1. The Political Environment
A Critical Concern
Chapter 6

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

3. 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

4. International Terrorist Incidents By Region 1992-1997
6-4
Irwin/McGraw-Hill
SOURCE:

5. International Incidents By Type of facility, 1992-1997
6-5
Irwin/McGraw-Hill
SOURCE:

6. International Casualties by Terrorist Incidents, 1992-1997
6-6
Irwin/McGraw-Hill
SOURCE:

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

8. 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

9. 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

10. 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

11. 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.

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