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CLOSE-UP
GLOBALPOWER
Not before time, after a decade of introspection, there is a strong push today to internationalise Irish
businesses. Our interviewees say we have the cultural DNA to do this with gusto
A
FTER years of an Irish Celtic tiger economy, where Risk factor
much of the trade and business focus was inward This caution is echoed by Thomas Lawton, professor of strate-
towards property development and indigenous con- gic management at Cranfield University School of Manage-
sumption,todaythereisanecessarypushunderwayfor ment. He will be a keynote speaker at the Beyond Borders con-
Irish companies to look further afield and build truly ference. Lawton has done extensive research into political risk
international enterprises. It is in this context that November sees in the context of internationalisation strategy and international
the Smurfit School hold a conference on this key issue: Beyond market entry.
Borders – Going International with Your Business. He says there is generally a major division between how small
Patrick Gibbons, Jefferson Smurfit professor of corporate plan- companies and large transnational organisations select market
ningatUCDSchoolofBusinessisoneofthosewhowillbespeak- entry, and how they deal with risk. “The big companies typically
ingonthesubject,onethatisclosetohisheart.NotalonedoIrish have a process in place for factoring political risk into their choice
businesses need to internationalise, but they also need to look of entry market, and one for the management of activities in for-
beyondthetraditionalexportmarketstodoso,hesays. eign countries. In the case of extractive industries like oil and gas,
“Ithinkgiventhecurrentsituationintermsofourcurrency,for clearly it’s very sophisticated. You look at the likes of Shell or BP,
example, firms need to look at expanding into the euro area as these guys have got teams of people in-house who are constantly
opposed to the sterling area. That has a profound impact on scanningthehorizon,awareofwhat'sgoingonincountriespoliti-
where people should be looking, even just to mitigate exchange callyandsociallyandfactoringthatintothedecisions.They’vegot
rate risk.” a risk policy, and they’ve got contingency plans if things go pear-
Even further afield, he believes we need to be more discrimi- shapedinaparticularcountry.
nating when we look at large markets like Asia. “There’s a dan- “With SMEs however – which let’s face it the bulk of Irish com-
ger of taking an homogeneous view of Asia, with many only paniesthatwanttointernationaliseare–theyrarelyfactorinpolit-
lookingtoChinaasanengineofgrowth.Ithinkmoreattention icalrisk,”saysLawton.“Ofcourse,whenyoumentionpoliticalrisk
should be given to India as well. Undoubtedly, China has been to people they think coup d’état or seizure of assets or something
the magnet for investment for the last 20 or 25 years, particu- very dramatic. In actual fact, a lot of political risk is fairly low key
larly in manufacturing, but whereas there are obvious rewards and constant, and can be quite debilitating with regards to busi-
to Chinese expansion there are significant risks as well – par- ness. I’m talking about the likes of corruption, protectionism,
ticularly in terms of population expansion, and the imbalance favouritismtocertaincompanies.
between males and females. This could create pressures in the “There are a lot of different aspects to consider, of which SMEs
future, as could the vast differences between rich and poor typically have little knowledge. So, in the context of Irish compa-
provinces.” niesinternationalisingIthinktheyreallydoneedtodomorepolit-
“Indiaisaverydifferentplace,withaverydifferentinstitutional ical risk assessment before they go in, before they choose markets.
structure, a different legal and government system. You might see Sometimestheobviouschoiceisnotthebestchoice.”
the evolution of India over the next 10 or 15 years being quite dif- Smaller companies will rarely have the in-house expertise, so
ferent to the evolution of China, and perhaps less risky to some Lawton points to existing repositories of knowledge. “I think it
extent.Theyhaveamorebalancedpopulationgrowth,amorereg- probably falls into three categories. One is via government and it
ulatedbusinesssystemwith,forexample,enforceablecontracts. couldbe,say,Irishembassiesabroad,theIDA,EnterpriseIreland.
“Then there is South East Asia, particularly Thailand, Malaysia It might be trade associations, industry associations. All of these
and Singapore. I think they are countries we should be looking at wouldhaveatleastgeneralinformation.
too, not only as regards trade, but we should also be alert to what “Route two is clearly local partners, with local knowledge that
theyaredoingandstayaheadofthem. can guide you through the minefield, if you will. Option three
“Ofcourse,therearecultural,politicalandregulatoryissuesthat wouldbetohiresomeconsultantstodoamorespecificassessment
can arise in all these countries, so these need to be attended to of the risk associated with a particular country. These would the
beforemakinganysignificantinvestmentinaforeignmarket. typicalroutestogaininglocalknowledge.”
22 UCD BUSINESS CONNECTIONS
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