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Lesson#10
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Political Environments
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FOREIGN NATIONAL ENVIRONMENTS
Political Environments
Foreign National Environment:
An international marketer needs information about foreign
countries’ environments that may affect the
business in any way, positively or negatively. Some of the key
aspects of a foreign market environment
that may affect international marketer’s business are give
below;
– Political
context: national leaders, national goals of leaders and governments, ideologies
of the
foreign political institutions and leaders, key institutions in
forming and implementing
regulations.
– Economic growth
prospects, levels of economic affluence (GDP, GNP), level and extent of
industrialization, business cycle stage.
– Per capita income
levels, purchasing power of the population, disposable incomes.
– End-user industry
growth trends. Industrial demands are mostly derived demands and industrial
buyers by materials and machinery to fulfill the end user
demands.
– Government:
political and business orientation, legislation, regulation, standards, barriers
to
trade.
Political systems in the world:
There are different political systems today in various countries
around the globe. The basic political
ideologies that are existing are given below;
Basic political ideologies
– Democracy
• Freedom Of
Opinion, Expression, Elected Representation With Limited Terms For Elected
Political offices, individual’s rights, liberties & social
freedom, independent & fair courts,
non-political bureaucracy etc.
– Quasi democracy
• Partly free -
(example is an appointed governor in HK but elected parliament)
– Totalitarianism
• Decision making
is restricted to one or a few individuals
Political risks in international markets:
A marketer’s firm faces numerous political risks in
international markets. Major political risks in
international markets are given below;
• Direct
interference in a foreign company’s business - expropriation, confiscation,
nationalization
• Campaigns against
foreign goods (from governments or people / publics)
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• Kidnappings,
terrorist threats & other forms of violence targeted against foreign firms or
foreigners.
• Civil wars have
the potential to disrupt businesses in many foreign countries
• Change in
policies, regulations – too often and non-consistent – affect businesses in any
country
• Change in
governments may also result into changing national priorities.
• Monetary & fiscal
policies - inflation, currency devaluation, increased taxation, and currency
controls etc. Also affect businesses of international marketers.
• Government as
business competitor – when government becomes involved in a business in its own
country then it has access to large resources, may implement
such regulations that my favor its
businesses and may become a formidable competitor.
• Multilateral
investment guarantee agency (miga) - a subsidiary of the World Bank provides
insurance
against some political risks. International marketers may use
such multilateral agency guarantees to
protect itself from political risks in international markets
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