Does a foreign company have an obligation to conform to local customs, Research Paper

Does a foreign company have an obligation to conform to local customs, or is it, at most, just good business to do so - Research Paper Example Foreign investment therefore is a result of the rising needs of companies to enhance the accomplishment of organizational goals. This paper presents a critique of whether a foreign company has an obligation to conform to local customs, or whether it does so since it is at most, just â€Å"good business†. When companies establish in foreign land, they find rules that govern trade, some of which may be similar to the parent country while others are totally different. There are also other companies in the particular country that are already established and are keen observers of the entry of new industries in the economy due to competition. Such companies expect the foreign investor to compete on fair grounds with the local organizations. No matter the nature of local customs, market liberalization requires businesses to invest based on willingness as well as the capability to maintain competitiveness under the prevailing conditions. On the other hand, local customs are obligatory for all organizations that have interest in investing within an economy. As investors move in to foreign markets, they usually face difficulties depending on many factors such as political stability, barriers to trade and conflicts of interests among other hindrances. These usually present high risks to foreign investors considering the fact that it requires a high initial capital outlay to establish in a foreign economy. The stocks acquired in foreign companies may be lost if the host country fails to formulate policies that facilitate foreign investment. In case of policies focused on the expropriation of foreign companies to utilize property or premises for other development purposes, foreign organizations may face a lot of difficulties and are usually at a risk of closure and losses (Dugan et al. 2008). However, the international law has provisions aimed at protecting foreign