Although the need for companies to go abroad is greater today than in the past, so are the risks. Managers must anticipate the risks and obstacles in doing business in foreign markets. Several complex problems confront companies that 'go global.
High debt, inflation, and unemployment in several countries have resulted in highly unstable governments and currencies, which limit trade and expose firms to many risks. Debt-laden and/or currency-starved countries are often not able to pay despite their willingness to purchase. The inability of poorer countries, for example in eastern Europe, to pay by normal (cash) methods becomes a serious obstacle for supplying companies.
The level of a country's exchange rate affects the company's competitiveness in the foreign market. A weak pound will favor exports of British goods. A strong exchange rate intensifies the level of competition the firm faces at home. For European companies whose countries are members of the Exchange Rate Mechanism (ERM), much of Che's uncertainty is removed from fluctuating exchange rates.
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