The political environment of a country is critical to the success of any MNC within it. The environment enables the efficient entry and operations of the MNC into the country. Political risk for a country can arise through civil war, violence, strikes, and coup d’états among others. This has the potential of crippling a county’s economy and has even more adverse effects on the citizens. In the event of political unrest, the MNC needs to make effective decisions that will positively influence the growth and development of the MNC not only in the country but globally.
Ukraine as a Country for an Entry and Operations of a MNC
A country that has recently faced notable political unrest is Ukraine. The Russo-Ukrainian war has been ongoing for the past decade, but recently, the invasion of Russia into Ukraine had a significant impact on the political environment and lives of the Ukrainians. Political unrest affects investments and businesses within a country (Jalloh, Djatmika, & Putra, 2017). The war which is based on security and part of Ukraine claimed by Russia has led to adverse economic ramifications not only for the country but globally.
Currently, the country is still facing serious political unrest with various government institutions paralyzed. The war has led to the death of thousands while many more have been displaced as Internally Displaced People (IDPs) and refugees. Further, the war has led to the depletion of government resources as various amenities and services initially set up for specific purposes have been redirected to the ongoing war. This has further impaired the growth and development of the country. It is crucial to note that the impact of the war will affect the country for many more coming years.
The political unrest has severely affected not only affected Ukraine economically but also the world. Globally, the war has created surging inflation and debt. According to the World Bank, the war is expected to shrink the Ukrainian economy by close to half by this year. Moreover, it is expected to drop the global economy by one percent. The war has lowered the global growth rate due to the uncertainty regarding its outcome (Ozili, 2022). Moreover, it can be deduced that the war will have a significant impact on the GDP of Ukraine.
The war has caused various MNCs to take radical decisions to ensure their growth in other global spheres, as well as to protect their employees. One of the MNCs initially operating in the country, Carlsberg AG, was forced to suspend its operations in two of its plants, in eastern Ukraine and Kyiv. The company, which is a leading global brewer globally decided to stall its operations in the two cities to protect its employees. Also, the company recently closed its third brewery in another city, Lviv, due to a shortage in the supply of natural gases which was disrupted due to the war. The decision made by this company is closing its breweries was to ensure the safety of its employees as well as its growth and development.
It is crucial for an MNC seeking to enter the country to perform a thorough SWOT as well as market analysis. To ensure its success, the MNC must evaluate the possibility of the country’s political unrest resolving. This will ensure the company is prepared to accrue the prevalent losses. Also, it will enable the company to assess the possibility of the political unrest exacerbating and hence take the necessary precautions to maintain its operations in the country.
Jalloh, I. J., Djatmika, E. T., & Putra, I. W. J. A. (2017). Political Instability and its Effects on International Companies: A Case Study on Sierra Rutile Limited (Sierra Leone). International Journal of Academic Research in Business and Social Sciences, 7(6), 2222-6990.
Ozili, P. K. (2022). Global economic consequence of Russian invasion of Ukraine. Available at SSRN.