o||t|ca| Lega| and kegu|atory

Lnv|ronment
o||t|ca| Lnv|ronment
MarkeLers musL vlew Lhe pollLlcs of Lhe
counLry because Lhe buslness declslons are
lnfluenced by Lhe counLry's pollLlcs ollLlcal
LnvlronmenL does noL remaln consLanL lL ls
unconLrollable and lL ls dlfflculL Lo cope
wlLh pollLlcs of dlfferenL naLlons
@ypes of o||t|ca| Lnv|ronment
MnCs have Lo cope wlLh Lhe pollLlcs of more Lhan one naLlon
- uomesLlc (Lhe home counLry pollLlcal envlronmenL)
- lorelgn (Lhe hosL counLry pollLlcal envlronmenL)
- lnLernaLlonal or Clobal pollLlcal envlronmenL
o||t|ca| Iactors
W @he pollLlcal sLablllLy of Lhe naLlon ls lL a
democracy communlsL or dlcLaLorlal reglme?
W MoneLary regulaLlons Wlll Lhe seller be pald ln
a currency LhaL Lhey value or wlll paymenLs only
be accepLed ln Lhe hosL naLlon currency?
W ls Lhere any hlsLorlcal relaLlonshlp beLween
counLrles LhaL would beneflL or hlnder
lnLernaLlonal markeLlng?
o||t|ca| Iactors
W WhaL ls Lhe lnfluence of communlLles or unlons
for Lradlng? Lg @he Luropean unlon and lLs
auLhorlLy over Luropean laws and regulaLlon
W WhaL klnd of lnLernaLlonal and domesLlc laws
wlll your buslness encounLer?
W WhaL ls Lhe naLure of pollLlcs ln Lhe counLry
LhaL you are LargeLlng and whaL ls Lhelr vlew on
encouraglng forelgn compeLlLlon from
overseas?
|ass|f|cat|on by @ype of Government
nowledge of Lhe form of CovernmenLs can be useful ln
appralslng Lhe pollLlcal cllmaLe Cne way Lo classlfy
CovernmenL ls Lo conslder Lhem as
W ar||amentary Governments (Cpen Government)
W Abso|ut|st Government (|osed Government)
ar||amentary Government
lso called as Cpen CovernmenL
arllamenLary form of CovernmenLs usually
consulLs wlLh clLlzens from Llme Lo Llme for
Lhe purpose of learnlng Lhelr preferences
MosL lndusLrlallzed naLlons and democraLlc
naLlons can be classlfled as parllamenLary
CovernmenLs
Abso|ute Governments
lso called as Closed CovernmenL Lhese
lnclude monarchles and dlcLaLorshlps ln an
absoluLlsL sysLem Lhe rullng reglme dlcLaLes
CovernmenL pollcy wlLhouL conslderlng clLlzens
needs declslons Such sysLems are undergolng
a drasLlc LranslLlon
Lx unlLed lngdom's consLlLuLlonal heredlLary
monarchy
LxcepLlons
W Many counLrles pollLlcal sysLem do noL fall lnLo one
of Lhese Lwo caLegorles Some monarchles and
dlcLaLorshlps (Saudl rabla and norLh orea) have
parllamenLary elecLlons
W SovleL unlon had elecLlons and mandaLory voLlng
buL was noL classlfled as parllamenLary because
Lhe rullng parLy never allowed an alLernaLlve on
Lhe balloL
W hlllpplnes under Marcos and nlcaragua under
Somoza held elecLlons buL was lnvolved ln voLlng
fraud
|ass|f|cat|on by Number of o||t|ca|
art|es
W @o party ( uS epubllcans and uemocraLs
u)
W ,u|t|p|e party (lndla Cermany lrance oland
and lsrael)
W |ng|e party (LgypL) and
W om|nated by one party (SovleL unlon Cuba
Llbya)
|ass|f|cat|on by Lconom|cs ystems
Lconomlc sysLems provlde anoLher basls for classlflcaLlon of
CovernmenLs
W Communlsm esources should be owned and shared by all Lhe
people for Lhe beneflL of Lhe socleLy lL ls Lhe CovernmenL LhaL conLrols all
Lhe producLlve resources and lndusLrles and as a resulL Lhe CovernmenL
deLermlnes [obs prlces educaLlon Lhe emphasls ls on human welfare
(Chlna)
W Soclallsm SoclallsL CovernmenL owns and operaLes Lhe baslc
ma[or lndusLrles buL leaves small buslnesses Lo prlvaLe ownershlp (lrance)
W CaplLallsm CaplLallsm ls an economlc sysLem ln whlch Lhe
means of producLlon are prlvaLely owned Supply demand prlce
dlsLrlbuLlon and lnvesLmenLs are deLermlned malnly by prlvaLe declslons ln
Lhe free markeL raLher Lhan Lhrough cenLral economlc plannlng or Lhrough
democraLlc plannlng CaplLallsm also refers Lo Lhe process of CaplLal
accumulaLlon
o||t|ca| k|sk Ana|ys|s
@here are varlous pollLlcal rlsks whlch Lhe
lnLernaLlonal markeLer musL conLenL such rlsks
lnclude hosL CovernmenLs acLlon agalnsL forelgn
lnvesLmenLs few of Lhem are
Oonf|scat|on
OLxpropr|at|on
ONat|ona||zat|on
Oomest|cat|on
o||t|ca| k|sks
onf|scat|on lL ls a process of a
CovernmenL Laklng ownershlp of properLy
wlLhouL compensaLlon
Lxpropr|at|on ls pollLlcally moLlvaLed and
forceful conflscaLlon and redlsLrlbuLlon of
prlvaLe properLy ouLslde Lhe common law
lL dlffers somewhaL from conflscaLlon ln
LhaL Lhere ls some compensaLlon a
company whose properLy ls exproprlaLed
agrees Lo sell lLs operaLlons noL by cholce
buL by force
o||t|ca| k|sks
Nat|ona||zat|on naLlonallzaLlon ls Lhe acL of Laklng
an lndusLry or asseLs lnLo Lhe publlc ownershlp of
a naLlonal CovernmenL or sLaLe naLlonallzaLlon
usually refers Lo prlvaLe asseLs buL may also mean
asseLs owned by lower levels of CovernmenL such
as munlclpallLles belng Lransferred Lo Lhe publlc
secLor Lo be operaLed by or owned by Lhe sLaLe
omest|cat|on ln Lhls case forelgn companles
rellnqulsh conLrol and ownershlp elLher
compleLely or parLlally Lo Lhe naLlonals Lhe resulL
ls LhaL prlvaLe enLlLles are allowed Lo operaLe Lhe
conflscaLed or exproprlaLed properly
nd|cators of o||t|ca| nstab|||ty
OSoclal unresL
uomesLlc ulspuLes
ellglous dlfferences
aclal dlfferences
OCovernmenL pollcles
OLLlLudes of naLlonals
nd|cators of o||t|ca| nstab|||ty
oc|a| Unrest @he soclal unresL ls Lhe ma[or cause for Lhe pollLlcal unresL lL lncludes confllcLs
mong dlfferenL groups ln Lhe socleLy rellglons and Lrade unlons company may noL be
lnvolved dlrecLly ln such dlspuLes buL Lhe buslness ls llkely Lo be dlspuLed by such lncldenLs
uomesLlc ulspuLes conflned wlLhln Lhe boundarles of Lhe counLrles and escalaLe lnLo vlolence
and lnLernaLlonal dlspuLes @hese can draw Lhe aLLenLlon of Lhlrd parLy lnLo Lhe confllcL
Att|tudes of Nat|ona|s n assessmenL of Lhe CovernmenL of Lhe hosL counLry and analysls of
Lhe aLLlLude of people of Lhe hosL counLry ls very lmporLanL ln Lhe sLudy of pracLlcal
LnvlronmenL @he percepLlon and aLLlLudes of Lhe clLlzens Lowards MnC's should be evaluaLed
LLlLude could be ln hosplLable Lowards forelgn enLerprlses and forelgn clLlzens values and
aLLlLudes vary beLween naLlons and even vary wlLhln naLlons Make sure LhaL you have a good
grasp of locallLy before you enLer Lhe lnLernaLlonal MarkeL
Government po||c|es @he CovernmenL pollcles play an lmporLanL role ln Lhe formaLlon of
pollLlcal LnvlronmenL @he CovernmenL pollcles Lend Lo change elLher wlLh passage of Llme of
change ln leadershlp or change ln CovernmenL lLself @he change ln aLLlLude of Lhe CovernmenL
leads Lo change ln Lhe CovernmenL pollcles lL may be elLher go beLLermenL or for Lhe worse
@he CovernmenL pollcles may Lend Lo change ln shorL run or long run
Assess|ng o||t|ca| Vu|nerab|||ty
O@he flrms own counLrys relaLlons wlLh oLher
counLrles
OSenslLlvlLy of Lhe producL or lndusLry
OSlze and locaLlon of operaLlon Lhe blgger Lhe
more vulnerable
OvlslblllLy of flrm ls lL hlgh proflle say vla
adverLlslng?
Assess|ng o||t|ca| Vu|nerab|||ty
OosL counLrys pollLlcal slLuaLlon
OCompany behavlor ls lL a good corporaLe
clLlzen?
OConLrlbuLlon Lo hosL counLry for example
employmenL
OLocallzaLlon of operaLlons
OSubsldlary dependence
Assess|ng o||t|ca| Vu|nerab|||ty
uependlng on Lhe answers Lo
Lhese checkpolnLs Lhe amounL of
rlsk real or percelved can be
assessed and fed lnLo Lhe
lnvesLmenL dlscusslon
,arket|ng mp||cat|ons
ollLlcal facLors glve rlse Lo a number of markeLlng
lmpllcaLlons @hese lnclude Lhe followlng
O ls Lhe producL ever sub[ecL Lo pollLlcal debaLe
O ls Lhe producL a crlLlcal lnpuL for oLher lndusLrles for
example cemenL?
O ls Lhe producL soclally or pollLlcally senslLlve for
example food? ls Lhe producL of naLlonal defense
slgnlflcance?
O ls Lhe producL Laklng a dlsproporLlonal amounL of
caplLal repaymenL?
O ls Lhe producL leadlng Lo Lhe low exposure llLLle
conLrol belng held ouLslde of Lhe hosL counLry?