What is an effective way for MNCs to address the risk that a country where it is going to do business has different rules and regulations than other countries?
A)It can buy insurance to cover unexpected expenses and losses.
B)It can set up a limited operation in that country to learn about its regulatory climate before expanding operations.
C)It can form a joint venture with another firm to spread the risks.
D)It can make significant investments in the country so that it can gain influence there.

Question

Quizplus · Accepted Answer

Setting up a limited operation in the country to learn about its regulatory climate before expanding operations is an effective way for MNCs to address the risk of different rules and regulations. This allows the company to gain firsthand knowledge of the regulatory environment and make informed decisions regarding future investments in the country. Insurance (A) and joint ventures (C) can help spread the risks, but they do not address the issue of understanding the regulatory climate. Making significant investments (D) may be an option for some companies, but it is a more costly and risky approach to dealing with regulatory differences.

What Is an Effective Way for MNCs to Address the Risk