Mgt 448 - Country Risk and Strategic Planning Analysis

Country Risk and Strategic Planning Analysis

Learning Team A

MGT448

June 18, 2012

Patricia Lott

Country Risk and Strategic Planning Analysis

Political, legal, and regulatory risks in Italy are considerably low, “according to a political risk summary” found at (A.M. Best, 2011). The basis of these results is on nine categories that have an effect on political risk. The categories are fiscal policy, monetary policy, international transaction policy, business environment, government stability, regional stability, social stability, labor flexibility, and legal systems. Italy has structural problems that inhibit the country from achieving complete economic potential. Problems include regional income differences, a somewhat high tax liability, and rigid labor guidelines. Following the laws and regulations for Italy should minimize risk.

In Italy there are various exchange rates available dependent on current trading, location of markets, and banks. Factors that influence risk of exchange in Italy’s trade, trend levels, economic health, growth, government surpluses or deficits, political conditions, speculation, market psychology, and inflation trends levels ("Foreign Exchange" 2011). According to ""Scudo Fiscale"" (2010), “The Italian Government has introduced legislation which will enable residents in Italy to safely repatriate their capitals back into Italy, without any risk of prosecution or penalties, upon payment of a small amount” (Scudo Fiscale). If a payment is made when required, no risk exists for repatriation of funds. For exchange the factors that influence this risk are above.

As far as big box store type shopping goes in Italy, there are none. So no risk of competition in that regard exists, however; Italy does have several shopping malls and a handful of outlet stores outside the city. Residents of Italy sometimes drive several hours to shop in this type of store. Shopping malls are recent additions to the Italian culture; Italy continues to enjoy street shopping in the many boutiques in the historic and beautiful buildings. Launching a business in Italy is difficult because of the many procedures and requirements to fulfill. The risks are that a Costco would have to be outside town making it more difficult for consumers to shop frequently; also Italy currently has only small and medium-sized businesses. A determination would determine whether or not there is a need for this type of store.

“Italy is a signatory to a Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty enables offsetting taxes paid in one of two countries