As we plan our FDI in the boot company in Canada, there are many areas we must consider to in fact produce and distribute the product despite risks and barriers we may run into. In this paper, we will analyze the risks and plan we have to drive our products to the market while staying on top the factors that come with an FDI in Canada.
Political, Legal, and Regulatory Risks.
The most obvious risk that we must be aware of when investing in a Canadian boot manufacturer is not conforming with laws that govern foreign direct investments and how they will apply to us. There will not be much political risk associated with our venture since the US and Canada have a great political relationship, so the trade and tariff agreements in place should be stable.
Exchange and Repatriation of Funds Risks.
Anytime there is a transfer of funds from our country to a foreign country for investment, and a transfer of funds in the case of the return on investment, there is a risk of loss associated with fluctuations in the monetary exchange rate. The current exchange rate between US and Canadian dollars is $0.80 US = $1.00 Canadian (Xe.com, 2015). This means that the current value of the US dollar is more than the Canadian dollar, so our investment into the Canadian market will allow us to invest more per US dollar. The risk lies in potential market fluctuations; if the value of the Canadian dollar drops, our return on investment will decrease. However, if the value increases, our return on investment will grow with the increase.
Competitive Risk Assessment.
Competition in the overall shoe industry in Canada is extremely high. The Canadian market is set to steadily grow over the next few years due to an evolving footwear market that is attracting foreign retailers and footwear specialists (Euromonitor.com, 2015). This forecasted growth and influx of foreign retailers, along with the already present retailers and manufacturers is a huge potential competitive risk.
