Economics · Globalization and Strategic Risk

An Indian manufacturing firm, 'Bharat-Auto', produces specialized components for global electric vehicle manufacturers. To stay competitive in the global market, the firm is considering a merger with a German technology startup that holds patents for advanced battery management systems. The firm faces high import duties on raw materials but benefits from the Export Promotion Capital Goods (EPCG) scheme. Six sentences describe the application: 1. Bharat-Auto exports 70 percent of its production to Europe and North America. 2. The merger will allow the firm to move up the value chain from a component supplier to a systems provider. 3. The firm uses the Advance Authorization scheme to import lithium and cobalt duty-free. 4. The global move toward 'Friend-shoring' has made the German partnership strategically vital. 5. The firm must maintain an 'Export Obligation' equivalent to six times the duty saved on machinery. 6. A sudden appreciation of the Euro against the Rupee could increase the acquisition cost of the startup. Applying the concepts of globalization, what is the most significant 'Strategic Risk' that Bharat-Auto faces in this global expansion?