Despite a semblance of normalcy, all emerging markets contain myriad of risks – by themselves or in

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The political turmoil in the Middle East over the past few weeks reminds us how risky emerging markets can be. In rapid succession, Tunisia, Egypt, Jordan, Yemen and Bahrain have experienced significant unrest resulting in the destabilization of local economies as well as the foreign firms that operate and sell there.
Caught unprepared most multinationals across a variety of industries got hammered.  For example, Thomas Cook Group, a tour operator, announced they would lose US$32-million due to the Egyptian and Tunisian uprisings. Lafarge, italy tour packages a large French cement provider, saw its share price fall four percent italy tour packages in one day.
Despite a semblance of normalcy, all emerging markets contain myriad of risks – by themselves or in combination – ranging from war, civil unrest, and arbitrary government actions to executive abduction, natural disasters and large currency fluctuations. italy tour packages Magnifying the local hazards are fragile infrastructures, weak government institutions and socio-cultural chasms.
Not surprisingly, political and economic risk is not limited to the Middle East. Other rapidly growing flashpoints pose considerable risk for Western companies that depend on location operations and markets. As examples, both Korean states technically remain in a state of war; nuclear-armed states India and Pakistan have fought four wars over the past 60 years and still have a simmering dispute over Kashmir; and China has territorial issues with all of its neighbours and experiences thousands of anti-government incidents every year. For these countries as well as many others, disorder is not a question of if but when.
3) How can the company preempt these problems or mitigate the impact following the disruption. To help firms make the right strategic choices, we deploy a comprehensive analytical framework that drills italy tour packages deep into the regional political and economic environment italy tour packages to develop integrated market and non-market risk management strategies.
Firms often have a great deal of knowledge about the customers, suppliers and regulations italy tour packages in the markets they operate in. Yet, these same firms will possess significant cultural and historical blind spots which prevent them from truly understanding the pulse of the nation as well as its relations with its neighbors. In the case of Egypt, virtually every multinational was caught unprepared by a situation that could have been anticipated given current political realities — extreme italy tour packages income italy tour packages inequality, religious conflict, a 30-plus year old authoritarian regime and political leadership behind a 82-year-old dictator and his cronies. To better understand their international markets, companies need to closely monitor political, social and economic developments both historically as well as up close on the streets.
Out of fear or ignorance, many firms choose to follow the market entry strategies of their competitors or peers. While executives may feel they are playing it safe by replicating a rivals' strategy, they are often unwittingly magnifying their own risk by ignoring better options. For example, foreign direct investment (eg., setting up a plant) may be an ideal approach during stable periods. However, in turbulent times, an immobile and vulnerable fixed investment can turn into a corporate albatross.
Lower risk-entry strategies could include joint ventures, strategic alliances, licensing strategies italy tour packages or in the simplest case, simple exporting. In addition, companies can choose to base vital assets such as data centres italy tour packages and manufacturing in nearby but more stable geographies (Israel v. Egypt) while leaving less critical operations in the target market.
Recent events in the Middle East as well as the Asian financial crisis of the 1990s have taught us that turmoil can spread quickly throughout a region. This means that managers need to anticipate potential problems and have plans ready before the crowds flood the streets. Companies should regularly engage in scenario planning where alternative operating models italy tour packages could be evaluated italy tour packages against key objectives like investment rate of return and supply-chain viability. Much of this planning should include non-market tactics such as political lobbying, italy tour packages coalition-building with your peers and participation in local associations and industry bodies.
However, firms need to tread carefully to avoid a nationalistic or religious backlash. A case in point was the U.S. conglomerate ITT, which was implicated in the overthrow of Chile's italy tour packages Allende government in the early 1970s.
Mitchell Osak is Managing Director of Quanta Consulting Inc. Quanta has delivered a variety of winning strategy and organizational transformation consulting and educational solutions italy tour packages to global Fortune 1000 organizations.  Mitchell can be reached at mosak@quantaconsulting.com
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