Bmw X5 Chinese

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Asia Pacific region plays an important role in the global economy today. The foreign direct investment (FDI) in this region has significantly increased since the last two decades representing 17% of the world FDI stock. Regardless of the swift economic progress and remarkable growth opportunities, this region is associated with a high level of uncertainty. International firms, at large, face complex political risks while setting foot in this market. The political uncertainties represent an important feature of the business environment and affect organisations in distinct ways.

POLICY BIAS:

The fundamental instituitional transitions are experienced by many countries in the Asia pacific region. Policy measures which are introduced by the government are either of a regulatory change affecting the ability to move funds out of the country, or of restriction on import or export of goods. It affects all kinds of businesses. For example, the Chinese government has moved towards a market-oriented economy from a central planning economy due to the impact of global trends. The economical shifts made by the countries in order to support their local market have resulted into a high level of uncertainty among the International companies at a global context.

For example, the BMW X5 Chinese clone scandal. It included BMW and the Chinese car manufacturing company, Shuanghuan, which manufactured an exact replica of the BMW X5. The lawsuit filed against the Chinese car company was rejected as a result of the governmental policies being in their favour.

INPUT COST:

Input cost basically includes capital, labour, transportation and raw materials which can all affect political risk. They generally affect a firm's decision making and are determined by market factors such as supply and demand as well as political factors such as government regulations. Input cost uncertainty includes enterprises switching options by investing in numerous Asian regions and taking advantage of dissimilarities available in input costs across regions with different forms of government and regulations. For instance, the Asian financial crisis in 1990s led to companies like ABB and GE reallocating their production flexibly to other countries in order to reduce their global cost structure and increase profits. The fundamental factor to consider here is that political risk allows such increases in profit to occur while simultaneously deteriorating the company's goodwill.

For example, Apple sold more than 240 million i-phone gadgets indirectly employs workers at $1.25 per hour to manufacture its products. Apple's favoured manufacturer, Foxconn has employed more than 400,000 workers at apple's manufacturing plant in Shenzen, China. The employees earn wages of $350 per month which comprises of 2% of the total cost/i-phone. Whereas, in America the minimum federal wage after working the similar 70 hours per week as opposed to the wages in china is $2030 per month. Apple saved about $40.3 billion as they had to pay smaller wages to the chinese workers instead of the high American wage standards under the same hourly