University of Phoenix
Influence of Governmental Policies on Global Market Entrance Strategy: A Multiple Case Study Dr. Craig H. Martin, University of Phoenix, Northcentral University, Walden UniversityABSTRACTA number of economic factors influence the determination by a company whether or not a market is attractive for entrance. Application of governmental fiscal, monetary and regulatory policies are demonstrated to be one of the primary factors influencing perception of market attractiveness for entrance. Incorporating a foundation of systems and complexity theory in conjunction with the above governmental fiscal, monetary and regulatory policies, three case studies of different countries were explored for the purpose of understanding why the application of the governmental policies influenced the perception of attractiveness of each for new market entrance investment. Understanding the influence of governmental policies on perception of a multinational company about level of market attractiveness for investment will assist corporate leadership in making future decisions. Themes emerging included that risk for investment increases as debt/government spending rises near 100%; that fiscal spending deficits may result in an increased hidden tax penalty from inflation in the country; that excess governmental regulation can inhibit economic growth and that having a territorial aggressive large neighbor nearby may inhibit perceived attractiveness. Keywords: GNP (gross national product), jobs, monetary policy, fiscal policy, market investment entry risksINTRODUCTIONThe growth in potential markets globally for consumer goods and services, as well as the growing number of companies seeking to share in the opportunities present in these expanding markets, have introduced the need for additional planning beyond the concept of simply entering a market (Khojastehpour, M., Ferdous, A.S., & Polonsky, M., 2015). Understanding the challenges of the society into which one plans to enter is paramount for being able to develop strategy which will enable the organization to meet and satisfy the needs of the people in that market (Steenkamp, J.E.E., & de Jong, M.G., 2010). Realization by business that a structured plan offering a high probability of success to take advantage of opportunities and mitigate challenges present in new markets is necessary for effective market entrance strategy (Reeves, Haanes & Sinha, 2015). Reeves, Haanes and Sinha (2015), who are senior partners with Boston Consulting Group, propose that strategy consists of studying the situation, defining a goal and development of a step-by-step path to get there. When entering a new market, steps imply understanding fully the market, including understanding the competitive forces present; defining the profitable goal for one’s goods and services within the market within a period of time; and developing the step-by-step plan for entrance.In the expanding global market place, the business environment encountered is likely to be more dynamic and more uncertain due to, among other factors, global competitive forces present, diversity found in markets, rapid growth and change in technology and economic interconnectedness of markets (Reeves and All, 2015). Study of the business environmental situation to develop a competitive advantage for the firm requires leaders to be observant and adaptive sufficiently to change course as needed to maintain that advantage once it is realized (2015). To assist leaders in the understanding of the competitive position in which one will reside after entering a new market, Michael Porter of Harvard University developed a framework for analyses of the level of competition within an industry and a business strategy environment (Porter, 2008). Porter identified five forces which, when analyzed collectively, presents a picture of the level of attractiveness of market for entry. At the center of the five forces is industry rivalry in that market. Other forces having impact on the central force are bargaining power of suppliers, bargaining power of buyers, threat of product substitutes and threat of new entrants.In 1993, Martyn Jones, a consultant at Groupe Bull, augmented Porter’s five force model for understanding the attractiveness of a new market with a sixth, or complimentary, force. Building on prior scholarly work, Jones posited the central government in the market as the complimentary force which also influences critically the attractiveness of a market for business (Ireland, Hoskisson & Hitt, 2008). Policies of government which influence the expansion of the market economically can, if effective, lower the influence of other of the five forces as there is more economy to absorb the impact of the other competitive forces. Understanding how application of governmental policies may influence the business environment in market in which a business plans to enter is the subject of this research. Although assumed that the economic purposes for use of governmental regulatory, fiscal and monetary policies are market expansion and jobs growth, observations of the actual application illustrate growth outcomes vary in application (Stockman, 2013). I will present three cases – the three Baltic Countries, Russia, and China – to explore how the application of regulatory, monetary and fiscal policies have influenced growth within each market and enhanced positively or negatively the attractiveness of the market for a new entrant. Through advancing understanding about likely outcomes following governmental application of regulatory, fiscal and monetary policies, leaders of companies seeking expansion into new markets may developed more informed decisions in advancing their return for the organizations stakeholders (Bartlett, Ghoshal & Beamish, 2008).LITERATURE REVIEWThe review of literature explores economic factors promoted by a host government critical for making corporate decision about whether the market is attractive for entrance. Foundational theories of risk and uncertainty incorporated into systems theory as applied to market economics are explored. Economic principles incorporated into central government policies are critically reviewed. Literature explaining market expansion opportunities and challenges in terms of benefits and risk are considered.Corporate Market Entrance as a PhenomenonWhen considering the entrance into a new market, companies for most of second half of the 20th Century scanned to develop a picture of total estimated GNP and population (Kotabe & Helson, 2010). With the estimated information, a calculation could be made of GNP/capita, which could then be used to rank countries as most to least advantageous for expansion of corporate products into the market. Other demographic factors considered relevant for global market strategy were obtained as possible (The CIA World Fact Book – 2015 - was an important source used by companies to develop market information). My perception is that global strategies developed for new market entrance for most companies was severely limited in scope and with lack of country in depth information about challenges facing the new entrant. The McKinsey Global Consulting Company introduced the concept of the SWOT analyses in order to broaden the factors considered important for developing a company’s market entrant strategy. The SWOT framework was introduced for all market strategy situations in the 1980’s under that acronym by McKinsey using the work of Albert Humphry Farrell (2006). The purpose of the model was to enable a classification of factors important to organizational effectiveness under the captions of challenges and opportunities (external, environmental factors) and strengths and weaknesses (factors internal to the organization). By developing a list of all such factors under each of the classifications, the outcome from use of SWOT was an improved rating of factors useful in strategy development for new market entry.Michael Porter, a Harvard professor, develop his five forces analyses as a more rigorous framework by which to evaluate factors found present in the external environment of the new market (Porter, 2008). The purpose of the evaluation of these five forces (including bargaining power of suppliers and buyers, threat of new substitutes and market entrants and rivalry within the industry) was to provide a framework by which the company can identify market attractiveness (Porter’s definition of an unattractive market is one which the combination of the five factors acts to drive down overall profitability of successful entry by industry into the market). The company, by applying its core competencies – its resources – may then develop a strategy to earn a profit above the industry average, if successful. The primary criticism of the use of Porter’s framework to evaluate the external forces facing the company considering entrance to the new market is that his five forces model places too much weight on industry structure and not enough weight on other external factors complimentary to and relevant to similar products already found in the market (Coyne & Balakrishnan, 1996). Further criticism pointed out that use of industry structure alone for developing strategy for new market entrance was incomplete without giving consideration to the resources the company brings to the new market and/or find in new market. Adam Bradenburger and Barry Nalebuff of Yale School of management employed game theory to introduce the concept of complementary forces – referred to as the sixth force to Porter’s five forces model – to help explain effective market strategy (Ireland, Hoskisson & Hitt, 2008). Martyn Jones, Groupe Bull Consultants, among others, contended that the 6th force is central government, which includes regional governments along with the country government for markets under consideration. Porter (2008) indirectly rebutted the assertions about a 6th force by referring to governments and innovation as forces which influence industry structure in a market.Benefits and Risks of Governmental Economic Policy That the prime objective of governments is to create an economic environment in which growth in jobs is consistent and sufficient to maintain low unemployment is assumed by most economists (Hill, 2014; Tammy, 2016). The assumption is based on pragmatism, i.e. a hungry electorate often will turn to revolution to overthrow the government, either by peaceful or non-peaceful means (Ohmae, 2005). During the Twentieth Century, economists led by Keynes, Friedman and Laffer developed policies for Governments to follow in order to increase the GNP, leading to creation of jobs (Stockman, 2013).The fiscal policies championed by Keynes and Laffer affect different variables in the macro Income and GNP equations. Keynes uses governmental spending increases to replace lagging consumer spending and investment expenditures in order to maintain GNP at current or growing levels to perhaps increase GNP and job creation. Although the concepts by Keynes have been demonstrated to work in theory, the steps championed by Keynes for fiscal policy application followed by most of the democratic governments have resulted in continual use of deficit spending (Schiff, 2012). The concepts incorporated by Keynes in development of a fiscal policy statement had the purpose to at least maintain employment levels in a country during periods of economic recession as well as during times of economic prosperity (Lewis, 2009). Keynes’ intent was for a government to increase its fiscal spending during periods of economic decline and to reduce government spending during periods of economic growth. Using this practice, total spending public and private for goods and services would remain approximately at a constant level, leading to the continual high level of employment sought by the government and maintenance of low public debt. Keynes’ principle applied to government fiscal policy is valid. However, he erred in the assumption that governmental bodies would lower levels of spending as economic prosperity returns (Lewis, 2009). Most governments, especially those in the Western sphere and with democratic forms of government, have continually increased budgets since the 1930s without considering the Keynes’ principle of returning to a balanced budget. The continual increase in spending by these governments has resulted in budget deficits in most years and a continual growth in governmental debt carried on the balance sheets (Rodrik, 2015). Laffer, while practicing as a member of the President Reagan administration, developed his Curves Model for applying personal income tax rates in a manner to influence growth in GNP and jobs during the 1980s. When tax rates are lowered for a significant period, the macro income model suggests that the amount of income deferred from taxes flows instead to discretionary income or personal savings (Stockman, 2013). Increases in discretionary income typically flow to consumer spending, and increases in savings flow to investment, both practices which feed job growth. A criticism of the Laffer curve model has been that a decrease in income tax revenues increases deficits as Government continues to spend, offsetting gains in consumer spending and investments. In practice, government spending, often fueled by deficit spending, has continued to increase annually in most democratic countries (Tammy, 2016). That the additional spending brought about by the deficits is beneficial to most of the citizenry is demonstrably clear (Stockman, 2013). In most developed countries, poverty has been eradicated or at least greatly reduced. Progress in reducing poverty continues in emerging markets. The governmental benefits for senior citizens have grown in nature and application as country populations’ age in better health in many counties.However, the benefits financed by deficit spending have also come at an economic cost. When spending outstrips demand for goods and services, which is often the case with government deficits (Sowell, 2004), rising inflation is usually the result. In the USA, for example, the average growth due to inflation has been about 3% since the end of WWII as compared to less than 2% historically. The hidden tax represented by inflation reduces the amount of Income available to spend for increases in level of real tangible goods and services.If deficit spending grows too large, which has been the case since 2008 in the USA and many other Western global countries, private spending may reduce due to restrictions in lending as government requirements for money cause shortages in lending capacities. Rickards (2014) demonstrates that with a deficit too high, real spending (total spending adjusted for inflation) will decline and likely fall into the realm of deflationary spending cycle. Deflationary pricing, which is a characteristic of deflation, will result in less tax revenues for government and total spending will spiral downward. John Tammy (2016) suggests that the problem with Federal Government spending is its size as funds from income taxes or funds financed are the equivalent of tax deprivation of private funds to drive real economic growth in GNP and jobsMilton Friedman (1994) opposes the use of fiat money in the scope of a country’s monetary policy. Fiat money (paper currency not supported in volume of money in economy with a combination of precious metals) alone is not the problem; rather it is the symptom. Whenever paper money has been the basis of a county’s monetary policy, legislatures and/or Central Banks have instigated spending levels exceeding or not level with the production of actual goods and services (Stockman, 2013).Rapid increases in the quantity of paper, or fiat, money have correlated with increases in a country’s inflation. Sharp monetary decreases to inhibit inflation may produce depression. Both propositions are well documented (1994). For example, the great contraction of 1929 – 1933 that propelled President Roosevelt to the Whitehouse and the inflationary - deflationary period witnessed in the 1970s, which again led to a change in Administration from Presidents Ford to Carter. Dent (2014) reports that real inflation in the period 2008-2014 is likely in the 9-10% range annually if the number reported was calculated using the model of the 1990s, indicating a real problem with the current level of monetary supply fostered by Federal Reserve policies. Inflation is beneficial to most Governments and detrimental to most private entities including consumers (Friedman, 1994; Tammy, 2016). Growth in inflation promotes increased revenues in tax revenues for the government. Inflation, however, produces a hidden, or implied tax relative to private income. National Income consists of wages plus taxes plus savings. If inflation’s pace of growth is faster than goods and services can be increased, the fallout leads to price increases. However, with graduated tax rates employed in many countries (Tammy, 2016), inflation often leads to higher tax bills for consumers, a further deflationary factor pressing on real growth in GNP. Inflation growth in conjunction with deficit spending creates downward pressure on real economic growth, the driver for jobs growth (Friedman, 1994). Rickards (2014) posits that currency sustainability is represented by the following equation: (R + I) – B = [T-S], in which R equals real growth in GNP, I equals inflation, B equals Government borrowing cost (expressed as a percent), T equals tax revenues and S equals Government spending ([T-S] implies an absolute positive number. Consider the implications if Taxes grow less than Spending, i.e. on the equation’s right hand side the absolute (positive) number grows representing deficit spending. Thus, Real GNP growth plus Inflation have to be more together than the Borrowing Costs to match the deficit spending number on the right. To finance the deficit, Borrowing costs likely increase due to concern with possible growth in inflation and the increased perceived risk for default held by borrowers (King, 2016). If one assumes inflationary growth is positive and growing, real growth by this model has to decrease to hold the equation in equilibrium, or sufficiently in size so that (R+ I) are no larger, once B is subtracted, to be such that the absolute value of [T – S] is realized. Rickards (2014) views US Government policy as two large Venn Diagrams. One diagram is monetary policy controlled by the Federal Reserve. The second Diagram represents fiscal policy, consisting of taxes and spending, controlled by Congress and the Executive Branch. Rickards (2014) estimates the following actual numbers in USA in 2014: The US deficit is estimated at 4% of GNP (absolute value). For sustainability, the right hand side of the equation is equal to 4. Borrowing costs are approximately 2%, which leaves Real growth plus Inflation with a value of 6 for a sustainable position. If one uses reported inflation of approximately 2%, real growth is projected at 4%. However, if one uses Dent’s (2014) estimate above of 9-10% for inflation in this period, real growth is a deflationary -3-4% (Consider the outcome if Borrowing costs move from 2-6%).Both Rickards (2014) and King (2016) view the level of debt in relationship to GNP in almost all of the Western, democratic countries to foster a risk which outweighs in 2017 the benefits gained from the level of deficit spending experienced in past almost 50 years. Dent (2014) and Tammy (2016) join Rickards (2014), King (2016) and Friedman (1994) in warning about the ever growing risk in countries in which debt levels exceed the level of GNP, a case which is all too often found in 2016 in many of the Western countries, including the USA. Market Entry and Country RiskToksoz (2016) identifies the major components of country risk faced by companies when investing in that country. The primary, known as sovereign risk, component is the level of probability that the country itself will default in payment of its publically issued bonds (debt). The transfer and convertibility (T & C) risk component implies the imposition of government controls on currency transfers into and out of the country, a limitation on foreign-exchange availability. The third component are the set of risks which fall under regulatory (operational and jurisdiction) risks, which include such business environmental risks as governance, government transparency and red tape, rule of law, infrastructure availability, regulatory risks including corruption, and banking system fragilities.Toksoz (2016) uses Nigeria as a case to differentiate between levels of risk found in the above components. Because of the large amount of revenues received from petroleum resources, sovereign risk in Nigeria is considered low. Transfer and convertibility risks are also assessed as low, due partly to 40-plus billions in Governmental reserves held and in part due to petroleum trading being coined in US dollars. However, due to banking fragilities associated with lack of regulation on inflows of capital from external petroleum sales, the rise in deficits associated with falling global oil prices, and rise in political risks due to death of long time Nigerian President, operational and jurisdictional risks are considered high and rising. The resulting overall risk associated with the integration of the three components has led to a perceived reduction in attractiveness of Nigeria as an investment for new market entrance. Stockman (2013), Dent (2014) and Toksoz (2016) describe the financial liberalization of capital flows into and out of countries as an underlying driver of ever increasing governmental fiscal spending, often fueled by ever increasing deficit spending and debt levels. Since the 1980s there have been four waves of intergovernmental waves of capital funds growth, the last beginning in 2008 (Toksoz, 2016). The issues of risk associated with increased deficit spending fueled by growing debt levels increase the importance of these issues in company scans of markets to assess a country’s attractiveness for new business market entrance investment.METHODOLOGYResearch was conducted employing qualitative methodology using an explanatory, multiple case study design for the purpose to understand why application of governmental regulatory, fiscal and monetary policies can influence the attractiveness of a market for new investment entry (Yin, 2014). The boundaries for each of the three cases considered are the markets within each country or region that were considered for study. For example, the combined markets of the three Baltic Countries – Lithuania, Latvia and Estonia – were considered as one market, the Western part of Russia including Saint Petersburg comprised the second case, Eastern Mainland China defined the third case. Data for the research was collected using the principle of triangulation (Yin, 2014). For the Baltic Countries case and the Mainland China Case, books which contained data on the subject of foreign investment experience in each country/case were thoroughly vetted (Fischer & Parmentier, 2010). Additionally, in depth interviews was conducted in each market during 2016. For Russia, data associated with the Saint Petersburgh was analyzed to supplement three interviews I conducted during a five day trip conducted in 2016 (I could find no relevant book).The foundational framework employed to conduct the multiple case studies include systems theory and complexity theory (Patton, 2015), monetary theory (Friedman, 1994), fiscal theory (Lewis, 2009) and country risk for business investment theory (Toksoz, 2016). Fiscal and monetary theory as well as country risk theory are discussed above within the Literature Review. Systems theory and complexity theory were employed to help understand why the outcomes of application of governmental policies observed differ in separate countries even though the governmental policies employed are similar.Two principles or concepts incorporated in systems and complexity theory proved useful to seek understanding about differing outcomes observed in the GNP behavior within each of the case study markets upon application of similar policies for fiscal spending, monetary and regulatory policies (Patton, 2015). Systems Theory implies that interrelationships exist globally between applications of a country’s regulatory and fiscal and monetary policies, although the outcomes in one specific market may differ from those in another (Patton, 2015).I chose to use three strategies for analyses promoted by Yin (2015) to enhance the credibility of the research. Relying on the principles described – fiscal theory, monetary theory, systems and complexity theory and country risk investment theory -, the analytic techniques of pattern matching with each case, explanation building for observations within each case, and cross-case synthesis are employed. CASE STUDIESIn each case explored, the Government(s) employed conscious elements of fiscal, monetary and regulatory policies to promote growth in GNP (gross national product) and real growth in jobs (Ohmae, 2005). In the Baltic Countries, each of which sought to purposely become members of the European Market, my perception was that the most meaningful analyses of the case was achieved by considering the Baltics as one. In Western Russia and Eastern China, each of which employ regional intra-country Governors with power, my perception was again to consider each of the regions as a market for entry. My research was guided by the question about why governmental policies employed in each case influenced the perceptions of attractiveness of each market for business investment for new market entrance (Yin, 2014). My analyses below is constructed using each of the three cases as a sub-title.The Three Baltic CountriesI had the opportunity to travel into each of the Baltic Countries in 2016. My own perceptions about the positive economic growth in GNP observed were reinforced through my evaluation of metrics about growth in GNP (2- 3%) and debt/GDP ratio of 44%. Unemployment in 2016 stands at 8-9%. Each of the Baltic Countries have effectively transformed from a satellite of the old U.S.S.R (United Soviet States of Russia) before the 1990s to successful members of the E.U. (European Union) with the euro as the country currency for each. The transformation benefitted from large influx of FDI (foreign direct investment) and ready credit provided by the IMF (International Monetary Fund) and the EU (Purs, 2012).The Baltic Peoples determined the goal for self-rule was a Government based on rule of law, ownership of private policy, conservative fiscal policy and a responsible monetary policy (Purs, 2012). To a large extent, the goals established beginning with the 1990s transformation have proven successful. Export markets for timber and agriculture have been promoted, natural developed ports have grown in size with exports to the EU and continued exports to Russia, and FDI for the global banking industry has consistently grown (especially in Latvia and Lithuania). I found through four interviews that the Baltic People are proud of the economic accomplishments and stand strong in the intention to maintain strong democratic principles based on individual freedom and a Government for, by and of the people. A primary focus of Government fiscal policy continues to be the transformation from State owned property to private ownership, especially for its seniors many of whom now own their own apartment mortgage free.Evaluation of components of country risk for business investment demonstrate the attractiveness of the Baltic Countries for investment. The sovereign risk and transfer and convertibility (T&C) risk are low. Each is a member of the EU and use the euro for currency. The requirements to remain members of EU and euro in good standing place constraints on excess use of either fiscal or monetary policies in a reckless, inflationary manner leading to country insolvency (Schiff, 2012). Internally, operational and jurisdictional risk for new market investment entrance is low according to each of my interviews and observations. The primary worry remains a concern that Russia might reverse its policy of peaceful coexistence with its neighbors, deciding to annex the Baltics for perceived improved access to ports and trans-country access to the Western Russian province located between Poland and Lithuania. Russia’s Western Region Including Saint PetersburgUpon the fall of the U.S.S.R., the people of Russia adopted a form of democratic Government and a systems based on capitalistic principles. The challenges of conversion of public ownership of property to private continues in 2016. A private mortgage system for homes and businesses has developed with the aid of governmental fiscal policy. The positive effect of FDI in retail, high tech and large capital industries of petroleum and automobiles was observed during my trip through Western region of Russia. I perceived the economic activity in and around Saint Petersburg similar to what is observed travelling about New York City market. The metrics witnessed in Russian economy since 1998 support the concept of the Russian market as being attractive for business investment for new entrance. GNP between 1998 and 2014 grew almost 21% annually, with inflation at 5.4% and growth in GDP per capita growth quadrupling to $26.1 thousand (Author Unknown, 2017). Unemployment in 2016 stands at 5.4%. Russia does run a budget deficit of 2.6% of GNP; however, Russia earns annually much foreign currency from petroleum exports dominated in US dollar and its debt/GNP ratio sits at 17.7%. The growth in metrics is more impressive considering the reduction in 2014 in global price for petroleum, although real growth in GNP turned negative in 2015-2016 (CIA Fact Book).One interview participant perceived the economic activity in the Western region of Russia to be equal to the economic activity witnessed in the Eastern manufacturing regions of Mainland China. Another pointed to the personal freedom now enjoyed by the Russian peoples to pursue whatever life pursuits and life style that an individual chooses (favorable perception held higher with the younger adults than it is with those older). The risks for entrance of business investment are considered in moderate range. Sovereign risk and T&C risk are dampened by Russia’s earning in hard currency from exports and being one of four countries with large gold reserves (CIA Fact Book). Russia remains in 2016 less strong than most of other G-20 Countries in managing internal application of jurisdictional and operational policies to foster individual economic freedoms for private property rights and private business activity. Tight Government regulation relative to private ownership in banking, energy, transportation and defense-related Sectors continue through 2016 (CIA Fact Book). Eastern Mainland ChinaThe fiscal and monetary policies adopted by China’s Government since 1978 have promoted business growth in the private sector, especially the manufacturing sector aimed at the exporting of goods (Lardy, 2014). China in 2010 became the World’s largest exporter of goods, providing a large and continual stream of hard foreign currency into the Country’s treasury (CIA Fact Book). Documented growth in GNP since 2000 has been in 7-10% annual range, with inflation of 2.3% and unemployment of slightly above 4%. Budget deficit is a relatively low 2.3% and debt/GDP ratio is at a relatively low 43.9% (Author Unknown, 2017).Reforms in fiscal and monetary policy begun in the 1990s and first decade of the 21st Century have promoted growth in private ownership sector of business as opposed to state-owned enterprise growth (Morrison, 2015). Economic statistics demonstrate the rise of private companies by 6.7% annually and the decline of state-owned companies since 2002, especially in sectors of agriculture, construction, most non-military related industries and services (Lardy, 2014). Despite predominance of state-owned firms in the export manufacturing industries, employment growth since 2002 from these industries flowed from private enterprises. Monetary policy is administered through the Government owned banks (Lardy, 2014). Government reforms have enabled bankers more economic leniency in making decisions about to which companies to direct loans. Higher returns in the private sector have promoted issuance of favorable credit to private companies rather than state-owned firms since 2002. My interview with a 20-year investment counselor in 2016 confirmed that the reality for loans to private enterprises continue to grow in 2016, promoting a rise of the Chinese private sector.China is perceived as an attractive market for FDI when market entry risks are considered (Toksoz, 2014). Sovereign risk and T&C risk are considered slight due to large inflow of foreign hard currencies generated by exports and, similar to Russia, being one of four large holders of gold (Rickards, 2014). Perceived threats from application of operational and jurisdictional policies have declined in importance due to China’s entry into the World Trade Organization (Morrison, 2015).IMPLICATIONS AND CONCLUSIONSComparing the debt/GDP ratios for each case – Russia 17.7%, Baltics and China each about 44% - with that of the US (104.2%), my perception is that each case government has managed fiscal and monetary policy responsibly and conservatively to achieve a percentage less than 50%. Yet in each case, employment in private sector has grown positively with unemployment rates measured less than double digits (compared to US rate of 10-12% if unemployment rate is adjusted for worker participation rate). In each case, the perceived sovereign and transfer and convertibility risks are low. In Russia and China, the perception of low risks is enhanced by each Country holding large supplies of the World’s gold (King, 2016). The level of budget deficits as measured by government spending less tax revenues received do not appear to influence perception of risk to extent of the debt/GDP ratio. The latter ratio is perceived as indicating a potential rise in likelihood of governmental insolvency occurring in a dynamic, but uncertain, future (Rickards, 2014). The lesson learned by government officials in each case is to develop and manage fiscal and monetary policies in a manner that focuses the Country’s total public debt measured against country GDP well below 100% (King, 2016). While no exact metric for the debt/GDP ratio associated with low risk of solvency or T&C (transfer and convertibility) risks is suggested, each case exhibited a number less than 50%. Conversely, the research intuitively suggests that a country with a debt/GNP ratio in excess of 100% experiences a loss in real GNP and a reduction in number of jobs in the economy (With a perceived true inflation for USA estimated at 9%, real growth is negative, or deflationary as demonstrated above).Evaluating internal, governmental jurisdictional and regulatory risks for new market entrants requires country specific analyses for new market business investment (Toksoz, 2014). For US multinationals, strong rule of law and private property rights are the expectation (Hill, 2013). The availability of strong local banks, especially ones supported by hard currency metals, which can issue foreign investment credit, proportionally reduces risk of loss of value for future investment in local assets (Rickards, 2014).As large countries, both geographically and in terms of GNP, Russia and China present unique challenges for perceived market attractiveness for new business investment into nearby neighboring countries. Russia and China consider countries bordering on their territory as in their sphere of influence with uncertainty surrounding whether future annexations similar to what occurred in the Ukraine in 2014 are probable (CIA Fact Book, 2017). The Baltic Counties’ level of uncertainty about Russia’s intent is a reason for caution by any company considering new investment there (Purs, 2012). From observations, my perception is that preferences of Russian and Chinese leaders are to enjoy the benefits of free trade and access for transportation with each of their neighbors rather than to suffer the cost of an annexed satellite. The Businessweek article (2016-2017) about Russia so supports the ernmental application of monetary, fiscal and jurisdictional and operational policies do not present the only set of benefits and risks for making decisions about new business investment in a new country or market. However, the research suggests that application of governmental policies should and does play a primary role of influence for making effective decisions when evaluating new market entrance.REFERENCESAuthor Unknown, December 26, 2016-January 8, 2017. Russia’s Deadly Mideast Game. Bloomberg Businessweek.Author Unknown, 2017. Russia Gross National Product, Retrieved from: Unknown, 2014-2015. CIA World Fact Book. 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