Taking into consideration the impact of political, social and economic factors on the establishment and growth of foreign ventures, it is paramount for company directors to ensure coverage of wide areas during the risk analysis process. One of the benefits of risk analysis is that it provides directors with adequate knowhow on goods and services to offer as well as choices of location. In addition, it helps company owners with policies that are vital for operations of a company. Similarly, risk analysis helps companies to be compliant with laws in foreign countries. This report analyzes economic risks, political risks, business environment risks and currency risks that we need to consider before our company embarks on establishing a joint venture in Nigeria. Economic risks One of the major factors that affect the growth of Nigeria economy is poor planning by the government. This has not only resulted to high level of unemployment but also a reduction of household’s income thus lowering the consumer’s purchasing power. For example, the revenue generated by the country’s extensive oil industry is not effectively managed thus increasing the poverty level in the country. In addition, the country has small arable land thus lowering the total food production. As a result, the country has reduced exports thus lowering the Gross Domestic Product (GDP). Another area that is negatively affected by poor government planning in Nigeria is infrastructure system. For instance, the country has poor road system making it difficult to assess rural areas as well as expanding business activities. It is worth to note that for any country to develop, competition is vital since it allows innovation and production of wide range of products in the market. However, a major obstacle affecting Nigeria economic prosperity is lack of genuine competition. As a result, market forces do not play a vital role to regulate the economy. In the same way, the country leaders are significantly engaged in controlling the economy an aspect that is contrary to the Adam Smith ideology of not allowing governments to interfere with economy (Dwivedi, 2001). Macroeconomic imbalances are another challenges facing Nigeria. For example, new ventures have the risk of facing unstable inflation and excessive borrowing by the government. Additionally, the government has failed to commit itself to address the macroeconomic challenges thus leading to larger deficit in the government budget. Political risks In order to establish a profitable business venture, it is imperative for investors to consider the political situation of the country they wish to invest. It is vital to note that even though a firm can have adequate finances to cater for its own internal security, political instability in a country can negatively affect the operations of a company resulting to its closure. This implies that as we focus on entering the Nigeria market, it is fundamental to analyze the political factors of the country thus identifying the obstacles or the benefits that our firm is likely to face. One of the major political aspects that are notable in Nigeria is the rivalry that exists between the North and Southern residents. This was catapulted by the policy that was applied by British government that included use of direct rule on the southern region and indirect rule in the Northern area. Not only has the rivalry between the
Running head: COUNTRY/INDUSTRY RISK ANALYSIS Country/Industry Risk Analysis 6th November 2012 Introduction The current stiff competition faced by local firms has forced them to go global with an intention of maximizing their profits and widening their market share…
As the report, Introduction to Financial Markets, declares a financial market is a trading environment where individuals and business entities can buy and sell financial assets, securities, and other fungible products at relatively low transaction costs. Securities consist of bonds and stocks, and commodities include metals or agricultural goods.
One of the most significant causes of the financial crisis disclosed by the author is the market instability. This was related with the poor credit lines which had deteriorated the money supply while limiting the economic growth. Individuals and businesses were unable to pay back their loans which also affected the assets and cash reserves.
The markets are however characteristically distinct by taking the clear pricing, the basic rules and guidelines for trading, expenses and fees and the market powers that determine the amounts of securities that are able to trade. However, some financial marketplaces are only giving authority to participants that meet positive standards, which in this case can be found on the issues like the quantity of money that is held, the depositor's physical location, the information of the marketplaces or the occupation of the member.
However, the yield curve can have a predictive power and strength for both real activity and inflation. The strong relationship between macro economy and the yield curve has been the conventional theme of a growing empirical theory (Stander, 2005). Various theories have been generated to show that the relationship is bi-directional; Nelson Siegel model.
Money is also used as a store of value, a repository of purchasing power over time. This means money can be used by the person anytime in availing of goods and services. However, money becomes an effective store of value only if there is price stability with high inflation not present to erode its value (Mishkin 49- 51).
The current deceleration in housing trade, inferior house costs and the retuning of mortgage variable rates has initiated a downturn in the mortgage sector. The predicaments are principally manifested in the "sub-prime" sector and are imitated in swiftly growing delinquency, non-payment and foreclosure rates.
The main goals of the monetary policies it put in place affect the money supply and interest rates in order to attain high level of employment, economic growth, price stability, efficient interest rate, stability of financial markets, and stability of foreign exchange rate markets (Mishkin 454).
ediaries and institutions operating the US financial market receive savings from domestic households, business houses as well as the Federal Government and invest those savings. The role of the financial market is to invest these savings to the most resourceful investments,
Remarkably, the financial markets facilitate the connection between the well-developed financial institutions and the borrowers who want to invest more than they earn, which suits the needs of the savers and borrows; hence,
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