Political and Regulatory Climate 4 Political and Regulatory Climate

Learning Objectives List and explain the political motivations behind government actions that promote or restrict international marketing. Identify pressure groups that affect international marketing. Discuss specific government actions salient to international marketing, such as boycotts and takeovers. List and compare the four basic legal traditions that marketers encounter worldwide. Cite examples illustrating how national laws can vary and change. Differentiate between the steps involved in managing political risk and those involved in planning for regulatory change.

Chapter Overview Host country political climate Host government actions Home country political forces Legal environments National regulatory environments Managing political risk Global marketing and terrorism 3

Political Motivations of Host Countries Self-preservation Security Prosperity Prestige Ideology Cultural identity 4

Host Country Actions Government subsidies Ownership restrictions Operating conditions Work permits Local content requirements 5

Takeovers Takeovers = Host-government actions that result in a firm’s loss of ownership or direct control An expropriation is a formal seizure of an operation A confiscation is an expropriation without compensation 6

Home Country Actions Guided by the same six interests as host countries U.S. embargo of Cuba U.S. anti-Arab boycott legislation Often home countries seek multilateral actions to increase their bargaining power 7

Legal Evolution Product liability Bankruptcy Regulating cyberspace 8

Human Nature Orientation (HNO) Positive HNO – assume people can be trusted to obey the rules Negative HNO – assume people cannot be trusted to obey the rules 9

Attitudes Toward Rules Attitudes toward rules are affected by two criteria: Level of power distance Type of human nature orientation 10

Managing Regulatory Change Alter Bargain to get government to change regulations Avoid Move to bypass the impact of the regulation Accede Comply Ally Avoid some risks by seeking strategic alliances 11

Political Risk Political risk is the possibility that an unexpected and drastic change due to political forces will result in adverse circumstance for business operations 12

Regulatory Change Versus Political Risk More moderate and predictable changes in the business environment Political risk More unexpected and drastic changes 13

Managing Political Risk Fighting the battle on two fronts: Perfect intelligence systems to avoid being caught unaware when changes disrupt operations Develop risk-reducing strategies that help limit their exposure, or the losses they would sustain, should a sudden change occur 14

Terrorism Affects International Marketing 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) Global tourism and education are affected Americans spend more on domestic and nearby tourism; less spent on overseas tourism. Fewer Middle Easterners are visiting America. Tighter visa controls in America have created an opportunity for non-U.S. countries to increase their share of international students Governments and companies spend lots of money to protect infrastructure, plant, equipment, and people 15