In advising ABC Motor Company on the subject of opening manufacturing facilities in Asia, Karim Global Consulting Firm would like to present the risk factors of two companies in the automotive industry which already operate in two different Asian countries. In order to present two very different regions for consideration, we have selected to review General Motors operations in China and Ford operations in India. We will examine risk factors that should be taken into consideration before entering the global market, such as political and economic risks.
There is considerable concern regarding the economic stability in India, as the country’s stock market, the Sensex, fell by twenty-five percent last year, which put the country in last place among all major world economies. Additionally, the country’s currency, the rupee, fell sixteen percent, which was the worst in all of Asia. These decreases are in large part due to worries regarding the country’s current account deficit as oil imports trump the country’s level of exports. With the rupee falling, inflation has been high in India. However, inflation in food prices fell drastically in December, raising hopes that general inflation rates will follow in the long run (Daniel, 2012).
Although India is the third largest economy in Asia, growth has fallen to its lowest rate in two years, 6.9 percent, by the middle of last year. (Daniel, 2012). However, though this information looks grim, India is not in any immediate danger of defaulting on payments, as the country has $300 billion in foreign reserves, in addition to a new “$15 billion currency swap line with Japan [that] was unveiled in December” (Daniel, 2012, para. 6).
In addition to economic risks, political risks to foreign entities wishing to do business in India must be taken into consideration. The year 2011 saw much political corruption, and