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expansion1.pptxRISKS FACED BY COMPANY X
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Introduction
This is an evaluation of the risks that a business is faced with when venturing into a market. In this particular presentation, the challenges that face company X has been evaluated when venturing into a foreign market and when its within the American jurisdiction.
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The discussion Outline
The discussion will be based on assessing the challenges that company x would face if it ventured into the Mexican market.
A comparison of the risks faced with those that it could face if it ventured into the American market has also been discussed.
The mitigation of the risks is also outlined
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Risks encountered in the Mexican market.
There is a direct regulation and control by the Mexican state
Different business culture.
Stiff competition.
Poor housing.
Shortage of trained executive personnel.
The Risks of a new open market.
Counterfeit products
High corruption levels.
Potential risks faced in doing business in Mexico may be either transactional litigation based. On the transactional side, an example of the type of risks involved is found in recent changes to Mexican labor law that have impacted the viability of previously-used corporate structures. For years companies seeking to minimize their Mexican tax burdens had relied upon a two-tiered corporate setup. This traditional corporate structure involved the utilization of an operating company which was then assisted by a service company – tasked with hiring operating company employees. This system allowed payments to the service company to be treated as exempt from taxation while simultaneously allowing the operating company to avoid otherwise mandatory Mexican profit-sharing obligations.
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Risks faced while expanding in America
Local Tariffs.
High minimum wages.
The aspect of specialization
Regulation.
Stiff competition from the local companies
Counterfeit products which leads to the weakening of brands
Business growth brings pressures to a system that may not have had the time/experience to get geared up for increased production or services. New timings of payables/receivables may create financial strain. Customers may feel underserved. Employees may be uneasy about all the changes. Growing is the next big challenge for a business owner. Pushing your existing product into new markets, or new products into existing markets will be unfamiliar and may have unanticipated results. Also as you push up against bigger competitors, don't be surprised if they fight back! Outsourcing, bringing in temporary executive savvy in expansion, training your staff in new technology/methodology or starting a new company with new equity, rather than existing cash flow.
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Mitigation of risks
Creation of supply chains so as to counter competition. This will increase the companies rate of distribution through the involvement of an intermediaries.
Proper market research. The company should ensure that it has conducted a proper market research so as to be familiar with the economic environment. This will include the familiarization with the regulations in place, the competition levels,
Conclusion
In conclusion, it is impossible for a company to venture into a market without facing some risks. The only possible way is to minimize the risks through effective marketing strategies .This will reduce the challenges experienced.
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