Economic risk

A country’s level of economic development generally determines its economic stability

Economic risk falls into 2 categories

– Government changes its fiscal policies

– Government modifies its foreign-investment policies

Managers are constantly reassessing economic risk

Economic Growth and World Trade

Growth in global trade has outstripped domestic trade growth

The number of transnational corporations in the world has increased from about 8,000 in 1975 to
40,000 in 2005.

Indicator of globalization is the extent to which a firm’s activities are concentrated outside of its home
country

G.E. has 60% of assets fully located outside of the U.S.

4 Orientations Ethnocentric – focus on home nation (similarities in foreign countries)

Polycentric – each host country is different (differences in foreign countries)

Regiocentric – similarities and differences in a world region

Geocentric – world view – similarities and differences in both home and host countries