1. Globalisation 17.1

2. Today…. Influences on Global Business 2: Political Influences
Political risk
Tension between free trade & protectionism
International organisations & treaties
Trade agreements
Multilateral
Bilateral
War & civil unrest

4. Political Risk
There are political risks whenever a business sells to an overseas market.

5. Political Risk Definition:
Any political event that results in a drastic change to the country’s business environment, and that ultimately has a negative impact on business operations and profit.

7. Political Risk cont.
Political risks tend to be greater in countries experiencing social and economic unrest (particularly terrorism), war or other violent conflict.

9. Political Risk cont. Potential examples of risk: Government corruption
Nationalisation of property
Armed conflict
Foreign invasion
Unpredictable changes in policy
Terrorism
Rampant crime

10. Question:
What reasons can you think of to expand into a politically risky country?

11. Video: Big Issues in Business: Political Risk

12. Free Trade vs. Protectionism
Democracy vs. Communism/Socialism?
Research indicates a correlation between participating in free trade and a country being democratic or having greater civil and political liberties.

13. Free Trade vs. Protectionism cont.
Protectionism – laws and regulations used by Governments to artificially shield industries and companies from overseas competition

14. Free Trade vs. Protectionism cont.
Arguments for Protectionism:
Protect infant industries
Protect domestic employment
Stop dumping of cheap overseas products
Become economically self-sufficient
Become defence self-sufficient

16. Free Trade vs. Protectionism cont.

17. International Organisations & Treaties
Since the end of World War II, countries have joined to form a number of international organisations. Any international business manager who plans global expansion must be aware of the existence and functions of these organisations.

18. International Organisations & Treaties cont.
Trade agreements:
Multilateral - between more than 2 countries eg. WTO, Asian Pacific Economic Cooperation (APEC) Australia & ASEAN (The Association of Southeast Asian Nations)

19. International Organisations & Treaties cont.
Trade agreements:
Bilateral – between 2 countries
Australia has bilateral agreements with USA, Singapore, Thailand, New Zealand, Chile and is negotiating numerous others

20. International Organisations & Treaties cont.
The main international organisations are:
World Bank (WB) – finances projects
International Monetary Fund (IMF) – Manages foreign exchange arrangements
Bank for International Settlement (BIS) – Monitors the global financial system and strives to maintain stability
And of course the World Trade Organisation (WTO)

21. International Organisations & Treaties cont.
World Trade Organisation:
Attempts to provide rule based trading framework for member nations
Aims are
Promote freer trade
Forum for trade negotiations
Settle Trade disputes between countries

22. International Organisations & Treaties cont.
Advantages for “economic integration”
Greater availability of goods & services for participating countries
Resources used more effectively and efficiently

23. War and Civil Unrest Devaluation of currency
Loss of inputs (labour, raw materials)
Racism
Destruction of supply chains or total business

24. Questions
Quiz Question time! Write yourself five questions on today’s topic. 

25. Today we covered….
Influences on Global Business 2: Political Influences
Political risk
Tension between free trade & protectionism
International organisations & treaties
Trade agreements
Multilateral
Bilateral
War & civil unrest