Host and Home Country Constraints
Although America gained independence in the 1700s, it still has some constraints which stress its development as well as development of individuals. Business persons and companies are greatly affected by these constraints. The most disturbing issue that has disturbed all departments in the nation is its position in the world. There are political, legal, economic and other constraints affecting the country.
Politically, American nations are challenged by peace treaties, foreign trade, military alliances, diplomatic exchanges, international aid, external voices and foreign trade. There is no political participant who attempts to influence the America’s political decision. This makes the States stranded with no external advice from experts or friend nations. Economically, America is also affected. The government has divided foreign aid strategies into five main objectives as they try to curb the constraints. There are numerous NGOs and international charity organizations which claim to get relief from America. The government has five departments which are faced by numerous challenges. These departments are: economic growth, peace and security, humanitarian assistance, investigating people and governing democratically. The nations are endangered by terroristic attacks from their enemies. This would greatly affect their economic status (Pastor, 2008).
There are various legal constraints in America which can delay the company from starting an industry in Peru. The manufacturer has to acquire legal documents from the Legal Services Outsourcing. Similarly, officials from the federal government must sign documents to show that the business aimed is legal. Currently, America has unsettled problems regarding economic zone. The policy to define economic zone is still in the early stages. This hinders expansion of the trade industry. Interstate policies are the most constraining as they directly affect each nation. There are certain state laws which restrain trade in the name of conservation (Deere & Esty, 2002).
Peru is the host country where Family Harvest Foods Company wants to start an industry. There are various constraints in this country which will affect the manufacturer. The greatest constraint faced by Peru is inflation. The consumer price level is doubled every year. This is attributed to the high levels of underemployment and unemployment in the country. Inflation increases violence and external debt. The deteriorating economic status of the country is greatly influenced by the divided society of Peru. Rapid growth of Peru population in the twentieth century worsened the economy since it overran the labor productivity.
Political violence and disorganized economy discourage foreign investors from investing in the country. In the past, Peru has had political violence after every election. The country has survived various military coups which hinder economic development. The public has been opposing foreign investment in their land. This means that culture of the people does not allow them to accept foreigners to invest in their land. There have been several official campaigns against foreign investment in the past. The government has been trying to settle these conflicts, but the spirit is still present. History repeats itself. Many investors fear investing in the country after considering the past events. Since the nineteenth century, foreign investment has played a minor role in the country’s economy (White, 2007).
Much of Peru’s land has poor quality soil and unfavorable climate. This is exaggerated by high dependence on unreliable water supplies. The situation is deteriorated by negative policies towards the agricultural sector. Price controls have been frequently recourse on foods to subsidize food imports. This hurts the agricultural sector. Generally, the government has been favoring urban consumers at the expense of rural producers. The Agrarian reform Law of 1969 is a giant constrain in the agricultural sector of Peru. The reform caused violence which made many people flee from their productive lands to refugee camps in 1980s (Bacon, 2008). These are the few productive regions which are still empty today. People are traumatized by the events and cannot dare go back to that land.
There is great competition in the food processing industry. Since 1980s, food processing occupied more than one third of the whole manufacturing industry. Textiles, metals and chemical industry are affected by a minor shake in the economy. The weak domestic market and economy for other products rather than food increase competition in food processing. There is great protection from the government for those firms which prefer foreign products more than domestic ones. Therefore, domestic cost is raised for consumers making them opt for the foreign goods. As a result of this, food processing is the only successful industry. Initiating a food processing industry requires strategic plans to fit in the existing competition (Fandl, 2007).
Technology constraints remain unresolved in Peru. The country has had political instability for a very long time. This has caused great imbalance between imports and exports demand. The unstable economy does not support advancement in technology. Food industry is the only successful sector. This means that other industries are yet to revive. Education, health and other social amenities are not fully advanced. Increasing population hinders rapid development. There are few skilled members of the society to employ. That is why the country has high poverty levels. Generally, Peru has social, cultural, economic, geographical and security constraints which hinder the country’s development.