Additional Information that needs to be considered before making the Investment decision
Wilson International needs to undertake extensive research in order to establish the pros and cons of the prime target market (Paul, 2009). Must business persons to analyze the relevant sectors of the economy before making crucial investments decisions. A number of factors such as the public’s expenditure level, the inflation rate, investment trends, and availability of labor, legal infrastructures, government policies, and market size need to be considered.
Also, the general macroeconomic stability and taxation on the capital gains must be taken into account (Paul, 2009). In addition, the investors need to be conversant with the financial statement reporting standards of the countries in which they wish to invest. Wilson international should also ensure that the importation costs in St Charles are affordable (Tavana, 2014). Wilson International also uses the Net Present Value (NPV) approach to identify sustainable investments. If the NPV value is above zero then, the investment is usually actualized however in business environments that have high risks, a higher discounting factor of up to 15% is appropriate. Thus, political stability and peace are essential for undertaking any business because it attracts more foreign investors hence strengthening a country’s currency (Tavana, 2014).
Whether an International Company can avoid all Political Risks
International companies cannot always avoid the political risks that may arise while undertaking business. Based on the SWOT analysis, political risks are regarded as threats and are usually beyond the control of business enterprises (Tavana, 2014). Conversely, International companies may lack prior information about upcoming social unrest in target countries. Nevertheless, the management of Wilson International has information about the political unrest in St Charles. In business, information is paramount thus business persons need to be proactive. The management should not take such information for granted hence need to analyze the situation critically in order to make informed decisions.
Whether Wilson International should build a Hotel on St Charles
It is important to note that successful entrepreneurs are typically risk takers and not risk averse. However, the existing conditions make the idea of building the Wilson hotel unfavorable. Wilson International, therefore, should not build a hotel in St Charles due to the county’s social unrest. Inasmuch as there are many multinational companies from Europe as well as the United States, Wilson International needs to take into consideration the long-term prospects (Tavana, 2014). The devaluation of the Caribbean currency and the full repatriation of company profits pose a threat to the island’s economy. It will slow the island’s economic growth rate and increase the inflation rates thus making the cost of doing business to be more expensive in the long-run.
The government should allow partial repatriation but not full repatriation of profits. Additionally, there are no restrictions on the Foreign Direct Investments (FDI) hence this may compromise on quality and standards (Paul, 2009). Further, the citizens of St Charles have recently engaged in protests due to the rising inflationary rate; however the situation might get worse if appropriate business strategies are not employed. The company should consider expanding in other countries that have political stability (Tavana, 2014). Also, Wilson International can opt to outsource some of its services in St Charles without necessarily building the company in the Island (Tavana, 2014). Thus, the company will be able to enjoy the profits whilst saving on the high financial costs associated with social unrest.
Paul, J. (2009). International business. New Delhi: PHI Learning Private Ltd.
Tavana, M. (2014). Developing business strategies and identifying risk factors in modern