do anything to reduce these costs? What? What in general was the effect of the creation of a single market and a single currency within the EU on competition within the EU? Why? What would the exit of the UK bring to the EU and the world economy?
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