The political environment abroad is quite different from that of North America. Most nations desire to become self-reliant and to raise their status in the eyes of the rest of the world. This is the essence of nationalism. The nationalistic spirit that exists in many nations has led them to engage in practices that have been very damaging to other countries’ marketing organizations. For example, foreign governments can intervene in marketing programs in the following ways: Show
Political StabilityBusiness activity tends to grow and thrive when a nation is politically stable. When a nation is politically unstable, multinational firms can still conduct business profitably. Their strategies will be affected however. Most firms probably prefer to engage in the export business rather than invest considerable sums of money in investments in foreign subsidiaries. Inventories will be low and currency will be converted rapidly. The result is that consumers in the foreign nation pay high prices, get less satisfactory products, and have fewer jobs. Core Principles of International Marketing – Chapter 4.2 by Babu John Mariadoss is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted. A key factor to assess in the political environment is the stability of the local government. You should also examine the country's policies toward business including such factors as trade and tariff policy, tax structure, anti-trust and competition regulations, union power, and consumer protection laws. THE POLITICAL ENVIRONMENT: The critical concern Political environment has a very important impact on every business operation no matter what its size, its area of operation. Whether the company is domestic, national, international, large or small political factors of the country it is located in will have an impact on it. And the most crucial & unavoidable realities of international business are that both host and home governments are integral partners. Reflected in its policies and attitudes toward business are a governments idea of how best to promote the national interest, considering its own resources and political philosophy. A government control's and restricts a company's activities by encouraging and offering support or by discouraging and banning or restricting its activities depending on the government. Here steps in international law. International law recognizes the right of nations to grant or withhold permission to do business within its political boundaries and control its citizens when it comes to conducting business. Thus, political environment of countries is a critical concern for the international marketer and he should examine the salient features of political features of global markets they plan to enter. THE SOVEREIGNITY OF NATIONS From the international laws point of view a sovereign state is independent and free from external control; enjoys full legal equality; governs its own territory; selects its own political, social, economic systems; and has the power to enter into agreements with other nations. It is extension of national laws beyond a country's borders that much of the conflict in international business arises. Nations can and do abridge s... ... middle of paper ... ...MENT ENCOURAGEMENT OF GLOBAL BUSINESS FOREIGN GOVERNMENT ENCOURAGEMENT Governments also encourage foreign investment. The most important reason to encourage investment is to accelerate the development of an economy. An increasing number of countries are encouraging investments with specific guidelines toward economic goals. MNCs may be expected to create local employment, transfer technology, generate export sales, stimulate growth and development of the local industry. US GOVENRMENT ENCOURAEMENT The US government is motivated for economic as well as political reasons to encourage American firms to seek opportunities in the countries worldwide. It seeks to create a favorable climate for overseas business by providing the assistance by providing the assistance that helps minimize some of the troublesome politically motivated financial risks of doing business abroad. The liability caused by the financial or personnel losses because of wrong political decisions or conflicts are known as political risks. Apart from the market based causes, business is highly influenced by political decisions taken by the governments in different countries. For example, political decisions by a ruling party regarding taxes currency, trade tariffs, investment, labor laws, environmental regulations and development priorities have a major impact on the business conditions and profitability which thereby may affect the national economy. Similarly, non-economic factors can also alter the status of a business. For example, political conflicts at times give rise to terrorism, civil wars, international wars, and even political elections that may replace a ruling political party with another political party, can also affect international market. In order to balance the political environment, we should consider the points discussed below −
|