The Political Environment A Critical Concern Chapter 6

Stability of Government Policies Political Parties Nationalism 6-2 Irwin/McGraw-Hill

Political Risks of Global Business Confiscation Expropriation Domestication Economic Risks  Exchange Controls  Tax Controls  Local-Content Laws  Price Controls  Import Restrictions  Labor Problems Political Sanctions Political and Social Activity Violence and Terrorism Cyberterorism 6-3 Irwin/McGraw-Hill

International Terrorist Incidents By Region 1992-1997 6-4 Irwin/McGraw-Hill SOURCE: http://www.state.gov/www/global/tourism/1997report

International Incidents By Type of facility, 1992-1997 6-5 Irwin/McGraw-Hill SOURCE: http://www.state.gov/www/global/terrorism/1997report

International Casualties by Terrorist Incidents, 1992-1997 6-6 Irwin/McGraw-Hill SOURCE: http://www.state.gov/www/global/terrorism/1997report

Assessing Political Vulnerability Government Attention Politically Sensitive Products Politically Sensitive Issues Political Risk 6-7 Irwin/McGraw-Hill

Forecasting Political Risk Decide if risk insurance is necessary Devise an intelligence network and an early warning system Develop contingency plans for unfavorable future political events Build a database of past political events for use in predicting future problems Interpret the data gathered by a company’s intelligence network in order to advise and forewarn corporate decision makers about political and economic situations 6-8 Irwin/McGraw-Hill

Good Corporate Citizenship It is a guest in the country and should act accordingly The profits of an enterprise are not solely the company’s; the local national employees and the economy of the country should also benefit It is not wise to try to win over new customers by completely Americanizing them Although English is an accepted language overseas, a fluency in the local language goes far in making sales and cementing good public relations The company should try to contribute to the country’s economy and culture with worthwhile public projects It should train its executives and their families to act appropriately in the foreign environment It is best not to conduct business from the United States but to staff foreign offices with competent nationals and supervise the operation from the United States 6-9 Irwin/McGraw-Hill

The MNCs Publics and Issues Church Labor Suppliers Customers Competitors Pressure groups Stockholders Academia General public Minority groups Public media Governments and agencies Conservationists Financial community Nationalism Industrial democracy Environment protection Energy and raw materials Taxes Incentives and restrictions Investment approvals and permits Personal relations Attracting personnel Mergers and acquisitions Money and credit Legitimacy Prices and profits Image (Company and product) Consumerism Women’s liberation Union relations Equal opportunities 6-10 SOURCE: Adapted from “How Embattled MNCs Can Devise Strategies for External Affairs,” Business International, December 12, 1975, p. 394. Irwin/McGraw-Hill

Strategies to Lessen Political Risk  Joint Ventures  Investment Base Expansion  Marketing and Distribution  Licensing  Planned Domestication 6-11 Irwin/McGraw-Hill Copyright©2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Encouragement of Global Business Foreign Government U.S. Government 6-12 Irwin/McGraw-Hill