1. Political and Regulatory Climate4
Political and Regulatory Climate

2. 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.

3. 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

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

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

6. 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

7. 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

8. Legal Evolution
Product liability
Bankruptcy
Regulating cyberspace 8

9. 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

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

11. 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

12. 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

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

14. 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

15. 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