Reason (R) : The international environment is more volatile and the domestic firm generally does not have full information about the environment.
International Risk: Assertion & Reason Analysis
Assertion (A) states that the perceived risk for a domestic firm operating internationally is considerably higher.
Reason (R) explains this is due to the greater volatility and incomplete information a domestic firm has about the international environment.
Evaluating the Statements
The assertion is correct. International operations involve factors like political instability, currency fluctuations, regulatory differences, and cultural barriers, which increase uncertainty and potential losses compared to domestic operations.
The reason is also correct. The international environment is inherently less predictable than a domestic one. Domestic firms often lack comprehensive data and understanding of foreign markets, competitors, and operational contexts, leading to information asymmetry.
Connecting Assertion and Reason
The lack of information and higher volatility (Reason R) directly contribute to the increased perceived risk (Assertion A) when a domestic firm ventures into international markets.
Final Verdict
Both Assertion (A) and Reason (R) are factually correct and Reason (R) provides a valid explanation for Assertion (A).
Important Questions from Business Environment and International Business
- When an employee is transferred to another country and is assigned a salary based on the base salary for that position in the country where he will work, the employer has used a _____ salary plan.
- Match List – I (TNCs) with List – II (Products) using the codes given below :
List – I (TNCs) List – II (Products) a. Marcopolo i. Banking b. Bombardier ii. Oil c. Citygroup iii. Bus d. Bridas iv. Railway Coaches
Codes : - According to eclectic theory of foreign direct investment, foreign direct investment will occur under which of the following conditions when they are to be uniquely combined?
A. Ownership
B. Location
C. Market power
D. Internationalization
E. Vertical integration
Choose the most appropriate answer from the options given below : - Which of the following are included in Foreign Direct Investment?
A. Wholly owned subsidiary
B. Joint venture
C. Investment in GDR
D. Acquisition
E. Investment by FIIs
Choose the correct answer from the options given below: - Which of the following are the benefits of globalisation?
A. Increase in competition would make companies more cost & quality conscious and innovative.
B. An open economy spurs innovation with fresh ideas from abroad.
C. Liberalisation & global competition enhances consumer choice and consumer surplus.
D. Developing countries could be very vulnerable to the harmful effects of globalisation.
E. Globalisation opens up enormous domestic and global opportunities for firms in developing countries.
Choose the correct answer from the options given below:
