4
Political and
Regulatory Climate
Learning Objectives
• List and explain the political motivations behind
government actions that promote or restrict international
marketing. Identify pressure groups that affect
international marketing.
• Discuss specific government actions salient to
international marketing, such as boycotts and takeovers.
• List and compare the four basic legal traditions that
marketers encounter worldwide.
• Cite examples illustrating how national laws can vary
and change.
• Differentiate between the steps involved in managing
political risk and those involved in planning for
regulatory change.
Chapter Overview
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Host country political climate
Host government actions
Home country political forces
Legal environments
National regulatory environments
Managing political risk
Global marketing and terrorism
Political Motivations of Host
Countries
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Self-preservation
Security
Prosperity
Prestige
Ideology
Cultural identity
Host Country Actions
• Government subsidies
• Ownership restrictions
• Operating conditions
– Work permits
– Local content requirements
Takeovers
• Takeovers = Host-government actions
that result in a firm’s loss of ownership
or direct control
• An expropriation is a formal seizure of
an operation
• A confiscation is an expropriation
without compensation
Home Country Actions
• Guided by the same six interests as host
countries
– U.S. embargo of Cuba
– U.S. anti-Arab boycott legislation
• Often home countries seek multilateral
actions to increase their bargaining
power
Legal Evolution
• Product liability
• Bankruptcy
• Regulating cyberspace
Human Nature Orientation (HNO)
• Positive HNO – assume people can be
trusted to obey the rules
• Negative HNO – assume people cannot
be trusted to obey the rules
Attitudes Toward Rules
• Attitudes toward rules are affected by
two criteria:
1. Level of power distance
2. Type of human nature orientation
Managing Regulatory Change
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Alter
Bargain to get government to change regulations
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Avoid
Move to bypass the impact of the regulation
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Accede
Comply
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Ally
Avoid some risks by seeking strategic alliances
Political Risk
Political risk is the possibility that an
unexpected and drastic change due to
political forces will result in adverse
circumstance for business operations
Regulatory Change Versus
Political Risk
• Regulatory Change
– More moderate and predictable changes in
the business environment
• Political risk
– More unexpected and drastic changes
Managing Political Risk
• Fighting the battle on two fronts:
1. Perfect intelligence systems to avoid being
caught unaware when changes disrupt
operations
2. Develop risk-reducing strategies that help
limit their exposure, or the losses they
would sustain, should a sudden change
occur
Terrorism Affects
International Marketing
• Starbucks pulled out of Israel because they feared a terrorist
attack
• GE criticized by a senator for taking “blood money” from a
state that supports terrorism (Iran)
• Global tourism and education are affected
– Americans spend more on domestic and nearby tourism;
less spent on overseas tourism. Fewer Middle Easterners
are visiting America.
– Tighter visa controls in America have created an
opportunity for non-U.S. countries to increase their share
of international students
• Governments and companies spend lots of money to protect
infrastructure, plant, equipment, and people