A Groundrule for Foreign Business Operations: Don’t Put All Your Eggs in One Basket!

by Gerhard Mueller



This article discusses risk factors involved in getting setup a company outside the U.S. In present-day domestic business practice in the United States, the advantages of diversity are recognized almost universally. Firms constantly seek new consumer markets which differ in geographical location or in personal-income strata represented thereby. Product diversification is pursued, and the decentralization of management authority has become an important trend on the administrative scene. In a cumulative way, diversity, so the argument goes, leads to a better utilization of resources. Financial aspects are often the most intricate part of business transactions in or with foreign countries and thus merit foremost attention. It will be maintained here that the risk factor associated with the use of foreign exchange varies inversely with the number of unrelated foreign currencies actively utilized. Furthermore, a willingness to deal in a variety of foreign exchange should broaden the scope of possible foreign operations materially.

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