International business is the process of producing and selling goods and services between countries. According to Cote (2020), businesses tend to produce goods abroad because of lower costs of labor or taxes. In its turn, they sell products and services in foreign markets due to a high potential to reach a wider audience, new customers, and higher incomes. However, when it comes to multinational corporations, they cannot expand in every country due to multiple risk factors. In the United States of America, a multinational corporation that has a proper risk management plan is likely to thrive, yet certain challenges are inevitable.
First of all, the political environment in the United States is stable compared to other countries. As per McCubbrey (2015), this reduces the so-called political risk, which is the risk to interests of a business caused by political instability or change. That is, in America, any multinational company is not to be concerned with experiencing war, diplomat sanctions, or mistreatment by local authorities. Moreover, the US dollar is one of the world’s most valuable and stable currencies, which reduces financial risks for foreign countries that can be caused by inflation rates (Cote, 2020). Another major advantage for multinational corporations is the cultural diversity of the United States, which means that people from different parts of the world are welcome to do business there. In addition to that, legal rules and regulations that are enforced in America favor foreign investment, unlike some other countries where foreign investment is illegal.
However, despite having numerous international business-friendly factors, the United States also has various risks and possible drawbacks for multinational corporations. Firstly, it is difficult for foreign businesses to get construction permits and install electricity on their proposed premises. For example, it can take an organization in New York 89 days to get electricity (McMaster et al., 2020). Secondly, various taxes range from federal, state, and local, and they all are a prerequisite for every business to pay. Finally, the American culture, which is mostly individualistic, may fail to support multinational firms that thrive in a communist market. In general, multinational corporations have a high potential of expanding in the United States if they are prepared to face certain risks and have a plan for how to overcome them.
References
Cote, C. (2020). 5 common challenges of international business you should consider. Harvard Business School Online. Web.
McCubbrey, D. J. (2015). Business fundamentals. University Press of Florida.
McMaster, M., Nettleton, C., Tom, C., Xu, B., Cao, C., & Qiao, P. (2020). Risk management: Rethinking fashion supply chain management for multinational corporations in light of the COVID-19 outbreak. Journal of Risk and Financial Management, 13(8), 173. Web.