Risks to set a business in international market

1. Introduction
The food and beverages industry is all companies involved in processing raw food materials,
packaging, and distributing them. This includes fresh, prepared foods as well as packaged foods,
and alcoholic and nonalcoholic beverages. Any product meant for human consumption, aside
from pharmaceuticals, passes through this industry. The food industry is a complex, global
collective of diverse businesses that supply much of the food energy consumed by the world
population. Only subsistence, those who survive on what they grow, can be considered outside of
the scope of the modern food industry.
The food industry includes:
 Regulation: local, regional, national and international rules and regulations for food
production and sale, including food quality and food safety, and industry
lobbying activities
 Education: academic, vocational, consultancy.
 Research and development: food technology.
 Financial services: insurance, credit.
 Agriculture: Raising of crops and livestock, seafood.
 Food processing: preparation of fresh products for market, manufacture of prepared
food products
 Marketing: promotion of generic products (e.g. milk board), new products, public
opinion, through advertising, packaging, public relations, etc.
 Wholesale and distribution: warehousing, transportation, logistics.
Overview
In this assignment we focus in the major risk areas of foreign countries. If we try to set up a plant
what types of problems may arise, in this assignment we try to figure it out. To set up a plant
many types of problems may rise like, political risk, environmental challenges, cultural pattern of
that country, currency conversion rate, interest rate risk, nature of government, economic
stability of that country, transportation facility of that country etc. Based on these problems we
give some recommendations to overcome the risks & set up new plants.

2. The food and beverage company have decided that they want to expand their operations to other
parts of the world. In this situation the company may face some risks, and the risks are may
include:
Economic risk: This risk refers to a country's ability to pay back its debts. A country with stable
finances and a stronger economy should provide more reliable investments than a country with
weaker finances or an unsound economy. In this situation the food and beverage company easily
expand their business of that country.
Political risk: This risk refers to the political decisions made within a country that might result
in an unanticipated loss to investors. While economic risk is often referred to as a
country's ability to pay back its debts, political risk is sometimes referred to as the willingness of
a country to pay debts or maintain a hospitable climate for outside investment. Even if a
country's economy is strong, if the political climate is unfriendly to outside investors, the country
may not be a good candidate for them.
Laws and regulations risk: Laws and regulations in international trade can be complex, and
they may have an impact on various aspects of their operations. Make sure that any contract they
sign stipulates that it is governed by the country’s legislation. They will also need to investigate
how their target market deals with intellectual property , health and environmental standards,
taxations, customs and duties, language, consumer protection and payment conditions.

3. Water pollution: Water is the main ingredient in substantially all their products and water
resources in many parts of the world are facing unprecedented challenges from population
pressures, pollution, poor management and the impact of climate change. As demand for water
resources increases around the world, the company that depend on abundant water resources,
including, may face increased production costs or capacity constraints which could adversely
affect their profitability or growth strategy over the long term.
Weather condition: Sales of certain of their products are significantly influenced by weather
conditions. They ordinarily record their highest sales levels during hotter weather in the spring
and summer months, but unseasonably cool weather conditions could depress demand and
negatively impact our results of operations.
Currency exchange rate risk: Foreign companies often generate sales and income in their local
currency - such as euro’s or Swiss francs. As a result, the food and beverage company from the
U.S. must convert these currencies into euro’s at some point. Unfortunately, the exchange rate
between currencies fluctuates over time, and can lead to unexpected gains or losses.
Fluctuations in interest rates could affect our financial results: They finance a portion of
their operations through interest-bearing loans and in the future they may conduct additional debt
financing through loans, the issuance of corporate bonds or other means. In addition, they may
finance future acquisitions in whole or in part through additional borrowings. Although they use
fixed-interest transactions and derivative instruments to manage their interest rate exposure, large
increases in interest rates could have an adverse effect on our financial condition and results of
operations.

4. Pay attention to health and environmental issues: More and more countries are adopting strict
regulations and standards to protect consumer health and the environment. These apply
particularly to food products, prescription drugs, chemicals and common consumer products.
Failure to successfully identify and complete acquisitions and joint ventures that
complement their existing operations could have an adverse effect on their medium- and
long-term growth objectives:
 They may be unable to identify appropriate acquisition and expansion opportunities or
may be unable to agree terms with potential counterparties, including due to competing
bids.
 They may fail to receive necessary consents, clearances and approvals in connection with
an acquisition or joint venture.
 They may be unable to raise necessary capital on favorable terms;
If they do not successfully execute our acquisition strategy, they may be unable to realize their
medium- and long-term growth objectives.
The food and beverage company may also face some other risks, that are:
 Changes in the legal and regulatory environment could limit their business activities,
increase their operating costs, reduce demand for their products or result in litigation.
 If they are not able to build and sustain proper information technology infrastructure,
successfully implement their ongoing business transformation initiative or outsource
certain functions effectively, our business could suffer.

5.  If they are unable to hire or retain key employees or a highly skilled and diverse
workforce, it could have a negative impact on their business.
Recommendations
1. Find a political stable country, political unstable country is very risky for business.
2. Create low pollution, otherwise environmental organizations may protest new business.
3. Set business in environmentally friendly countries.
4. Set business in that type of countries where interest rate is minimal.
5. Examine country’s law and regulations.
6. Labour cost should be minimal.

6. Reference or sources
 www.suntory.com
 globaledge.msu.edu
 en.wikipedia.org