Chapter 4: Political

Question 1

Political Stability

explanation

Answer 1

• Lack of political stability affects business operations with riots, looting, protests and general disorder

Question 2

Stability of Foreign Government

Political risk: Ownership Risk

Answer 2

• When operations are threatened by government takeover and expropriation
• Result in the loss of offshore property (huge loss)

Question 3

Stability of Foreign Government

Political risk: Operation Risk

Answer 3

• When governments create red tapes and other legal barriers to business operations
• Slows down business operation, increasing operational cost

Question 4

Stability of Foreign Government

Political risk: Economic Risk

Answer 4

• Government may create policy that affects economic factors like interest rate and restriction of international capital
• Affects exchange rate, making it hard to make business decisions

Question 5

Relationship with Foreign Government

Diplomatic and economic relationship between governments

Answer 5

• If there is an issue or disagreement, one or both country can retaliate or punish the other with economic restrictions

Question 6

Relationship with Foreign Government

Free Trade Agreement

Answer 6

• Regional partnership to make trade easier between countries by giving the other economic advantage

Question 7

Relationship with Foreign Government

Similar culture and shared history

Answer 7

• Often develop into trading partners which encourage cross- national business