Political Influence to the Business in Global markets

1. Political and Regulatory
Climate
• Government Can Encourage or Discourage Foreign Businesses
in different ways
• The principal role in host country is initiating and
implementing policies regarding the operation, conduct and
ownership of businesses
• National Interest (Self interest of a country) is different from
country to country

2. Goals of national Interest
 Self – Preservation
 Security (minimizing threats from outside)
 Prosperity (improving Living Condition)
 Prestige
 Ideology (protect Ideology in combination with other goals)
 Cultural Identity

3. National Sovereignty
Sovereignty is the Complete control exercised
with in a given geographic area, including the
ability to pass laws and regulations and the
power to enforce them

4. HOST GOVERNMENT ACTIONS
 Government Subsidies
Popular Instrument used to attract foreign
investment . Governments are use direct or indirect
subsidies to encourage firms to export goods
 Ownership Restriction
E.g. – India’s Foreign Exchange Act in 1973
( Foreign Ownership could not exceed 40%)
Coke and IBM – Coke negotiated

5.  Operating Conditions
Host Countries control firms in the areas of product
design and packaging ,pricing, advertising, sales
promotion and distribution
Companies should seriously consider these constraints
before entering a market
E.g. - Mexico City
 Boycotts of Firms
Government Boycotts tend to shut some companies
completely out of a given market
E.g.- Coca-Cola in Israeli (Totally Banned)

6.  Take overs
Takeovers are any Host- Government –initiated
actions that result in a loss of ownership or
direct control by the foreign company
(Take the power of the company)
An expropriation ( taking out of an owners
hands) is a formal seizure of an operation
A confiscation( Seizure by the government) is an
expropriation without compensation

7. LEGAL ENVIRONMENTS
 Common Law
Countries take parts in British commonwealth
 Civil Law
Roman Tradition , Judges Play a Important role, Trade mark
Protection
 Islam Law
Koran and Islamic Traditions, bank interest policy
 Socialist Law
Marxist Ideological system established in china, Russia and other
former eastern bloc countries

8. National Regulatory Environments
 This is also Vary Among Countries
 Business Face Grater Regulatory Burdens in
developing countries than they do in developed
countries
E.g.- It takes 21 steps to register a commercial
property in Nigeria compared with only 3 steps in
Finland

9. LEGAL EVOLUTION
 Product liability
the area of law in which manufacturers, distributors, suppliers,
retailers, and others who make products available to the public are
held responsible for the injuries those products cause. (tangible
personal property)
 Bankruptcy
bankruptcy is something you must do to take action and be held
responsible (this is also different country to country )
 Regulating Cyberspace

10. Attitude Toward Rules
Attitudes toward rules are affected by two criteria:
 Level of power distance
 Type of human nature orientation
HNO – Human Nature Orientation
 Positive HNO – assume people can be trusted to
obey the rules
 Negative HNO – assume people cannot be trusted
to obey the rules

11. Regulatory Change
 International marketers must understand the
different political and regulatory climates in
which they operate
 Preparation is important to deal with changes
 These changes can be moderate or drastic
 And they can be less or more predictive
E.g. – Taxes , price controls, revision of labeling

12. Managing Regulatory Change
 Alter
Bargain to get government to change regulations
 Avoid
Move to bypass the impact of the regulation
 Accede ( agree or express agreement)
Adjust its Operation to comply with a government requirements
 Ally ( A friendly nation)
Avoid some risks by seeking strategic alliances

14. REGULATORY RISK VS POLITICAL RISK
 Regulatory Change
More moderate and predictable changes in the
business environment
 Political risk
More unexpected and drastic changes

15. Risk Reduction Strategies
Relay On Local Partner's who have excellent contacts
with Government

16.  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)
 Governments and companies spend lots of
money to protect infrastructure, plant,
equipment, and people

17. Prepared BY