International Trade and Brief Company Profile
Political-Legal Environment Country’s differences in relation to political and legal systems can have dramatic impact on the benefits, costs and risks associated with expanding a business internationally (Hill, 2008, p. 219). In order to make a well analysed decision on feasibility of expansion of Octahedron into either Mexico or Colombia, the political-legal environments of each country must be researched and analysed. Beginning with Mexico, the current government type of Mexico is a Federal Republic.
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The current government is in the process of improving many of the country’s economic challenges, in particular, the improvement and modernisation of labour laws. According to online website run by the U.
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S Department of State (2011, para. 7) the President’s main priorities are to create more job opportunities within the country, which can be interpreted that the country is open to international business expansion, as it will provide more jobs within the country, which in turn will improve the economy of Mexico.
However, there are some setbacks in the way of political risks if Octahedron were to expand to Mexico, as it is very difficult to improve such things with so much corruption in the country and a high amount of organized crime on the streets. Such corruption often scares international iinvestors away, as it is not worth risking one’s life to expand a business internationally. However, the current government is working hard to improve this situation and have assisted Mexico in dramatically improving international trade.
According to online website ‘Encyclopaedia of the Nations’ (2012, para. 4) the success of this can mostly be attributed to the North American Free Trade Agreement (NAFTA) which they joined in 1994. As well as NAFTA, Mexico is part of another Free Trade Agreement with the European Union. These agreements set Mexico up as a highly sought after country for international expansion, as it is one of the only country’s with special access to both the North American and European markets.
Expanding to a country that is part of these free trade agreements s exactly what Octahedron needs, as according to Mcgee, working with a free trading country will save costs of imports and exports (2011, para. 1), therefore increasing the company’s profitability. However, the political-legal environment of Colombia must also be analysed as a potential player for international expansion of Octahedron. The form of government currently running is a Constitutional Republic. According to journalist Pablo Mejia (2011, para. 2) Colombia is perhaps best known as one of the highest drug trading countries in the world, which is never a positive reputation to hold, especially not for international expansion.
However, over the past decade Colombia has had a dramatic decrease in crime rates, increase in pro-business politicians who have encouraged more openness to foreign trade (2010, para. 3). The political risk of a country is a key consideration for iinvestors hoping to emerge into a new market. Another journalist, Kimball states that the most threatening political risk of expansion to Colombia is social unrest within the country and the high level of corruption (2011, para. 2). It has been ranked among the world’s most violent countries, due to the guerrillas and drug gangs.