Table of contents Introduction 2 Working internationally 2 Setting and implementing objectives 3 Culture differences 5 Currency exchange risks 6 Coping with risks 7 Conclusions and recommendations 9 References 12 Introduction Moet Hennessy Louis Vuitton is, as the company describes itself, a world leader in luxury (LVMH, 2010)…
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Though The global financial crisis battered many European businesses, Bernard Arnault, the manager of LMVH, believes that his company will not suffer much in the long run, but will, on the contrary, continue growing in emerging markets; particularly China, India and Russia. This means the manager has faith in his strategy and, indeed, investing into further growth instead of cutting budgets in times of a financial crisis will provide the company with an advantage of getting new sources of income. LVMH’s management seems to understand the continuous need for development. As a result, the company will not lose its existing market share because of cost cuts (Pacek & Thorniley, 2007, p. 11). Arnault is setting realistic goals to achieve sustainable growth in the upcoming years. Working internationally Furthermore, intention to work in the emerging markets of China, India and Russia is very logical considering that in the emerging markets LVMH’s products will be filling large existing voids and, in addition, the company will have fewer competitors than in the developed markets (Miller, 1998, p. 148). So an emerging market is always a good environment for company’s success. Nevertheless, LVMH will face a number of challenges and risks entering the new markets. Among them are differences between cultures, political uncertainty, and currency exchange risks. As for all the other aspects, risks of domestic firms are basically similar to those of multinational ones and, hence, a decision of the company not to operate overseas may be caused only by these two mentioned above factors. At the same time, a multinational company, despite larger number of risks, has more advantages in comparison with a domestic one. The reason for it is the fact that while, exposed to some risks, the domestic office is working on the development of new profitable managing strategies, foreign subdivisions of the company are working and getting profits. At the same time a purely domestic company puts all its resources for solving the current problem and has no additional income. Nevertheless, a new business abroad will be exposed to a greater number of potential risks than a home-country one. Any multinational company is exposed to risks such as change of foreign currency exchange rate, commodity prices and interest rates because it denominates its transactions in foreign currencies. That’s why there is also some uncertainty in future earnings, liabilities and assets values. Therefore, before taking a decision on the country of entry, a profound analysis of its current political and economical situation is to be performed. Setting and implementing objectives One more important thing to consider is that there is always a possibility of risk influencing company’s strategic planning and strategy. Therefore, objectives should be flexible enough in order for the company to be able to adjust them to particular circumstances in case market environment or other factors influencing company’s operations change. Besides, not only management, but each separate employee of the company should be aware of such objectives, strategies and special programs in order to understand his/her particular part in their achievement better, and feel free to initiate actions aimed at their achievement. Every employee should have clear responsibilities and duties in this or that project in order for everyone to know and understand one’
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