After reading Chapters 7 & 8, and understanding the concepts presented in Chapters, read the IB Strategic Insight on page 224 of the textbook. Based on this and other concepts presented in the chapter, discuss how an MNC or entrepreneur operating in Africa can protect its business from political risk.

Although Kenyan Arabica coffee grown around Mount Kenya has a strong reputation worldwide, recent production of the coffee has hit a low of 45,000 tons. This is in sharp contrast to the record 127,000 tons that was harvested in the 1987-1988 harvest. What led to such decline while the neighboring country of Uganda has seen a doubling of production? Experts attribute this decline partly to the ending of coffee quota by the global coffee cartel. However, many believe that the onerous regulation governing coffee sale in Kenya is also to blame. Instead of a market where buyers and sellers can compete to buy the coffee and sell directly to exporters, Kenyan regulations require that farmers deal with a number of intermediaries that ultimately reduces the price they are given. Most small local farmers belong to cooperatives that process the coffee beans for sale. Once the coffee beans are bagged, they are sold by one of the eight marketing agents to around 60 domestic and international coffee dealers. These transactions occur as auctions at the Nairobi Coffee Exchange. Because of regulations requiring so many intermediaries, local farmers tend to receive lower prices. In fact, these farmers complain regularly that the coffee dealers tend to have agreements to keep prices low. The auctions are often hushed events where traders press buttons to signal their intention to buy. Additionally, many of the dealers and marketing agents tend to belong to the same sister companies. They can also collude to keep prices low. Source: Based on The Economist, 2016, "Kenya coffee: A bitter harvest," March 26, pp. 80-81