International expansion is a significant strategy for numerous international restaurants, such as Subway. However, expanding to other nations comes with a variety of risks that include foreign exchange risk and political risks. Foreign exchange risks ensue when the investment value fluctuates as a result of changes in the currency exchange rate. When a local legal tender gains value against an overseas currency, the profit margin made in the foreign country will decline after being swapped back to the local currency. Because of the unpredictable nature of exchange rates, it may be difficult to be safeguarded against this risk, damaging a company’s operations and revenues. Another factor involves culture and religion. A nation’s religious customs have to be considered as various foods may be against the beliefs. Certain cultural and religious customs do not authorize the consumption of certain kinds of meat, whereas in nations such as France, also do not allow consumption of certain types of meat. Moreover, other nations, such as France have a preference for low amounts of meat in their sandwiches. Therefore, a company such as Subway needs to comprehend a country’s culture before the establishment of the business. Culture ignorance escalates the possibility of failures.
Engaging in a non-equity joint venture comes with advantages and risks. Foremost, partners can save, therefore reducing the risk of losing capital and resources and also reducing the amount of capital required to start investing in technological advancements. Another advantage entails the creation of job opportunities. This means that through partnerships, numerous job openings are created in the production of Ford products. Another advantage entails an increase in the revenue streams to governments as smaller corporations remit revenue to the administrations. However, there are various risks involved with the joint venture. One of the risks is that partners may bear varied objectives. This may lead to the disruption of a partnership as well as significant losses. Another risk entails non-balanced resources and investments that may result in fallout in the partnership. Partners may fail to offer effective and directive leadership, which may crumble a business.
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