Geographical Expansion of Business Essay

Paper Type:  Essay
Pages:  6
Wordcount:  1619 Words
Date:  2022-06-16

Sovereign Risk

The pursuit of geographical expansion of business exposes companies to different economic and political cycles. The presence of varying economic and monetary policies yields sovereign risks from instability capable of influencing the income levels. International business experience is varying nature of sovereign risk. Firstly, it may arise from the monetary policy issued by the central administration to change foreign exchange platform. For example, the central bank may replace the pegged currency with currency float. Secondly, it may emerge from political risk during compliance when a country dishonours previous payment agreement to settle its sovereign debts. Besides, it may occur when a state nationalizes the entire sector, thereby making private investment worthless.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Expropriation Threat

Investors face expropriation risks in projects they hold, own and run in foreign jurisdictions. Such occurs in politically unstable countries leading to insufficient structures to protect the international investments. Investors seek contractual and treaty protections as the basis of recourse and seeking compensation. Direct expropriation occurs where a state exercises sovereignty over an investment individually or through wider-scale nationalization. It happens through clear transfers of project ownership from investors, leaving them to seek compensation, such as the Orinoco Belt takeover by the Venezuela government. Indirect expropriation occurs when the state interferes through actions rendering the investors' rights to the project useless. Such arose in Tecmed and Azinan in Mexico where investor considers running the non-profitable project and abandoning the investment.

Justification for Expropriation

Expropriation risk emerges when the investor is either hardly or insufficiently compensated by the state. It contradicts the investors' desire for sufficient compensation to protect them from worsening their position. Nevertheless, the government justifies their expropriation efforts for not compensating witnessed in Metalclad in Mexico. Governments may legitimize their actions to realize the public purpose. Secondly, they may cite protection of public health interest in environmental emergencies. Thirdly, the government may seek relocation from the irreparably contaminated areas. Again, the government may acquire privately-held land to develop infrastructure including power stations and roads.

Challenging the Planned Expropriation

Timely and adequate compensation is the fairest option a company would attain during confiscation of property. The company has right to invoke due process during expropriation to avoid discriminatory actions. It may contest the transparency of the rules and adherence to investment principles and investment-related treaties. The company should challenge the legitimacy of the work and effective compensation through the institutional arrangement. The company should consider the time taken to compensate, adequacy of calculation technique, payment modalities and independence of review channels. The company could consult with stakeholders on expropriation events. Lastly, it may engage independent channels including arbitral tribunals and commissions to context the expropriation decision and oversee the process to ensure equitable and fair treatment.

Mitigation of Expropriation Risks

Investors could avoid interference from the state in their project by seeking sovereign guarantees before undertaking the investment. The sovereign guarantees involve a concession agreement on compensation. Secondly, investors should ensure the project is within the scope of investment treaties. A bilateral investment treaty (BIT) offers extra-contractual protection enshrined in the right to equitable treatment. Disputes arising under BIT are settled under neutral international arbitration forums such as the International Centre for the Settlement of Investment Disputes (ICSID). Projects undertaken within the scope of multilateral investment treaties (MIT) are guided by the charter governing members on foreign investments. The company may pursue the self-contained resolution through the Hague-based Permanent Court of Arbitration.

Managerial Decision-making risks

Organizational decision making by the management often faces uncertainty on whether choices are disastrous or beneficial. Managerial risk occurs as the potential for a decision leading to undesirable outcome and losses. Decisions risks and choices made as two-interrelated elements in realizing organizational management given the uncertainties involved.

Ethical Issues in Decision Making for Companies Involved in Space Exploration

Space exploration lacks a central governance system is leading to a chaotic and fierce competitive arena. It creates an ethical issue when determining the authority in charge of the entities undertaking space mining. The absence of a governing structure is the recipe for conflicting interest. Secondly, space exploration faces the ethical dilemma when ascertaining ownership of asteroids. It becomes difficult to verifying property rights in companies pursuing the same asteroid. It is vague for a company to claim to own the space. Thirdly, space mining exposes earth to pollution when building robots and mining equipment and launching the rockets. Lastly, space mining may cause resource depletion leaving future generations unable to mine asteroids when all are exhausted at present.

How Corporate Financial Scandals Can Damage a Company or Industry

Corporate scandals influence the share pricing of a company with buyers to steer away from its products. It brings more significant influence to earnings with customers and suppliers likely to withdraw. Such events lead to reduces sales and insufficient supply to meet the consumer demands. Corporate scandals scare away loyal customers' conscious of the brand attributes. Such makes it challenging for the company to win back customers in overly competitive segments. The resulting decline in sales revenue strangle retained earnings, thereby bring negative liquidity as it embraces debt financing. Lastly, corporate financial scandals make the company unable to attract employees, win contracts and secure contract renewals despite imposed fines and penalties.

Arguments for firms having a responsibility to their communities and society as the whole

Companies create boundless management through corporate responsibility to solve environmental and social challenges. Businesses have better positions to bring sustainable change through efficient allocation and utilization of resources than other philanthropic organizations. It creates a moral obligation to improve the system that helps them succeed including better health for citizens and minimizing pollution. Engaging in corporate social responsibility delivers competitive immunity towards creating sustainable business in the long-term. Besides winning consumers conscious of responsible companies, corporate social responsibility is the source of innovation, competitive advantage and expanding the existing market. Social responsibility inspires differentiation and innovation that leads to longer-term immunity and sustainable business.

Arguments against firms having a responsibility to their communities and society as a whole

Corporate social responsibility propagates a false notion of sacrificing profits to realize social goods. Secondly, it misleads target audience into believing private sector participation in meeting public goals. Soothing promises of corporate responsibility deflect attention for stricter laws. It convinces the public and regulating agency of non-existence of real challenges. Virtuous organizational behavior prioritizes winning reputation by concealing the impact to the society and environment.

How companies reduce their risks and exposure to reputation damage by top management behaviour?

The difficulty to overcome reputation impairment necessitate paying close attention to top management decisions. Attaining comprehensive management of reputation risk compels strategic alignment blend with organizational resiliency and operational focus. Such is possible through effective board oversight to have ultimate checkpoints on the executive performance. The surveillance helps identify significant threats and reduces them to acceptable levels. Secondly, integrating risk within the business planning and strategy formulation challenges the assumptions that a reputation is an afterthought event. Such delivers a robust decision-making table to unearth inherent soft spots and incongruities. Organizational resiliency occurs when the organization adopts world-class response to resolve high profile crisis.

Supporting the brand-building game plan sponsored by a continuous value proposition yields accountability to performance and reputation. Additionally, cultural alignment through strong corporate values blend with end-to-end performance incentives enables the management to discover the warning signs. It creates a positive culture linked to strict compliance with regulations and internal policies. It compels the executive to walk the talk through compressive risk assessment. Such extends to quality commitment through prioritizing positive interactions with other stakeholders. It creates passionate focus to improve the stakeholder experiences extended to quality public reporting. Lastly, implementing a robust control environment blend with a competitive model. It nurtures a strong culture to attain operational and compliance objectives, thereby eliminating embarrassing control breakdowns.

Ethical issues in the day-to-day operations of following companies


The ethical compliance program is a natural part of Starbucks organizational culture. Its strategy to expand its locations is interpreted as anticompetitive. Such arises when multiple Starbucks outlets are within one street. They strangle smaller coffee shops kicking them out of business. Besides causing the bankruptcy of smaller coffee shops, ethical consumers accuse Starbucks of environmental friendly hypocrisy. They report Starbucks of keeping running water taps. Again, they dispute sourcing conditions with Starbucks profiting while coffee farmers live in abject poverty.

Energy Australia

Energy Australia faces the ultimate dilemma of maximizing shareholders returns while eliminating unnecessarily high costs. It fails to meet the affordable delivery of reliable electricity to consumers. Again, carbon emissions remain high while the world seeks efforts to reverse.


The push towards ethical fashion in New Zealand companies reveals most apparel companies are deploying reverse engineered process to ensure sanity in their sourcing and factories. Kathmandu faces ethical concerns on its ability to monitor exploitation within its supply chains and active management of labour rights. The company lags behind on paying improved wages within its supply chain. The company has improved in tracing raw material and supply chain working conditions under Better Cotton Initiative. However, it has only managed to locate eighty percent of its cotton supply leaving twenty percent unchecked.


Bayer merger with Monsanto triggered a fierce reaction over monopolizing food supply through its agribusiness consolidation. It is accused of triggering reduced competition through its commanding position hence shrivel up innovation, therefore slowing crop yields improvement. Its monopoly status strengthens its position to lobby for governments on policies that would benefit its shareholders at the expense of farmers and other consumers.


The consistent leadership of the company through ethical operation faces a threat from product quality. The company resolved the reception errors through the provision of free bumpers for its iPhone 4 us...

Cite this page

Geographical Expansion of Business Essay. (2022, Jun 16). Retrieved from

Free essays can be submitted by anyone,

so we do not vouch for their quality

Want a quality guarantee?
Order from one of our vetted writers instead

If you are the original author of this essay and no longer wish to have it published on the ProEssays website, please click below to request its removal:

didn't find image

Liked this essay sample but need an original one?

Hire a professional with VAST experience!

24/7 online support

NO plagiarism