The Political Environment
Agenda
A.Stability of Government and Its Policies B.Political Risks of Global Business C.Assessing Political Vulnerability D.Reducing Political Vulnerability
share many common economic and societal goals. An international marketer needs to understand the philosophies of the major political parties.
Nationalism
Nationalism has been defined by Cateora as an intense feeling of national pride and unity, an awakening of a nations people to pride in their country. Nationalistic tendency tend to focus on what is better for the state rather than the world.
A. Stability of the Government
One of the top concerns of an international business is the stability of the government and its policies.
The international marketer
is not as concerned with who is in power as much as she is concerned with the stability of the policies that affect the marketing of her product.
Nationalism can cause:
o o o o Restriction on imports Tariffs Restrictive barriers A desire to only by commodities produced in the home country
The keys to international marketing as related to governments are predictability and stability. The international marketer should understand both the political parties that exist and the nationalistic tendencies of the people.
B.Political Risk of Global Business Risks in international marketing can range from:
1. Confiscation 2. Expropriation 3. Domestication
Political Parties
A political party is a group of people who come together in politics that share many common economic and societal goals. An international marketer needs to understand the philosophies of the major political parties. A political party is a group of people who come together in politics that
Confiscation
One of the major political risks that can occur is the confiscation of assets. This is when a government goes into a business and seizes all of its assets without compensation.
Expropriation- is a lesser form
of confiscation because the
government will make some compensation available for seizing the assets.
This is when countries pose trade restrictions on other countries in order to cause change.
Domestication
Domestication is when a foreign government tries to take foreign investment and transfer it to national control and ownership.
o Political and Social Activist
This is a group of people who have a political or social agenda who see your company as a means to further their agenda.
Domestication can occur by the government mandating the following:
o Transfer ownership to nationals o Managers in the company must be nationals o Decisions must be made by nationals o Inputs for the product are produced locally
o Violence and Terrorism
There are times when your product and/or company may be seen as a symbol of a particular country in which a group of people seek to do harm to that country by acts of violence.
Economic Risks
Exchange controls Local-content laws Import restrictions Tax controls Price controls Labor problems
B.Assessing Political Vulnerability
When examining the potential of a foreign market, the marketer should assess the following:
o Politically Sensitive Products and Issues o Forecasting Political Risk
Other Political Risks o Political Sanctions
Politically Sensitive Products
To figure out if your product is subject to political sensitivity, you should ask
yourself is your products perceived as affecting: o The environment o Exchange rates o National and Economic security o Welfare of people
Qualities of Good Corporate Citizenry
Realize and act as if you were a guest in the country. Distribute some of the profits back to the foreign market. Do not try to Americanize the market. Try to do business in the mother language. Should try to develop some worthwhile public projects. Executives should respect the foreign culture. Staff foreign offices with competent nationals rather than all US citizens.
Forecasting Political
Risk. Forecasting can occur using inhouse political analysis or hiring external sources that specialize in examining political risk. o This analysis can be used to help determine whether you should market your product in the foreign market and what conditions must be met for you to pull out off the foreign market.
Strategies to Lessen Political Risk
Joint Ventures Expanding the Investment Base Control Marketing and Distribution Licensing Planned Domestication
Political Payoffs
Pay people in power to intervene on your behalf. Make sure you spread the money out to all major parties, not just the one currently in power.
C.Reducing Political Vulnerability
Good Corporate Citizenship Through Managing External Affairs Strategies to Lessen Political Risk Political Payoffs
