Question

Which of the following statements is not true about risk as it affects companies' choice of locations for foreign operations?

a) Companies and their managers differ in their perception of what is risky.
b) One company's risk may be another company's opportunity.
c) There are means to reduce risk other than avoiding locations.
d) Companies choose the cheapest location regardless of risks.

Answer 1

The false statement about risk and companies' location choices is that companies choose the cheapest location regardless of risks. In reality, they consider a myriad of factors, including costs, supply chain logistics, infrastructure, taxation, government competence, and environmental regulations.

Step-by-step explanation:

The statement that is not true about risk as it affects companies' choice of locations for foreign operations is 'Companies choose the cheapest location regardless of risks.' Companies assess a variety of factors when determining where to locate their operations, and while cost is a significant component, it is not the only consideration. When deciding on a location, companies will look at labor and financial capital costs, proximity to suppliers and customers, the quality of infrastructure, the level of taxes, and local government competence and honesty. The cost associated with environmental regulations is factored in, but it is generally a small portion of the total costs.