Political Environment .

Factors here include system of government in targeted market;

political stability; dominant ideology; and national economic priorities. This aspect of
an international market is often the single most important one, for it can be so
influential in shaping other factors. For example, a government that is distrustful of
foreigners or intent on maintaining domestic control of an industry or industries might
erect legal barriers designed to severely curtail the business opportunities of foreign
firms.

Political

 Is there any historical relationship between countries that would benefit or hinder
international marketing?
 What is the influence of communities or unions for trading? E.g. The European Union
and its authority over European laws and regulation.
 What kind of international and domestic laws will your business encounter?
 What is the nature of politics in the country that you are targeting, and what is their view
on encouraging foreign competition from overseas?

Political Factors.
 The political arena has a huge influence upon the regulation of businesses, and the
spending power of consumers and other businesses. You must consider issues such as:
 1.How stable is the political environment?
 2.Will government policy influence laws that regulate or tax your business?
 3.What is the government's position on marketing ethics?
 4. What is the government's policy on the economy?
 5. Does the government have a view on culture and religion?
 6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or
others?

Patterns of trade

 Most industrialised nations trade with each other. This had led to their
continued domination. particularly the USA, Western Europe and
Japan which between them have 66% of world GNP and trade. In
1985 industrialised trade to other industrialised countries accounted
for 47% of trade, next came developing countries to industrialised
(15%), and finally industrialised to developing countries (13%).
 Political influences can also be seen between trading partners, for
example Zimbabwe's trade with China. Marketers need to identify
trading patterns between nations and product trading patterns. East-
West trade and West to the former communist bloc is likely to grow at
the expense of North-South trade.

THE POLITICAL ENVIRONMENT: The critical concern Political

environment has a very important impact on every business operation
no matter what its size, its area of operation. Whether the company is
domestic, national, international, large or small political factors of the
country it is located in will have an impact on it. And the most crucial &
unavoidable realities of international business are that both host and
home governments are integral partners. Reflected in its policies and
attitudes toward business are a governments idea of how best to
promote the national interest, considering its own resources and
political philosophy. A government control's and restricts a company's
activities by encouraging and offering support or by discouraging and
banning or restricting its activities depending on the government. Here
steps in international law. International law recognizes the right of
nations to grant or withhold permission to do business within its
political boundaries and control its citizens when it comes to
conducting business. Thus, political environment of countries is a
critical concern for the international marketer and he should examine
the salient features of political features of global markets they plan to
enter. THE SOVEREIGNITY OF NATIONS From the international laws
point of view a sovereign state is independent and free from external
control; enjoys full legal equality; governs its own territory; selects its
own political, social, economic systems; and has the power to enter
into agreements with other nations. It is extension of national laws
beyond a country's borders that much of the conflict in international
business arises. Nations can and do abridge specific aspects of their
sovereign rights in order to coexist with other countries. Like the
European Union, North American Free Trade Agreement (NAFTA) are
examples of nations voluntarily agreeing to give up some of their
sovereign rights in order to participate with member nations for
common, mutually beneficial goals. For example the pajama game
discussed in global perspective is not unusual for multinational
corporations. The pajama caper was a controversy arose over a US
embargo forbidding US businesses to trade with Cuba. Wal-Mart was
selling Cuban made pajamas in Canadian market. When Wal-Mart
officials in US came to know about this, they ordered all offending
Cuban pajama's as it was against US law. Canada was incensed with the
obtrusion of US law on Canadian citizens. The Canadian citizen's felt
that they should be able to buy Cuban-made pajama's if they wanted
to. Wal-Mart was caught between a Canada-US foreign policy feud.
Wal-Mart Canada was breaking US law if it continued to sell pajamas,
and was subject to a million-dollar fine and possible imprisonment.
However, if it did pull out pajamas from Canadian market it was subject
to 1.2 million dollar fine under Canadian law. The ideal political climate
for a multinational firm is stable, friendly environment. Unfortunately,
that is never really the case, it's not always friendly and stable. Since
foreign businesses are judged by standards as variable as there are
nations, the friendliness and stability of the government in each
country must be assessed as an ongoing business practice. STABILITY
OF GOVERNMENT POLICIES The most important of the political
conditions that concern an international business is the stability or
instability of the prevailing government policies. Political parties may
change or get reelected but the main concern for MNCs is the
continuity of the set rules or code of behavior regardless of the party in
power. A change in the government does not always mean change in
the level of political risks. In Italy the political parties have changed 50
times since the end of World War II but the business continues to go on
as usual inspite of the political turmoil. In comparison is India, where
the government has changed 51 times since 1945 but however much of
the government policies remain hostile to foreign investments.
Conversely, radical changes in policies toward foreign business can
occur in the most stable of the governments. Some of the African
countries are among the unstable with seemingly unending civil wars,
boundary disputes and oppressive military regimes. Like one of the
region with the greatest number of questions concerning long-term
stability is Hong Kong as since China has gained control, the official
message is that nothing will change and thus everything is seemingly
going smoothly but the political analysts say that it is too early to say
how will the business climate change, if it will. If there is potential for
profit and if given permission to operate within a country, MNCs can
function under any type of government as long as there is some long-
term predictability and stability. POLITICAL PARTIES Particularly
important to the marketer is the knowledge of all philosophies of all
major political parties within a country, since anyone might become
dominant and alter prevailing attitudes. In those countries where there
are two strong political parties where usually one succeeds the other, it
is important to know the direction each of the parties is likely to take.
Changes in direction a country may take toward trade and related
issues are caused not only by political parties but also by politically
strong interest groups and factions within different political parties,
which cooperate to affect trade policies. NATIONALISM Economic
nationalism that exists to some degree in all countries is another factor
that affects international environment. Nationalism is intense feelings
of national pride and unity, an awakening of nation's people to take
pride in their own country. This pride can take an anti-foreign business
bias. One of the central aims of economic nationalism is the
preservation of national economic anatomy where national interest
and security are more important than international considerations.
POLITICAL RISKS OF GLOBAL BUSINESS CONFISCATION, EXPROPRIATION
AND DOMESTICATION The most severe political risk is confiscation,
which is seizing of company's assets without payment. Less severe is
however, expropriation, which requires reimbursement, for the
government seized investment. A third type of risk is domestication,
which occurs when host country takes steps to transfer foreign
investments to national control and ownership through series of
government decrees. A change in the government's attitudes, policies,
economic plans and philosophies toward the role of foreign investment
is the reason behind the decision to confiscate, expropriate or
domesticate existing foreign assets. ECONOMIC RISKS International
companies are often faced with many economic risks most of which
arise without any prior warning. Economic risks are an important and a
recurring part of political environment that a few companies can avoid.
· Exchange controls stems from shortage of foreign exchange held by
the country. When this happens, controls may be placed upon all
movements of capital or selectively against most politically vulnerable
companies. Exchange controls are extended to cover products by
applying a system of multiple exchange rates to regulate trade. · Local-
content laws- companies often require a portion of any product sold in
a country to have a local content. · Import restrictions- selective
restrictions on import of certain raw materials, machines and spare
parts are common strategies used to force foreign companies to
purchase more materials within host country creating markets for local
products. · Tax controls- taxes are a classified risk when used as a
means of controlling' foreign investments. They are often raised
without warning and in violation of formal agreements. · Price controls-
essential products that command considerable public interest are often
subject to price controls. ASSESSING POLITICAL VULNERABILITY Some
products are more politically vulnerable than others, in that they
receive more government attention. This special attention may result in
positive or negative actions towards the company. Unfortunately there
are no absolute guidelines for marketer's to follow whether the product
will receive government attention or not. POLITICALLY SENSITIVE
PRODUCTS. There are some generalizations that help to identify the
tendency for products to be politically sensitive. Products that have an
effect upon the environment exchange rates, national and economic
security, and the welfare of the people are more apt to be politically
sensitive. For products judged non essential the risk would be greater,
but for those thought to be making an important contribution,
encouragement and special considerations could be available.
FORECASTING POLITICAL RISKS A number of firms are employing
systematic methods of measuring political risk. Political risk assessment
can: · Help managers decide if risk insurance is needed · Devise and
intelligence network and an early warning system · Help managers
develop a contingency plan · Build a database of past political events
for use by corporate management · Interpret the data gathered and
getting forewarnings about political and economic situations REDUCING
POLITICAL VULNERABILTY Even though the company cannot directly
control or alter the political environment, there are measures with
which it can lessen the susceptibility of a specific business venture.
GOOD CORPORATE CITIZENSHIP A company can reduce its political
vulnerability by being a corporate citizen and remembering: - 1. It is a
guest in the country and should act accordingly 2. The profits are not
it's solely, the local employees and the economy of the nation should
also benefit. 3. It is not wise to try and win over new customers by
totally Americanizing them. 4. A fluency in the local language helps
making sales and cementing good public relationships. 5. It should train
its executives to act appropriately in the foreign environment.
STRATEGIES TO LESSEN POLITICAL RISKS MNCs can use other strategies
to minimize political risks and vulnerability. They are: - · Joint ventures ·
Expanding the investment base · Marketing and distribution · Licensing ·
Planned domestication · Political payoffs GOVERNMENT
ENCOURAGEMENT OF GLOBAL BUSINESS FOREIGN GOVERNMENT
ENCOURAGEMENT Governments also encourage foreign investment.
The most important reason to encourage investment is to accelerate
the development of an economy. An increasing number of countries
are encouraging investments with specific guidelines toward economic
goals. MNCs may be expected to create local employment, transfer
technology, generate export sales, stimulate growth and development
of the local industry. US GOVENRMENT ENCOURAEMENT The US
government is motivated for economic as well as political reasons to
encourage American firms to seek opportunities in the countries
worldwide. It seeks to create a favorable climate for overseas business
by providing the assistance by providing the assistance that helps
minimize some of the troublesome politically motivated financial risks
of doing business abroad. Word Count: 1698