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Chapter 4: Political and Regulatory Climate

by: Kerrigan Unter

Chapter 4: Political and Regulatory Climate IBUS 3201

Marketplace > George Washington University > Business Administration > IBUS 3201 > Chapter 4 Political and Regulatory Climate
Kerrigan Unter
GPA 3.0
International Marketing Management
Anna Helm

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International Marketing Management
Anna Helm
Class Notes
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This 3 page Class Notes was uploaded by Kerrigan Unter on Monday October 19, 2015. The Class Notes belongs to IBUS 3201 at George Washington University taught by Anna Helm in Fall 2015. Since its upload, it has received 47 views. For similar materials see International Marketing Management in Business Administration at George Washington University.


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Date Created: 10/19/15
IBUS 3201 Chapter 4 Political and Regulatory Climate 4 Host Country Political Climate governments are sharply in uenced by the prevailing political philosophy local pressure groups and the government s own selfinterest selfpreservation security prosperity prestige ideology cultural identity a country s selfpreservation is most threatened when its national sovereignty is at stake sovereignty the complete control exercised within a given geographic area including the ability to pass laws and regulations and the power to enforce them countries often limit foreign ownership of newspapers television and radio stations for reasons for preserving national sovereignty prosperity is usually expressed in national income GNP and comparisons between countries are frequently made in terms of percapita income GNP per capita fostering national prosperity can also involve goals other than supporting economic development and employment local industry associations and local unions can pressure the government into acting in certain ways 42 Host Government Actions government subsidies represent free gifts that host government dispense in the hope that the overall benefits to the economy will far exceed such grants host governments sometimes pursue the policy of requiring that local nationals become part owners of foreign subsidiaries operating within their borders governments establish and enforce many regulations that affect the environment in which businesses operate host countries control firms in the areas of product design and packaging pricing advertising sales promotion and distribution government boycotts can be directed at companies of certain origin or companies that have engaged in transactions with political enemies boycotts tend to shut some companies completely out of a given market takeover any hostgovernmentinitiated actions that result in a loss of ownership or direct control by their foreign company expropriation formal or legal seizure of an operation with or without the payment of compensation confiscation expropriation without any compensation domestication the limiting of certain economic activities to local citizens 43 Home Country Political Forces unilateral restrictions imposed by one country only put businesses from that country at a competitive disadvantage Intemational Countries come under attack for the following reasons their choice of markets their methods of doing business controversy usually involves business practices in product strategies promotion practices and pricing policies promotional practices the way products are advertised or pushed through the distribution channels 44 Legal Environments common law derived from English law acknowledges the presence of social norms civil law based on the Roman tradition of the preeminence of written laws laws may be more encompassing as well as precise Islamic law derived from the Koran as well as from other Islamic traditions dominates family law but its application to business situations varies greatly from country to country socialist law arose from Marxist ideologies economic power is often centralized and market economies were unknown 45 National Regulatory Environments regulations can be regional or even vary city by city product liability law bankruptcy transactions in cyberspace discrepancy between the rules and what people actually do Human Nature Orientation HNO negative societies societies that assume people cannot be trusted to obey the rules positive societies societies that assume people can be trusted to obey the rules tight cultures there are many rules norms and standards for correct behavior loose cultures few rules norms and standards for correct behavior 46 Regulatory Change regulatory changes encompasses many government actions such as changes in tax rates the introduction of price controls and the revision of the labeling requirements managing regulatory change alter avoid accede and ally political mapping consists of identifying all individuals involved in a regulatory decision and understanding their various points of views 4 7 Political Risk political risk the possibility that an unexpected and drastic change due to political forces will result in adverse circumstances for business operations the presence of political risk means that a foreign company can lose part or all of its investment market or earnings in another country as a result of political actions on the part of a host government the rm s home government or pressure groups all political instability may not post the possibility of negative consequences to every firm political risk assessment PRA decide the objectives of the system determine the internal organization and responsibility within the company and determine how the analysis will be done ways to minimize political risk local partners minimize assets by borrowing locally diversifying across markets ad purchasing insurance 48 Global Marketing and Terrorism direct effects of terrorism disruption of power communication and transport systems as well as physical damage to facilities and loss of life indirect effects of terrorism increased costs to supply chains and increased regulations imposed by governments


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