Based on the risk assessment models explained in the material, how likely is a multinational corporation to expand in your country? Why or why not?
Risk assessment is used to illustrate the overall process where you recognize potential hazards, evaluate the risks associated with that hazards, and determine appropriate strategies for eliminating the hazards. After identification, you can analyze and evaluate how severe the risk is. Although there is always something happening unexpectedly, with appropriate strategies, we can effectively eliminate or control the harm from happening as best as we can.
i. Hazard Identification
When we experience an issue, the first thing we should do is to identify what the issue is. If you can precisely identify the issue, you have already solved half of it.
ii. Risk analysis
After the hazards have been identified, now, we can start a process for comprehending the nature of the risk.
iii. Risk control
Get to the actions of implementing risk evaluation decisions monitoring these actions.
Case in Point
Decathlon, as an example of a multinational corporation trying to expand its business in Taiwan. According to a survey conducted by Decathlon, Taiwan’s sports population has increased by 85% in 2017, a record high and attractive business opportunities. From France, Decathlon, the world’s second-largest sporting goods store chain, and Europe’s largest sporting goods store chain saw the trend of the Taiwan market.
In 2012, Decathlon opened its first store in Taichung. Its expansion plan to open more stores has never stopped. So far, it has established 11 branches, has become the largest sports goods retailer in Taiwan. Back in 1996, Decathlon was just tried to sell bicycle products in a secluded corner of Taichung City. And, amazingly, it turned out that there was a huge demand for its products. When you come to Decathlon’s first branch in Nantun District, Taichung City, you can find that there is a sports field outside the store. Friends of all ages can play basketball, biking, and skating there for free.
90% of Decathlon products are made by itself instead of outsourced and the price is cheaper than many other big brands. It is characterized by high quality and low prices. Originally, Decathlon came to Taiwan just to purchase parts and raw materials for its production and sold them to Europe. From cost control, quality management, to the integration of the brands, logistics, retail, and even design, testing, production, export, Decathlon can find the suppliers to satisfy all its needs in Taiwan. Decathlon has developed multiple partnerships in Taiwan and cooperated with 60 local suppliers to assist in production in Taiwan and market them to countries out of Taiwan.
Decathlon has been operating in Taiwan for more than 30 years and maintaining a good relationship with consumers in Taiwan is Decathlon's key to success. Politically, Decathlon can quickly improve its performance with the help of the Taiwan Ministry of Economic Affairs and the government for their assistance in understanding investment laws and participating in the BOT case. For instance, Taichung City Government was responsible for finding the land for the first branch in Taiwan, and it was allowed to operate it for 40 years.
So, how likely is a multinational corporation to expand in Taiwan?
I think the first thing the multinational company should understand is, do Taiwanese or the market really demand your products? In the case in point mentioned above, Decathlon successfully satisfied the needs of sports goods in Taiwan. However, not every company is so successful. Many companies from China are much more difficult to do direct investment in Taiwan. Why? Politically, they have to correspond more laws than other companies since China and Taiwan are two very antagonistic countries. China is always saying that Taiwan is part of them, but the Taiwanese don't think so.
Reference
Controlling International Expansion (Vermeulen, 2001)
Business Strategy Review, 2001, Volume 12 Issue 3, pp 29-36
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