• 2004 – Czech Republic joined EU
• Fiscal and monetary policy aims to align its macroeconomic conditions with the rest of the EU.
• The earliest date to join eurozne is unknown ...may be 2012

• Cultural environment
• Demographic environment
• Econmic environment
• Natural environment
• Technological environment
• Political Environmnet

•
The political environment includes all laws, government agencies, and lobbying groups that influence or restrict individuals in the society. The international business is also subject to political decrees made by government both in „home“ and „host“ countries.
•
Home government can apply presure not to deal with disapproved parties ……export licence…….withdrawal of export guarantee cover.
• Host government my take measures like taxation, ownership controls, operating restrictions or expropriation.

Resource Allocation
Market Command
Centrally
Planned
Capitalism
Private
Market
Capitalism
Resource
Ownership
State
Market
Socialism
Centrally
Planned
Socialism

The reasons of expansion
The factors that drive enterprises to seek business development and growth through international and global operations:
 Market factors
 Cost factors
 Competitive factors
 The international business environment

Entry modes
 Exporting
 Turnkey Projects
 Licensing
 Franchising
 Joint Ventures
 Wholly Owned Subsidiaries

Three Types of Political Risk
•
– Exposes property and life
•
– Interference with the ongoing operations of a firm
•
– Limitations on the outflow of funds

Economic Risk
• Exchange controls may be levied
• Tax policies may be used to control corporations and their capital
• Price controls may employed to control prices of imported products or services

Managing the Risk
• Demonstration of concern with host country’s society can be effective.
• Firms can take out insurance to cover losses due to political and economic risk.

The Political and Economic Environment
• One important aspect is the phenomenon of ethnicity
– Driving force behind political instability
• Firms must assess political risks
– Government actions that could adversely affect the long-run profitability or value of a firm

Political Risk – 7 Typical risk events
• Expropriation of corporate assets without prompt and adequate compensation
• Forced sale of equity to host-country nationals, usually at or below depreciated book value
• Discriminatory treatment against foreign firms in the application of regulations or laws
• Barriers to repatriation of funds (profits or equity)

Managing Political Risk
• Avoidance – either the avoidance or withdrawal of investment in a particular country
• Adaptation – adjust to the political environment
• Dependency – keeping the host nation dependent on the parent corporation
• Hedging – minimizing the losses associated with political risk events

What is political risk?

Political Union
Economic Union
Common Market
Coordinate aspects of members’ economic and political systems
Remove barriers to trade, labor, and capital; set a common trade policy against nonmembers; and coordinate members’ economic policies
Remove all barriers to trade, labor, and capital among members; and set a common trade policy against nonmembers
Customs Union
Remove all barriers to trade among members, and set a common trade policy against nonmembers
Free-Trade Area
Remove all barriers to trade among members, but each country has own policies for nonmembers