International Marketing: Chapter 6

POlitical Ideology
body of consteucts theories and aims the constitute a sociopolitical construct
Features of a contemporary democratic system
freedom of opinion, expression, and press, free dom to organize, free elections, limited terms for elected officials, fair court system, nonpolitical bureaucracy infrastructure, citizen access to the decision making process
Systematic Political risj
change in public policy
Procedural Political Risk
Bureacratic delays, labor disputes, etc
Distributive Political Risk
tax and regulatory revisions
Catastrophic POlitical Risks
random political events
Leading Sources of Political Risk
Nationalization, International war or civil strife, Unilateral breaches of contract, Destructive governmental actions, Harmful actions against people, Restrictions on the repatriation of profits, Differing points of view, Discriminatory taxation policies
Sovereignty
Independent, free from external control
Can lose sovereignty though…
WTO (biggest threat), NATO, NAFTA
Monarchy
rule by one
Aristocracy
Rule by few
Democracy
Rule by many
Nationalism
Intense feeling of national pride and unity, national interest and security are more important than international relations
Nationalism is not…
a widespread fear or animosity directed at a particular country
Confiscation
the seizing of company’s assets without payment
Expropriation
where the government seizes your investment but makes some reimbursement for the asset
Domestication
when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees. (mandating local ownership)
Tax controls
political risk used as a means of controlling foreign investment
Price controls
Essential products that command considerable public interests
Labor Problems
Labor unions have strong government support they use effectively in obtaining concessions
Political Sanctions
one or a group of nations may boycott another nations (stop all trade between the countries)
Political and Social Activists
not usually government sanctions, interrupt normal flow of trade
Nongovernmental Organization (NGO)
affecting policy decisions made by governments (protests, lobbying) Also involved in mitigating much of human misery plaguing parts of the planet
Goals of terrorism against multinationals
embarrass a government, generate funds by kidnapping executives, use as pawns in political or social disputes, inflict terror within a country (Sept. 11)
Cyberterrorism
inflict damage on a company with little chance of being caught (foreign and domestic antagonists)
Viruses
becoming more damaging – spreads rapidly that it is hard to stop
Politically sensitive products
Perceived to have an effect on the environment, exchange rates, national and economic security, and the welfare of people. They are publicly visible or subject to public debate. (Health often the subject)
Political risk assessment
Attempt to forecast political instability. (Will the government fail?)
Investment risk assessment
level of risk a company is undertaking
Lessening Political Vulnerability
Relations between governments and MNCs are generally positive if investment benefits the community
Minimize political vulnerability and risk
joint ventures, expanding the investment base, licensing, etc.