ASSESSMENT 2

1. You are the CEO of a company that has to choose between making a $100 million investment
in Russia or Poland. Both investments promise the same long-run return, so your choice is driven
by risk considerations. Assess the various risks of doing business in each of these nations. Which
investment would you favor and why?
- A $100 million investment is quite a hefty sum, as the CEO it is my responsibility to choose
where I use it as an investment. Before deciding whether to invest in a certain country, the person
should be able to identify the risks associated with doing business in each nation.
Based on my research Russia’s legal system has already been a concern to many foreign
investors, the country was known for its corruption, lack of transparency, and inconsistent
enforcement of laws. The judiciary's independence has also been questioned, raising doubts
about the fairness of legal proceedings. It is known that Russia political system is dominated by
the centralized power of the Kremlin, it can provide a sense of stability, however it also raises
concerns about the influence of political decisions on business operations. Russia's economy is
heavily reliant on natural resources, particularly oil and gas. This dependence exposes the
country to commodity price fluctuations and global market dynamics. With this investing in
Russia has already proven that there will be a lot of risks associated with it.
Meanwhile in Poland, after joining the European Union (EU), Poland has made significant
strides in reforming it’s legal system. The country has implemented measures to improve
transparency, reduce corruption, and align its legal framework with EU standards. This political
stability, coupled with its EU membership, provides a favorable environment for long-term
investments. Poland has emerged as one of the fastest-growing economies in Central and Eastern
Europe. The country has diversified its economic base, attracting investments across various
sectors.
In conclusion, Poland is the chosen country where I will invest the $100 million rather than
Russia. Poland's alignment with EU standards, stable political environment, and diversified
economy offer a more conducive setting for long-term investments.

2. What do you think might stand in the way of Alta Gracia becoming successful? What
strategies might Bozich adopt to minimize the risk of failure while still adhering to his high
ethical standings?
- The challenges that Alta Gracia might encounter hindering it success in the business will be the
rivalry with companies with similar approaches that Alta Gracia have and the possibility that
they could offer lower prices that could attract many customers. To minimize the risk of failure,
Bozich must establish a startegic management wherein the company must set goals, techniques
and objects in order to improve the competitiveness of the firm. Also they must also let the
market recognize how different they are from other apparel companies.

3. Read the Country Focus on Chavez's Venezuela, then answer the following questions:

a. Under Chavez's leadership, what kind of economic system is being put in place in Venezuela
How would you characterize the political system?
- Under Hugo Chavez’s leadership, Venezuela operated under Command Economy. From the
phrase itself “consolidated his hold over the apparatus of government” which means to
strengthen and secure one’s control over the structures and functions of the government.
Venezuela’s economic system will fall under the command economy - which is an economic
system where the allocation of resources, including the determination of what goods and services
should be produced, and in what quantity is planned by the government.
Under Chavez’s leadership, Venezuela’s political system could be characterized as social
democracy. Social democracy is a political movement advocating a gradual and peaceful
transition from capitalism to socialism by democratic means.

b. How do you think that Chavez's unilateral changes to contracts with foreign oil companies
will impact upon future investment by foreigners in Venezuela?

- Unilateral changes to a contract means where one party alters the terms of the agreement
without the consent of the other party, these could potentially impose a conflict between the
other parties. Due to these extreme changes implemented by Chavez, it seems apparent that
foreign investors would be unlikely to work in and with Venezuela in the future.

c. How will the high level of public corruption in Venezuela impact future growth rates?

- Venezuela was ranked in 2011, 164th out of 178 nations of level of corruption. If the corruption
is still on going many citizens will migrate out of the country and thus will lower the population
count, once the others figure out that the people are leaving the country because of corruption,
they would not even consider visiting or moving in the country, which will eventually lower the
growth rate of the country.

d. Currently Venezuela is benefiting from a boom in oil prices. What do you think might happen
if oil prices retreat from their current high level?

- During the latter part of Chavez’s rule, Venezuela benefited from high oil price, if the oil prices
retreat from their current high level, it could potentially lead to significant social and political
repercussions such as a decrease on national income, not being able to fund the public services
and social programs and also the possibility of an increased inflation rate in the country.
e. In your estimation, what is the long-run prognosis for the Venezuelan economy Is this a
country that is attractive to international businesses?

- The economy of Venezuela is based primarily on petroleum, as the country holds the largest
crude oil supply in the world. Currently, it is very attractive to the international business if the
amount of barrels Venezuela produced has been in increasing rate, however, the petroleum (oil)
is known as one of the exhaustible resources that are extremely scarce in nature, it is an
exhaustible resource, if Venezuela still depend on their oil reserves that are continuously
depleting it would likely lead to a severe economic, political and social challenges in the
economy. It will no longer be attractive for an international business.

4. How does the kind of corruption Siemens engaged in distort competition?

- The type of corruption Siemens engaged in distorting competitions is bribery. Bribery is to

5. Read the Management Focus feature: Did Walmart violate the Foreign Corrupt Practices Act?
What is your opinion? If you think it did, what do you think the consequences will be for
Walmart?

- The Securities and Exchanged Commission charged Walmart with violating the Foreign
Corrupt Practices Act (FCPA) by failing to operate a sufficient anti-corruption compliance
program for more than a decade as the retailer experienced rapid international growth. Walmart
prioritized expanding its global presence and reducing expenses over following the legal and
ethical standards, particularly in relation to compliance with laws such as the FCPA. One of the
consequences of their action will be a possible strain on their reputation as a multi-channel
retailer and the charges that the SEC give to Walmart will not be a small sum.

6. Do you think the legally binding agreement signed by H&M, Zara, Tesco, and others will
make a difference? Does it go far enough? What else might be done?

- In my opinion, it will make a difference, this will advocate the protection of the workers,
enforce labor safety requirements and the regular control in the factories, the work conditions
will enhance, and accidents will be prevented. However, due to corruption in Bangladesh and
regular violations of laws, it is likely that not all agreements with companies will be fulfilled and
local business owners will continue their previous line of behavior in order to minimize costs. Its
success will depend on the details of the agreement and the compliance of both parties.

7. From an economic perspective, was the shift to a free trade regime in the textile industry good
for Bangladesh?
- Bangladesh shifted to a free trade regime in the textile industry, which has made the country
become one of the world’s lowest-cost producers of textile. It has increased the nation’s exports,
and it has led to the higher income, employment, and economic growth of Bangladesh.

8. What are the risks facing foreign firms that do business in Indonesia? What is required to
reduce these risks?

- According to a World Bank study, business activity in Indonesia is hurt by excessive red tape.
It takes 151 days on average to complete the paperwork necessary to start a business, compared
to 30 days in Malaysia and just 8 days in Singapore. Another problem is the endemically high
level of corruption. The process of attaining approvals and permits can be slow and cumbersome
while corruption cam potentially lead to legal risks and increase costs. To reduce these risks it is
important that the foreign firm to have a thorough research to understand the economic, political
and cultural landscape of the country, and must establish anti-corruption policies and provide
training to employees on compliance and ethical behavior.

9. What political factors explain Indonesia's relative sluggish economic performance when
compared to some of its Southeast Asian neighbors? What economic factors? Are these two
related?

- The dictatorial rule of President Suharto was the main political factor that led to the economic
decline in Indonesia. His practices of “repressing internal dissent” and “crony capitalism”
brought the country into massive amounts of debt. Even with the rescue package from the IMF,
the corrupt government prevented the money from saving the failing economy. The economic
factors that contributed were the foreign investors leaving and the private investors began pulling
out of the “all important oil industry,” decreasing one of Indonesia’s main sources of income.
The corruption and debt became a motive for investors to leave the country, the risks have
greatly increased for the businesses with such unstable conditions in the country.

10. What are the implications of Japan's economic stagnation for the benefits, costs, and risks of
doing business in this nation?

- Japan’s prolonged economic stagnation has several implications for businesses considering
entering or operating within the country. Despite stagnation, the country maintains a reliable and
predictable business environment, however, the persistent deflationary environment can erose
profit margins and create uncertainty about pricing strategies. Companies might struggle with
lower consumer spending and decreased demand. In conclusion, stagnation results in the
decrease in new product development, innovation and expansion in new areas, as well as
marketing.

11. In the 1980s, Japan was viewed as one of the world's most dynamic economies. Years, it was
viewed as one of its most stagnant? Why has the Japanese economy stagnated?

- In 1989 Japan was widely viewed as an economic super-power. After three decades of robust
economic growth it had risen to become the world's second-largest economy. The
stock market was booming. Economists were predicting that Japan would overtake America to
become the world's largest economy by 2010. The stock market collapsed and property prices
rapidly followed it down. Japanese banks, which had financed much of the boom in asset prices
with easy money, now found their balance sheets loaded with bad debt, and they sharply
contracted [Link] major factors that lead to stagnation of the Japanese economy are
the high rate of retirement and high debt levels. In Japan, the birth rate is low; hence, there are
many people who have retired.

12. Alta Gracia serves a niche market, colleges, where there is higher awareness of ethical issues
in apparel production. Do you think the strategy would work if the company tried to sell to the
mass market through retailers like Wal-Mart?

- It will be successful if both parties will maintain the brand’s core value and adapting to the
demands of mass-market. But it can also be risky for Alta Gracia because of the competions in
Wal-Mart which usually have lower prices. Walmart usually prefers to keep the prices as low ass
possible.

13. The case states that higher wage rates at the Alta Gracia factory have raised the cost per item
by 20 percent. Can you see any way in which the philosophy with regard to pay and working
conditions at Alta Gracia might lower costs in the long run?

- The case states that higher wage rates at the Alta Gracia factory is a case of “fair labor”. It is
not easy to keep quality, cost, price and profit all on their maximum rate but it is possible. If the
company keeps their quality on performance wasting will be reduced and in a long run profits
will be [Link] assume responsibility for their productivity and quality of work,
thereby eliminating at least one layer of supervision and reducing costs of waste and defective
merchandise.

14. What is the impact of corrupt behavior by Siemens on the countries where it does business?

- With Siemens corrupt behavior through bribery to win contracts, this can weaken the integrity
of institutions and legal frameworks, making it harder for businesses and individuals operate
under fair and predictable conditions. Following the scandal it will definitely damage the
reputation of Siemen and the countries involved, for the countries involved, it can deter other
companies from investing, further stifling economic growth.

15. How was Poland able to avoid the worst effects of the economic crisis that gripped most of
Europe during 2008-2009?

- In the year 2008-09, the economies across Europe were hit hard. A notable exception was
Poland, whose economy grew by 1.5% during 2019, while the rest of Europe has battled with
recession. Poland’s government was fiscally very conservative, kept its public debt in check, and
didn’t allow it to expand during recession. Poland did not only rely on Export but it had
significant demand from its domestic market as well. Poland also acquired the membership of
European Union in 2004 which provided it easy access to the large consumer markets of Western
Europe. This assisted Poland to be a major exporter [Link] also opened its markets to
international trade and foreign investments. By having a tight monetary policy earlier in the
decade, in 2008 and 2009 it served the country very well and helped it to avoid the effects of
economic crisis significantly. The Polish government implemented a scheme to boost demand
for German automobiles companies by giving cash grants to people who exchanged old cars
for new ones (a “cash for clunkers” program) helped Poland because the country had several
automobile plants and was selling many cars and components to Germany.

16. What explains the high level of corruption at Siemens How did managers engaged in
corruption rationalize it?

- There were high levels of corruption at Siemens company, not only were the employees of the
company involved in bribery, it was part of its [Link] used bribery to win business deals, they
corrupted monarchs, government officials, and other companies for them to be given contracts.
The managers of the company were not remorseful of their actions. In fact, they rationalized
their actions. The rationale that they used was that in some countries, there were no laws
prohibiting companies from bribing officials to get contracts.

17. What do you think about Walt Disney's decision not to purchase merchandise from
Bangladesh? Is this an appropriate way of dealing with the problem?

- Walt Disney’s decision not to purchase merchandise from Bangladesh reflects their motives to
address concerns about the working environment in Bangladesh. Walt Disney practically does
not want to associate with factories that may have poor labor practices or unsafe working
conditions. It is an appropriate way in engaging efforts to improve conditions directly and might
offer a more balanced solution that supports both ethical practices and local economies.

18. Free market economies stimulate greater economic growth, whereas state-directed economies
stifle growth. Discuss.

- Free Market economy ecourage competition, and with competition the economy will
continually improve its innovation and efficiency in the market, companies will strive to improve
their products and services to gain a competitive advantage which can drive to technological
advancement and economic growth. In a state-directed economy, the government controls
economic activity—agriculture, manufacturing, retail, entertainment, the media, and education.
The state sets prices and wages, determines where and when goods are bought and sold, and
regulates how everything is made. State-directed economy might suffer due to the lack of
competition which will reduce innovation to the economy which will result in stifle growth of
the economy.

19. Economically who benefits when retailers in Europe and the United States source textiles
from low-wage countries such as Bangladesh. Who might lose? Do the gains outweigh the
losses?
- When retailers in Europe and the United States source textiles from low-wage countries, the
one who will gain benefit from it will be the retailers as they will face a lower production costs,
which allows them to offer cheaper prices to consumers and potentially increase their profit
margin. Consumers will also benefit from it as they will enjoy cheaper prices. However, there are
also cons about this, although jobs are created, workers may face poor working conditions, low
wages, and limited job security. They may also lack access to basic rights and protections. As
much as gains outweighs the losses, the losses must also be addressed and improve conditions
that can lead to more balanced ans sustainable outcomes.

20. As an international business, which economy would you rather invest in, that of Japan or that
of India? Explain your answer.

- As an international business, the economy I would rather invest in will be India. Rather than
choosing an economy that has been consistently stagnant, I would choose a country that is
continuously growing market with a lot of opportunities in diverse sectors to develop and create
a better innovation that can rise in the market continuously.