The Political Environment
A Critical Concern
4
4
Political Risks of Global Business
Stability of Government Policies
● Government Policies
6-2
6-3
● Political Parties
● Nationalism
Irwin/McGraw-Hill
●
●
●
●
●
●
●
●
Confiscation
Expropriation
Domestication
Economic Risks
 Exchange Controls
 Local-Content Laws
 Import Restrictions
Political Sanctions
Political and Social Activity
Violence and Terrorism
Cyberterorism
Irwin/McGraw-Hill
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Tax Controls
Price Controls
 Labor Problems


Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4
4
Assessing Political Vulnerability
Forecasting Political Risk
● Decide if risk insurance is necessary
● Government Attention
6-7
● Politically Sensitive Products
● Politically Sensitive Issues
● Political Risk
Irwin/McGraw-Hill
(EXIMBANK USA)
6-8
● Devise an intelligence network and an early warning
system
● Develop contingency plans for unfavorable future
political events
● Build a database of past political events for use in
predicting future problems
● Interpret the data gathered by a company’s intelligence
network in order to advise and forewarn corporate
decision makers about political and economic situations
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Irwin/McGraw-Hill
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
4
Good Corporate Citizenship
The MNCs Publics and Issues
● It is a guest in the country and should act accordingly
● The profits of an enterprise are not solely the company’s; the local
national employees and the economy of the country should also benefit
6-9
● It is not wise to try to win over new customers by completely
Americanizing them
6-10
● Although English is an accepted language overseas, a fluency in the local
language goes far in making sales and cementing good public relations
● The company should try to contribute to the country’s economy and
culture with worthwhile public projects
● It should train its executives and their families to act appropriately in the
foreign environment
Publics
Issues*
Church
Labor
Suppliers
Customers
Competitors
Pressure groups
Stockholders
Academia
General public
Minority groups
Public media
Governments and agencies
Conservationists
Financial community
Nationalism
Industrial democracy
Environment protection
Energy and raw materials
Taxes
Incentives and restrictions
Investment approvals and permits
Personal relations
Attracting personnel
Mergers and acquisitions
Money and credit
Legitimacy
Prices and profits
Image (Company and product)
Consumerism
Women’s liberation
Union relations
Equal opportunities
● It is best not to conduct business from the United States but to staff
foreign offices with competent nationals and supervise the operation from
the United States
Irwin/McGraw-Hill
Irwin/McGraw-Hill
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
SOURCE: Adapted from “How Embattled MNCs Can Devise Strategies for
External Affairs,” Business International, December 12, 1975, p. 394.
4
4
Strategies to Lessen Political Risk
Encouragement of Global Business
 Joint Ventures
6-11
 Investment Base Expansion
 Marketing and Distribution
 Licensing
● Foreign Government
6-12
● U.S. Government
 Planned Domestication
Irwin/McGraw-Hill
Copyright
2002 by The McGraw-Hill
Companies,
Inc. rights
All rights
reserved.
Copyright©2002
by The©McGraw-Hill
Companies,
Inc. All
reserved.
Irwin/McGraw-Hill
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.