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Risk Analysis.

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Running head: RISK ANALYSIS Risk Analysis Luis Gonzalez Leslie Nankervis Antonio Sims Ruby Lovett - Starks Karen Wyckoff University of Phoenix Professor Piwtorak August 31, 2004 Week 3/Team One Risk Analysis There are steps businesses can take to minimize the risks and maximize the benefits of exporting. AKLLR needs to develop an effective business strategy before investing and trading internationally. Factoring in AKLLR's strategy, the steps being taken to manage the risk, and how much this is going to cost the business. Political / legal / regulatory risks: Political: The government has made it quite clear that is unable to fully support a society where people live longer and where jobs for life no longer exist. Increasingly it is promoting a need for individual responsibility, especially in education, health, retirement and social benefits such as unemployment, disability and legal aid. The free market is being actively encouraged to meet these needs, though it is often directed through political decisions. Risks: o Government's legislation will shift unprofitable levels of risk and administration onto financial services suppliers. o Consumers will have easy access to understandable financial information such that they become more discerning and demanding of financial services suppliers. Legal: Insurance products are a contract usually requiring a signature of both parties. A life policy document has collateral status and can be sold to a third party or used as security against a loan or mortgage. General insurance products are less stringent, and many are bought over the 'phone without any form of signature (e.g. travel insurance). Risks: o Legal requirements for electronic commerce become onerous. o Electronic commerce security features cannot keep track with the expertise of hackers. Consumers fail to gain confidence in the use of electronic commerce. o Electronic commerce accentuates consumers buying on price. o Electronic commerce opens the flood gates to foreign insurers. Regulatory Factors: Generally the government is trying to dismantle controls, leave pricing and quality standards to market forces and individual negotiation. ...read more.


It seems that everything these days is made in China and that it would be easy to find a supplier. In reality, finding the right supplier can be a daunting task. China is a massive country over 700 cities making up one quarter of the world's population spread over an area of four million square miles with extreme variation in price, quality and production ability. Probably the biggest headache for American buyers when conducting supplier research is that there are no comprehensive industry guides. Furthermore, ISO certification does not carry the same weight as in the West and websites do not always realistically portray the supplier's ability. The fact of the matter is that only through physical inspection of the facilities and review of actual production samples will gain a true understanding of a supplier's ability. It is a daunting task, but the time, energy and funds spent on a trip to China during the initial supplier identification phase will pay dividends in the long run. Ability to Control Quality: In an ideal world, the manufacturer could handle their QC internally and defective goods would never leave China. In reality, there is often a lot of hand holding required to ensure the suppliers fully understand your specifications and quality concerns, especially during initial production runs. Setting up your own sourcing center in China is not a realistic option for most US buyers. However, there are some simple rules to keep in mind, which can limit risks. o Always see an actual production sample from the actual supplier before issuing payment or placing a Purchase Order (PO) This lack of transparency complicates service, price and communication. o Ask the supplier to provide their internal QC documentation as part of the buying process. o Employ local auditors and independent laboratories if unable to conduct final QC on the systems. Their service fees are very small compared with cost of faulty products in your supply chain. ...read more.


From 80 to 120 million surplus rural workers are adrift between the villages and the cities, many subsisting through part-time, low-paying jobs. Popular resistance, changes in central policy and loss of authority by rural cadres have weakened China's population control program, which is essential to maintaining long-term growth in living standards. Another long-term threat to growth is the deterioration in the environment, notably air pollution, soil erosion, and the steady fall of the water table especially in the north. China continues to lose arable land because of erosion and economic development. Beijing says it will intensify efforts to stimulate growth through spending on infrastructure - such as water supply and power grids - and poverty relief and through rural tax reform. Accession to the World Trade Organization helps strengthen its ability to maintain strong growth rates but at the same time puts additional pressure on the hybrid system of strong political controls and growing market influences. China has benefited from a huge expansion in computer Internet use. Foreign investment remains a strong element in China's remarkable economic growth. Growing shortages of electric power and raw materials will hold back the expansion of industrial output in 2004. Strengths: * Market Oriented System. * Second Largest Economy. * Member of the World Trade Organization (WTO). * Cheap Qualified Labor. * Amiable Government Policies. * High Market Demand-Population of 1.2 billion growing by 17 million annually. Weaknesses: * Communist Controlled * Partnering Requirements * Distribution * Financial Systems * Low-speed on-line payments * Less mature Venture Capital Financing * Inefficient Stock Markets Opportunities: * Standard of Living Moving Upward * Poverty Level Under 10% * Fastest Growing Destination for U.S. Exports * Fourth Largest U.S. Trading Partner. * Increasingly Affluent Working and Middle Class. Threats: * Air Pollution * Soil Erosion * Fall of Water Table in North China * Shortages of Electric Power * Shortages of Raw Materials Trends: * 400 Brands of AC Reduced to 50 * Market Capacity 15 million units and growing 38.2 % last year. * Intense Competition in this sector. * Quality Improvements * Production Capacity Expanding * Prices Falling. ...read more.

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