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International Risks
FedEx faces international risks in its operations. Some international risks are dependent on the country. Smaller countries have higher barriers to international trade. International trade increases the standard of living for all countries involved. The international success of FedEx is primarily because of its ability to overcome risks and capitalize on the benefits. FedEx’s global achievement has helped them achieve economies of scale.
FedEx is vulnerable to exchange rate risk due to its global operations. Currency exchanges and forward contracts can minimize the risk of exchange rate fluctuations. FedEx also faces many regulations which vary from country to country. Regulations are often changed and can have an adverse impact on FedEx’s business and operations worldwide. FedEx could be exposed to political risks as well as diversity problems, such as language barriers among customers and suppliers. International trade involves the preparation of a number of documents which also creates difficulties and causes additional paperwork and documentation costs (Berger, 2010).
In the international marketplace, FedEx should expect to face restrictions on trade between nations. Foreign governments may charge tariffs or taxes on certain imported products designed to raise revenue, protect domestic companies or slow the flow of illegal or unsafe products into the country (Berger, 2010). Foreign governments may set quotas – limits on the number of foreign imports that they will accept in certain product categories. The risk of tariffs and trade wars could result in a decline in the gross domestic product of the countries involved, according to economists (Radcliffe, 2019). The risk of declining economies poses a risk to FedEx because the demand for delivery services declines simultaneously. Unfortunately, this international risk can not be mitigated by FedEx as they have little to no control over the changes in demand that could arise.
FedEx faces an international risk due to the uncertainty of the future of CUSMA, a modernized version of NAFTA. It is expected to be implemented by 2020 once all three countries approve it (FedEx, 2019). If this trade agreement were extinguished, the United States, Canada, and Mexico will suffer economically; therefore, sales revenues in many industries will suffer. FedEx relies on the sales of other industries to use their delivery service, and this loss in sales revenue would result in the shipment of fewer packages being delivered locally and internationally.
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