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Google’s Global Expansion Strategy

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Opened their first office outside the U.S. in 2001 and had only limited experience with operations outside the U.S. Expansion into international markets required management attention and resources. In addition, the company had to institute mitigation strategies to protect shareholders wealth and address the following risks associated with expansion outside the U.S.: (1) Challenges caused by distance, language and cultural differences and in doing business with foreign agencies and governments, (2) Difficulties in developing products and services in different languages and for different cultures, (3) Longer payment cycles in some countries, (4) Credit risk and higher levels of payment fraud, (5) Legal and regulatory restrictions, (6) Currency exchange rate fluctuations, (7) Foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S, (8) Political and economic instability and export restrictions, and (9) Potentially adverse tax consequences.

In assessing investment opportunities in a foreign country, it is important for a parent firm to take into consideration the risk arising from the fact that investments are located in a foreign country. A sovereign country can take various actions that may adversely affect the interests of Multi National Corporations (MNCs). One of the challenges during cross-border growth is to measure and manage political risk, which refers to the potential losses to the parent firm resulting from adverse political developments in the host country.

Depending on the manner in which firms are affected, political risk can be classified into three types: (1) Transfer risk, which arises from uncertainty about cross-border flows of capital, payments, know-how, and the like. (2). Operational risk, which is associated with uncertainty about the host country’s policies affecting the local operations of MNCs., and (3). Control risk, which arises from uncertainty about the host country’s policy regarding ownership and control of local operations.

Companies can learn from these experiences, and to account for transfer, operational and control risks before making joint venture capital investment in foreign countries.  

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YouSigma. (2008). “Google’s Global Expansion Strategy." From http://www.yousigma.com.

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