Benefits And Risks Of A Foreign Investment Project

Introduction Expanding business activity to a foreign country presents many opportunities and risks. Rewards and risks has to be analyzed and weighted carefully before committing capital for a foreign investment project. Socioeconomic as well as cultural factors must be considered since countries vary in levels of wealth, education, needs and wants. China and Iraq has many differences politically as well as socioeconomically and culturally; therefore, both countries present different levels of risk and opportunity. Furthermore, both countries have different degree of barriers that a company has to deal with before entering the markets. Careful evaluation of political, cultural, and socioeconomic factors must be completed to decide if†¦show more content†¦Also, there is a wide disparity between rural China and densely populated cities like Shanghai and Beijing. Urban regions being much more prosperous, Chipotle should focus on densely populated areas first. Iraq being very politically unstable country failed to create a good economic environment for businesses to succeed. Therefore, income levels in Iraq are extremely low. The country has GDP per capita of $4,629, which is almost two times lower than China. Not accounting for political and other risks, Iraqi people simply do not have enough income to eat out. This factor alone makes Iraq not suitable for expansion. Education Average expected years of education in China is 13.1 years which is about two and a half years less than the US. Education is an important factor in any country since it is a determining factor for not only country’s production but also equality levels. Iraq’s average expected years of schooling is 10.1 which is much lower than the U.S. The education level is a good predictor of prosperity, equality, and stability of a country. Therefore, it’s not surprising that Iraq is not perceived to have favorable business environment. While China is catching up the developed countries and becoming more attractive for foreign investors. Cultural Factors China and Iraq are vastly different countries to operate a business in.