the political environment a critical concern chapter 6
TRANSCRIPT
The Political EnvironmentA Critical ConcernChapter
6
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Stability of Government Policies
● Government Policies
● Political Parties
● Nationalism
Irwin/McGraw-Hill
6-2
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
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
Irwin/McGraw-Hill
6-3
815
16
422
602
93
122
73
0 200 400 600 800 1000
AfricaAsiaEurasiaLatin AmericanMiddle EastN. AmericaW. Europe
International Terrorist IncidentsBy Region 1992-1997
SOURCE: http://www.state.gov/www/global/tourism/1997report
Irwin/McGraw-Hill
6-4
International IncidentsBy Type of facility, 1992-1997
SOURCE: http://www.state.gov/www/global/terrorism/1997report
623
38
94
204
1535
0 500 1000 1500 2000
BusinessDiplomatGovernmentMilitaryOther
Irwin/McGraw-Hill
6-5
International Casualtiesby Terrorist Incidents, 1992-1997
815
16
422
602
93
122
73
0 200 400 600 800 1000
AfricaAsiaEurasiaLatin AmericanMiddle EastN. AmericaW. Europe
SOURCE: http://www.state.gov/www/global/terrorism/1997reportIrwin/McGraw-Hill
6-6
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Irwin/McGraw-Hill
Assessing Political Vulnerability
● Government Attention
● Politically Sensitive Products
● Politically Sensitive Issues
● Political Risk
6-7
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Irwin/McGraw-Hill
Forecasting Political Risk
6-8
● 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
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Irwin/McGraw-Hill
Good Corporate Citizenship
6-9
● 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
The MNCs Publics and Issues
ChurchLaborSuppliersCustomersCompetitorsPressure groupsStockholdersAcademiaGeneral publicMinority groupsPublic mediaGovernments and agenciesConservationistsFinancial community
NationalismIndustrial democracyEnvironment protectionEnergy and raw materialsTaxesIncentives and restrictionsInvestment approvals and permitsPersonal relationsAttracting personnelMergers and acquisitionsMoney and creditLegitimacyPrices and profitsImage (Company and product)ConsumerismWomen’s liberationUnion relationsEqual opportunities
Publics Issues*
SOURCE: Adapted from “How Embattled MNCs Can Devise Strategies for External Affairs,” Business International, December 12, 1975, p. 394.Irwin/McGraw-Hill
6-10
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Strategies to Lessen Political Risk
Joint Ventures
Investment Base Expansion
Marketing and Distribution
Licensing
Planned Domestication
Irwin/McGraw-Hill Copyright©2002 by The McGraw-Hill Companies, Inc. All rights reserved.
6-11
4
Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Irwin/McGraw-Hill
Encouragement of Global Business
6-12
● Foreign Government
● U.S. Government