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This article discusses the political and financial threats that concern the entry of the Zip6 Company in Venezuela. Political risks stem from policy choices that have different impacts on the nation's economic activities. Economic problems are often relevant to analyze before entering a new industry. The essay will also include a thesis and a suggestion as to whether zip6 should join Venezuela.
Constitutional inconsistency results from the adaptation of a country's government strategy or political soundness (Kaufman, 2010). As such, they are referred to as large-scale shifts in market conditions as each industry is affected by the political climate. The political unsteadiness is described by frequent wars, steady distress, and general strikes in a nation. Venezuela is under a dictator type of government where the administration controls more significant part of the country’s benefits (Central Intelligence Agency, 2016).This creates unfavorable environment for any business due to unpredictable political climate. Politics influences the operation a company (Kaufman, 2010). This can result to damages of property of the organization affecting its operations.
On monetary front, Venezuelan government does not offer enough security to foreign interests within the country. This makes a delicate and profoundly unsafe condition for the Zip-6 organization to work. Moreover, the stringent value controls set up by the administration tend to discourage privately owned businesses from putting resources into the country(Central Intelligence Agency, 2016).This is a constraining element for the Zip-6 organization since the costs set by the legislature may not support production procedure of the Zip-6 vitality. This will cause the management to spend more in production. This will increase the spending of the organization reducing the profit. However, if the organization can set up itself in the market through value controls of products, Zip6 can acquire a large market share since most of people are average earners and can afford to buy the drinks at a friendly cost.
The other advantage is on the population of the people. Venezuela has an aggregate population of 29,275,460 adolescent being the majority (Central Intelligence Agency, 2016). In light of this population, the organization can have a big target market to reach with their Zip-6 as drinks are costly taken by young generation through an effective marketing system. Also, the country has high rate of unemployment which indicates that the company is at a position of getting cheaper labor. However, the company will need to spend more on training the employees since there are few skilled personnel’s in the country (Central Intelligence Agency, 2016).
In conclusion, given the appraisal of the political and economical circumstances in Venezuela, the nation is not a suitable place for any multinational company to set full operation base. The organization will have a hard time to control both political and economical risks. The company will be exposed to unpredictable political environment which is not conducive for operations for any foreign investors. Investing in the country will waste time on management as they try to establish strategies of risk diversification to ensure that the organization remains in the market.
The risks discussed exceed the financial business advantages to be caused by the partnership between zip6 and Venezuela soda pops organization. The organization will be put in an unsafe position on investing in a country as it will be exposed to many risks. As a result, I will prescribe that the organization does not buy the Venezuela soda pop and suppressing plant. The company can consider investing in another country which is less risky. This will guarantee that the organization will take advantage of the massive market in the country without bringing about superfluous misfortunes like in Venezuela.
Central Intelligence Agency (2016). The world fact book.CIA. Retrieved October 22,2017 from https://www.cia.gov/library/publications/resources/the-world-factbook/geos/ve.html
Hill, C. W., Cronk, T., &Wickramasekera, R. (2013). Global business today (8thEd.).Australia: McGraw-Hill Education.
Kaufman, B. E. (2010). “SHRM theory in the post‐huselid era: why it is fundamentally misspecified industrial relations.”Journal of Economy and Society, 49(2), 286-313.
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