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Oct 2009 Q1.

When domestic business offers all the business opportunities to grow and prosper, why do Indian companies resort to International usiness! Companies engage in international business for variety of reasons, but the main goal is typically company growth or expansion. Whether a company hires international employees or searches for new markets abroad, an international strategy can help diversify and expand a business. 1. Many companies look to international markets for growth. Introducing new products internationally can expand a company s customer base, sales and revenue. !. Companies go international to find alternative sources of labor. "ome companies look to international countries for lower#cost manufacturing, technology assistance and other services in order to maintain a competitive advantage. $. "ome companies go international to locate resources that are difficult to obtain in their home markets, or that can be obtained at a better price internationally. %. Companies go international to broaden their work force and obtain new ideas. & work force comprised of different backgrounds and cultural differences can bring fresh ideas and concepts to help a company grow. '. "ome companies go international to diversify. "elling products and services in multiple countries reduces the company s exposure to possible economic and political instability in a single country (eactive reasons for going international include) • • • Market # the company is responding to demand it discovers in another location Competitive *nvironment # it sees competitors going to a particular place +olitical *nvironment changes # ,rade -arriers ,ariff or non#tariff barriers) If an exporting company finds that the government in the recipient country starts to build tariff or non#tariff barriers to block the export, then it might be a reason for the exporter to set up a manufacturing operation overseas in order to avoid the tariffs. • +olitical *nvironment changes # (egulations *nvironmental regulations or changes in work.safety regulations may cause the company to go overseas to a less restrictive location • *conomic *nvironment changes Costs of production at home increase, forcing the company to find a cheaper place to produce

in most cases. money or manpower. better positioned than companies that simply react.Companies who are proactive in international business are. +roactive reasons for going international include) • • • • • • • *xpanding sales by strategically seeking out advantages /aunch an offensive into a new market before competitor does +ower and prestige Incentives) sometimes the host government will offer special tax breaks to entice an investment /ower costs of labour. production and energy /ess stringent rules and regulations effecting pollution and labour Minimi0ing risk) International operations may reduce operating risk by smoothing sales and profits and from competitors gaining advantage. If you simply react you might make a mistake and not do things properly because you are stressed for time. .

local sales presentations. legal re7uirements. Which foreign mar&ets! #. +rovide support services to a manufacturer regarding local advertising.here are some basic decisions that the firm must take before foreign expansion like) Which markets to enter. &bility to create customer relationship. ". 5irm has to devote effort. and on What scale. . !. time and expense to learning the rules of the country.so that they can drive them out of market.he advantage is when firms enters early in the foreign market commonly known as first#mover advantage. !3 Importing distributors . 6irect exports) 6irect exports represent the most basic mode of exporting made by a 2holding3 company. "numerate different methods of entry in international business. $.manufacturers in their local markets for an established commission on sales.he present wealth of consumer markets 2purchasing power3 # 4ature of competition 'iming of entry$% . . 6irect export works the best if the volumes are small.here are two types of exporting) direct and indirect. #odes of entry into an International usiness$% . customs clearance formalities. +isad)antage$ 1. It1s the ability to prevent rivals and capture demand by establishing a strong brand name. (irst mo)er ad)antage*% 1. &bility to build sales volume in that country. #*conomic and political factors which influence foreign markets. /arge volumes of export may trigger protectionism. capitali0ing on economies of scale in production concentrated in the home country and affording better control over distribution.porting$ *xporting is the process of selling of goods and services produced in one country to other countries. #/ong run benefits of doing business in a country depends on following factors) # "i0e of market 2in terms of demographics3 # .he choice based on nation1s long run profit potential. !. (isk is high for business failure2probability increases if business enters a national market after several other firms they can learn from other early firms mistakes3 1. When to enter those markets.ypes) 13 "ales representatives) "ales representatives represent foreign suppliers.Q2. their growth prospects and pitfalls in each method.

*xport management companies 2*MCs3 . .hese are similar to *. appliances.manufacturers.Cs3 . or both. and other intangible property  +otentially greater sales than with indirect exporting. Confirming houses . make delivery. patents. :nlike *. such as toys.he advantage of export merchants is promotion.Cs usually perform all the necessary work) locate overseas trading partners.Cs in the way that they usually export for producers.manufacturer and a foreign buyer. . .hese are similar to confirming houses with the exception that they do not pay the suppliers directly < payments take place between a supplier.hese provide support services of the entire export process for one or more suppliers.Importing distributors purchase product in their own right and resell it in their local markets to wholesalers.ne of the disadvantages for using export merchants result in presence of identical products under different brand names and pricing on the market. &ttractive to suppliers that are not familiar with exporting as *. Importing distributors are a good market entry strategy for products that are carried in inventory.Cs. goodwill. present the product. &n opportunity here arises in the fact that if the client likes the product it may become a trade representative. prepared food. and pay the suppliers. meaning that export merchant1s activities may hinder manufacturer1s exporting efforts. they rarely take on export credit risks and carry one type of product. &dvantages)  Control over selection of foreign markets and choice of foreign representative companies  8ood information feedback from target market  -etter protection of trademarks. Indirect exports) &n indirect export is the process of exporting through domestically based export intermediaries.he exporter has no control over its products in the foreign market. negotiate purchases.hese are intermediate sellers that work for foreign buyers. 6isadvantages)  9igher start#up costs and higher risks as opposed to indirect exporting  8reater information re7uirements  /onger time#to#market as opposed to indirect exporting. *MCs trade on behalf of their suppliers as their export departments.hey receive the product re7uirements from their clients. & potential disadvantage includes supplier1s unawareness and lack of control over what a confirming house does with their product. :sually. 4onconforming purchasing agents . etc. &dvantages . . 7uote on specific en7uiries. not representing competing ones. retailers. *xport merchants) *xport merchants are wholesale companies that buy unpackaged products from suppliers.manufacturers for resale overseas under their own brand names.ypes) *xport trading companies 2*. .

-oth parties have to maintain the product 7uality and promote the product. as opposed to direct exporting  Inability to learn how to operate overseas  Wrong choice of market and distributor may lead to inade7uate market feedback affecting the international success of the company  +otentially lower sales as compared to direct exporting. . /icensee escapes himself from the risk of product failure.he domestic company can choose any international location and en>oy the advantages without incurring any obligations and responsibilities of ownership. Chance for leakages of the trade secrets of the licensor.herefore one party can affect the other through their improper acts. 6isadvantages  9igher risk than with direct exporting  /ittle or no control over distribution.e. %. copy rights.investment etc. marketing. %. .3 technology. /icensee may develop his reputation @. etc. sales. /icensee gets the benefits with less investment on research and development '. .  . . . Indirect exporting is preferred by companies who would want to avoid financial risk as a threat to their other goals    1. /ow financial risk to the licensor $. 9ere the manufacturer in the domestic country is called licensor and the manufacturer in the foreign is called licensee. !. -icensing $ In this mode of entry. managerial. +isad)antages) 1.5ast market access Concentration of resources for production /ittle or no financial commitment. due to wrong choice of market and distributors by export partners. brand name etc to a manufacturer in a foreign country for a fee. and sales strategies. /icensor can investigate the foreign market without much effort on his part. '.he cost of entering market through this mode is less costly. 2.he management team is not distracted  4o direct handle of export processes. $.he export partner usually covers most expenses associated with international sales  /ow risk exists for those companies who consider their domestic market to be more important and for those companies that are still developing their (=6. /ow investment on the part of licensor. (ranchising .d)antages? 1.hose companies that seriously consider international markets as a crucial part of their success would likely consider direct exporting as the market entry tool. . marketing. /icensee may sell the product outside the agreed territory and after the expiry of the contract. Chance for misunderstanding between the parties. It reduces market opportunities for both !.the domestic manufacturer leases the right to use its intellectual property 2i.

services facilityand turn the pro>ect over to the purchase when it is ready for operation for remuneration like a fixed price. . It provides immediate access to international manufacturing facilities and marketing network. employee training. business.here is a problem of leakage of trade secrets. #ergers 3.he company immediately gets the ownership and control over the ac7uired firm1s factories. . . 5ranchisee gets the benefits of (= 6 with low cost. . $. *g nuclear power plants. . '. If the industry already reached the stage of optimum capacity level or overcapacity level in the host country. %.d)antages) 1. brand name and distribution networks. construct and e7uip a manufacturing. technology. . /ow investment and low risk !. payment on cost plus basis. '. !.his strategy helps the host country. . railway line etc.his form of pricing allows the company to shift the risk of inflation enhanced costs to the purchaser. +isad)antages$ . -oth the parties have the responsibilities to maintain product 7uality and product promotion. 5ranchisor can get the information regarding the market culture. national highways.rade marks !.customs and environment of the host country.he franchisor provides the following services to the franchisee.c4uisitions) & domestic company selects a foreign company and merger itself with foreign company in order to enter international business. !. /. +roduct rotation %. 2. . 'urn&ey 0ro1ect) & turnkey pro>ect is a contract under which a firm agrees to fully design. It reduce the market opportunities for both %. .:nder franchising an independent organi0ation called the franchisee operates the business under the name of another company called the franchisor under this agreement the franchisee pays a fee to the franchisor. oil refinery. +isad)antages) 1. reservation services 7uality assurances program etc. 1. It may be more complicating than domestic franchising.perating "ystem $. It is difficult to control the international franchisee.d)antages$ 1. $. 5ranchisee escapes from the risk of product failure. 9ence they are multiyear pro>ect. &lternatively the domestic company may purchase the foreign company and ac7uires it ownership and control. employee. Continuous support system like advertising. 5ranchisor learns more from the experience of the franchisees.he company can formulate international strategy and generate more revenues. $. airports. .

-ut policies and trademark will be implemented from the +arent body. salary to employees. . Wholly Owned 9ubsidiary$ "ubsidiary means individual body under parent body. "preads the risk between or among partners. expertise. %. . human skills. 5. . lawyers regulation. "cope for collapse of a >oint venture is more due to entry of competitors changes in the partners strength. It provides strength in terms of re7uired capital. '.nly the certain percentage of the profit will be given to the parent body.hen the operations become unresponsive and inefficient. "ynergy due to combined efforts of varied parties. or limited liability company.hey give their own rent. !. While individuals have the capacity to act . %. technological economic and political encourage the formation of >oint ventures. +isad)antages$ 1. marketing skills.he reason for this distinction is that a lone company cannot be a subsidiary of any organi0ation? only an entity representing a legal fiction as a separate entity can be a subsidiary. . Conflict may arise !.here are no branches here. &c7uiring a firm in a foreign country is a complex task involving bankers. $. +artner delay the decision making once the dispute arises. and enable the companies to share the risk in the foreign markets. . !. 6oint 7enture . +rovides skills like technical skills. . & subsidiary. %. Boint ventures provide large capital funds suitable for ma>or pro>ects. etc. mergers and ac7uisition specialists from the two countries.his strategy adds no capacity to the industry. Makes large pro>ects and turn key pro>ects feasible and possible. $. corporation. is an entity that is controlled by a bigger and more powerful entity.Aarious environmental factors like social . and the controlling entity is called its parent 2or the parent company3.1. /abour problem of the host country1s companies are also transferred to the ac7uired company.he decision making is slowed down in >oint ventures due to the involvement of a number of parties.he controlled entity is called a company. '.his act improves the local image in the host country and also satisfies the governmental >oint venture. It involves shared ownership. technology. . "ometimes host countries imposed restrictions on ac7uisition of local companies by the foreign companies. 8. /ife cycle of a >oint venture is hindered by many causes of collapse. /atest technology re7uired human talent etc.d)antages) 1. . $. . .wo or more firm >oin together to create a new business entity that is legally separate and distinct from its parents. . in business matters.his "ubsidiary or individual body as per their own generates revenue.

"ubsidiaries are a common feature of business life and most if not all ma>or businesses organi0e their operations in this way. sometimes with multiple levels of subsidiaries. . other ways that control can come about and the exact rules both as to what control is needed and how it is achieved can be complex 2see below3. they differ from divisions. which are businesses fully integrated within the main company. and these.here are. a business entity can only act through its directors. "ubsidiaries are separate. .on their own initiative. although this term can also apply to cooperating companies and their subsidiaries with varying degrees of shared ownership. and not legally or otherwise distinct from it. organi0e their businesses into national or functional subsidiaries.he most common way that control of a subsidiary is achieved is through the ownership of shares in the subsidiary by the parent. . however. *xamples include holding companies such as -erkshire 9athaway. in turn. or Citigroup as well as more focused companies such as I-M. and others. . 5or this reason. .ime Warner. . officers and employees. or Eerox Corporation. distinct legal entities for the purposes of taxation and regulation.his gives rise to the common presumption that 'CD plus one share is enough to create a subsidiary.hese shares give the parent the necessary votes to determine the composition of the board of the subsidiary and so exercise control. . & subsidiary may itself have subsidiaries.hese. & parent and all its subsidiaries together are called a group. may have subsidiaries of their own.

change rate. doubling the inputs in each country leads to a doubling of total output3 • . .otes on$ a: <omparati)e .hlin and "amuelson who argued that countries have different factor endowments of labour.he basic theory of comparative advantage was developed by 6avid (icardo (icardo s theory of comparative advantage was further developed by 9eckscher.or consumption • 'ransportation costs are ignored If businesses exploit increasing returns to scale 2i.his worsens their competitiveness and causes a switch in comparative advantage. It can and does change over time.his is true even if one nation has an absolute advantage over another country. where the opportunity cost of production is lower. the si0e and efficiency of the available labour force and the productivity of the existing stock of capital inputs3.his makes them less competitive in international markets. economies of scale3 when they specialise.e. .rmerod. .e. .e. the goods and services produced by Country E will become relatively more expensive over time. • In)estment in research 3 de)elopment 2important in industries where patents give some firms significant market advantage3 # for more information on this have a look at this page • #o)ements in the e. the potential gains from trade are much greater.it is FD over a number of years. 5or example if average inflation in Country E is %D whilst in Country . . What determines comparati)e ad)antage! Comparative advantage is a dynamic concept. If an economy can improve the 7uality of its labour force and increase the stock of capital available it can expand the productive potential in industries in which it has an advantage. Countries will specialise in and export those products which use intensively the factors of production which they are most endowed. . . &ssumptions underlying the concept of comparative advantage • 0erfect occupational mobility of factors of production # resources used in one industry can be switched into another without any loss of efficiency • <onstant returns to scale 2i. • -ong%term rates of inflation compared to other countries. If each country specialises in those goods and services where they have an advantage.d)antage$ Comparative advantage exists when a country has a margin of superiority in the production of a good or service i.he idea that specialisation should lead to increasing returns is associated with economists such as +aul (omer and +aul .he 4uantity and 4uality of factors of production a)ailable 2e.g. the following factors are important in determining the relative costs of production) • .o e. land and capital inputs. &n appreciation of the exchange rate can cause exports from a country to increase in price.ternalities arising from production and.Q/: Write 9hort . then total output and economic welfare can be increased 2under certain assumptions3. "ome businesses find they have en>oyed a comparative advantage in one product for several years only to face increasing competition as rival producers from other countries enter their markets. 5or a country.

"uppose certain bundle of goods. because it can buy some amount of goods.his model can also be used for other ma>or geographic regions. 5oreign currency is demanded by the people because it has some purchasing power in its own nation. services in :.g.• • Import controls such as tariffs and 4uotas that can be used to create an artificial comparative advantage for a country s domestic producers# although most countries agree to abide by international trade agreements. %'. . services in the domestic economy. G 1C and the same bundle in India costs. the rate of exchange between two currencies in the long run will be fixed by their respective purchasing powers in their own nations.he 6iamond model of Michael +orter for the Competitive &dvantage of 4ations offers a model that can help understand the competitive position of a nation in global competition. costs :. .# then the exchange rate between Indian (upee and :. . product design.raditionally.". &lso domestic currency has a certain purchasing power. the relative purchasing power of the two currencies determines the exchange rate. in fact the domestic purchasing power is being exchanged for the purchasing power of that foreign currency. reliability. (s. . because it can buy some amount of goods. .services in the domestic economy. 6ollar is G1 H (s.. when home currency is exchanged for any foreign currency.on%price competiti)eness of producers 2e. -ecause this is the exchange rate at which the parity between the purchasing power of two nations is maintained.".his exchange of the purchasing power takes place at some specified rare where purchasing of two currencies nations gets e7uali0ed. /and -. . in fact the domestic purchasing is being exchanged for the purchasing power.hus. . when exchange rates are of a fluctuating nature.g. • • • c: <ompetiti)e ad)antage of nations$ .he exchange rate under this theory is in e7uilibrium when their domestic purchasing powers at that rate of exchanges are e7uivalent e. & change in the purchasing power of any currency will reflect in the exchange rates also. .hus. %'C. /ocation . economic theory mentions the following factors for comparative advantage for regions or countries) &.".&. when home currency is exchanged for any foreign currency. 9ence under this theory the external value of the currency depends on the domestic purchasing power of that currency relative to that of another currency.hus. 7uality of after#sales support3 b: 0urchasing power parity$ • • • &ccording to +++ theory.

natural resources. "peciali0ed factors of production are skilled labour. . %. . &lso +orter argues that intense competition spurs innovation. 5actor Conditions) 5actor conditions refers to inputs used as factors of production # such as labour. . . &s a rule Competitive &dvantage of nations has been the outcome of % interlinked advanced factors and activities in and between companies in these clusters. where many companies compete vigorously in most industries !. but +orter argues that the IkeyI factors of production 2or speciali0ed factors3 are created. (elated "upporting Industries) +orter also argues that a set of strong related and supporting industries is important to the competitiveness of firms.hese interlinked advanced factors for Competitive &dvantage for countries or regions in +orters 6iamond framework are) 1.C. capital and infrastructure. not inherited. "ome countries may be oriented toward a particular style of management. "tructure and (ivalry) +orter argues that the best management styles vary among industries. /abor *. 4atural resources 2minerals.hese can be influenced in a pro#active way by government. . /ocal population si0e. energy3 6. . 5irm "trategy. Competition is particularly fierce in Bapan.his sounds similar to standard economic theory. land.his includes suppliers and related industries. 6emand Conditions) Michael +orter argues that a sophisticated domestic market is an important element to producing competitiveness. capital and infrastructure.hose countries will tend to be more competitive in industries for which that style of management is suited. 5irms that face a sophisticated domestic market are likely to sell superior products because the market demands high 7uality and a close proximity to such consumers enables the firm to better understand the needs and desires of the customers $.

. such as increased access for their textiles and apparel in developed#country markets.". ..rade facilitation d.e. 4egotiations offered an opportunity to revive confidence in global trade and to lay the groundwork for the robust global trading system of tomorrow. Ministerial Conference. that the :. and the vast ma>ority are dependent on agriculture for their livelihoods . one of the founding members of the 8#!C.he negotiations collapsed on !L Buly over issues of agricultural trade between the :nited "tates.". to make a more generous offer for reducing trade#distorting domestic .hey seek a clarification of language relating to their interests in existing agreements. &griculture is particularly important for developing countries. Jatar. 6evelopment :" 5eels that the developing countries were not reciprocating on trade concessions 6eveloped countries ma>orly the :" wanted what would seem like a fair deal) rich countries open their market. +roblems developing countries are having in implementing current trade obligations. and poor countries do the same in return. "everal countries blamed each other for the breakdown of the negotiations.hey also claim that they have not reali0ed certain benefits that they expected from the (ound. 6eveloping countries claim that they have had problems with the implementation of the agreements reached in the earlier :ruguay (ound because of limited capacity or lack of technical assistance. led by -ra0il and India. was sacrificing the world s poor for :. • • • • • . and opportunity. in 4ovember !CC1. . India claimed that its position 2i. 8oal) (educe trade barriers in order to expand global economic growth. &griculture has become the most important and controversial issue.n the contrary developing countries advocated that Kmarket access1 would displace millions of farmers. . because around M'D of the population in developing countries live in rural areas.Q8: W'O%+oha =ound$ • • • • /aunched in 6oha. . .1s 5ourth W. "ervices c... In particular.he :nited "tates and some *uropean :nion members blamed India for the failure of the talks. and China.he :nited "tates is being asked by the *uropean :nion 2*:3 and the developing countries.he negotiations focused on the following areas) a. India. a measure designed to protect poor farmers by allowing countries to impose a special tariff on certain agricultural goods in the event of animport surge or price fall. at the W. -ra0il. /ack of media attention. development. broke away from the position held by India. there was insoluble disagreement between India and the :nited "tates over the special safeguard mechanism 2""M3.*uropean commercial interests3 was supported by over 1CC countries. &griculture b.

while developing countries are concerned with special products < those exempt from both tariff cuts and subsidy reductions because of development. .support for agriculture.he :nited "tates is insisting that the *: and the developing countries agree to make more substantial reductions in tariffs and to limit the number of import#sensitive and special products that would be exempt from cuts. Import#sensitive products are of most concern to developed countries like the *uropean :nion. or livelihood considerations. . .hese were the ma>or issues which lead to the failure of the 6oha (ound. food security.

o have some assurance that these investments will succeed. . & track record of improving payment discipline can lead investors to seriously consider bids for distribution concessions. %3Investors1 control over their investments & key issue is the demand for transparency from investors 2known as /imited +artners.he entire money coming into a +* fund is pooled and invested at the discretion of the fund managers. Investors base long#term investment decisions on the reliability. . !3"tability and enforcement of laws and contracts 5or international investors the test of a good legal framework is its clarity and the enforceability of contracts.he desire to exercise greater control over investment is a result of high expectations and the promise from private e7uity in !CCM. 8overnments of developing countries need to be aware that international investors are less likely than domestic investors to continue to put up with the costs of administrative inefficiency. &de7uate cash flows in the sector are a high priority forboth firms with investments in distribution and those withinvestments in generation. as well as for sector specific investments and a shortened time frame within which they can exit their investments. particularly contracts with government agencies. which unfortunately got short#circuited by the financial crisis. experience has led them to be more cautious about investing in sectors where collections are a problem.Q>: (+I%0arameters the In)estors must consider.hey want industry specific investment. Indeed. 13&de7uacy of cash flows in the sector Investors give clear priority to ade7uate cash flows for ensuring a reasonable prospect of recovering costs and making an investment a success. applicability. investors want to see that the rights and obligations of private investors are clearly defined and that applicable laws and contracts are enforced. . usually in proportion to the contribution of investors. -ut now investors want to be involved in the process of investment. investors rated a legal framework that clearly defines the rights and obligations of private investors as by far the most important factor in decisions to invest in a developing country. . and enforceability of laws and contracts. or also /+s3. Many high net#worth individuals 294Is3 are stuck with their earlier investments. Investors would like some security to cover the risk of nonpayment. "ome of the other factors considered are 4onpayment by customers is a problem that investors cannot fix without the government1s commitment to payment enforcement. *ven though firms investing in generation are at a remove from retail customers. . Investors considered payment discipline and enforcement even more important in determining the success ofan investment.he survey responses indicate that this opportunity cost is significant in the power sectors of developing countries. &lso. Investors today hesitate to make blind pool investments. 94Is who have made money . $38overnment responsiveness to the needs and time frames of investors 6elays in government approvals and licensing have an opportunity cost for international investors responding to concession auctions and solicitations for bids.

the way they are held accountable to the public and how their relations with both the regulated industry and government are organised.: 0olitical ris&s +olitical risk is a type of risk faced by investors. industrial. . . political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisionsNor Oany political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business ob>ectives. &lthough correcting market failure is often the most important task for independent regulators. It is a risk that can be understood and managed with reasoned foresight and investment. income. the main reason why they are given independence is their role in limiting government failure. investment. their basis of legitimacy. -roadly. monetary.from being entrepreneurs in control of finances do not want to lose control of their investments. or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies 2fiscal. . trade..hus independent regulators often stress that such regulators can limit political interference in business decisions and regulatory risks. independent regulators differ from other regulatory institutions with regard to their tasks.herefore. financial. and governments. Q?: <ase 9tudy$ . '3 (egulatory independence In theory. corporations.ne of the concerns /+s have is the lack of knowledge and the status of their investment over the years. an understanding of the particular characteristics of independent regulators is important to understand their role in the regulation of liberalised markets. Control and the separation of the state as owner or potential seller of utilities and the state as regulator is extremely important for the liberalisationprocess to be credible. +olitical risk faced by firms can be defined as Othe risk of a strategic. labor.

. or events related to political instability 2terrorism.he politics of determining who will fill the vacancies when the current president steps down is increasingly preoccupying decision#makers. "ocial unrest. riots. International (elations China1s political e7uation with India remains on the knife#edge be it the Pashmir visa issue. the construction of dams to block to flow of water in the -ramaputra river. &s a result any dispute between the two governments can have adverse effects on 6urby /td or any other company which invests in China.and developmental3. &ll these factors lead to a very fragile relationship between the two governments. *conomy +rotests and strikes put the government on edge.elecom /td. coups. which could also affect companies. 5lare#ups of ethnic discontent. slowing policymaking and deterring the government from taking significant decisions. and insurrection3 "uccession +olitics) . civil war. especially Internet and telecoms ones like 6urby . "uch pressures encourage a mixture of tough security and aversion to policy gambles and could be risky for 6urby /td. *thnic unrest.Chinese government efforts to contain sources of protest. continuing and undeterring support of +akistan by supplying various arms and ammunitions to their army or the &runachal +radesh /and dispute.