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THE POLITICAL AND LEGAL ENVIRONMENT

THE POLITICAL AND LEGAL ENVIRONMENT. Global Marketing. THE POLITICAL AND LEGAL ENVIRONMENT. Overview After global marketers understand why and how governments regulate their business activities, they can better analyse and respond to governmental actions. Why Do Governments Intervene?.

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THE POLITICAL AND LEGAL ENVIRONMENT

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  1. THE POLITICAL AND LEGAL ENVIRONMENT Global Marketing

  2. THE POLITICAL AND LEGAL ENVIRONMENT • Overview After global marketers understand why and how governments regulate their business activities, they can better analyse and respond to governmental actions

  3. Why Do Governments Intervene? • To stay in power • To achieve socioeconomic goals • Macro-systemic concerns identified by Boddewyn and Cracco • To protect the national interest • To maintain national sovereignty • To preserve the national identity

  4. Types of Interventions • In ownership and Control • Confiscation - takeover without compensation • Expropriation - takeover with compensation • Domestication - relinquishment of ownership and control to locals

  5. Types of Interventions • Other Forms of Intervention • Exchange controls • Export requirement as percentage of local output • Import restrictions • Taxation increases

  6. Types of Intervention • Some Marketing Mix Regulations • Local content law (product) • Price ceiling (price) • Distribution territory specifications (place) • Local advertising agency requirement (promotion)

  7. Assessing Political Risk - Estimating the likelihood of Governmental Intervention • Seeking Experts’ Opinions • Current and retired government officials familiar with the local situation • Academics specializing in a region and its politics • Conducting In-House Research to Monitor Political developments

  8. Assessing Political Risk - Estimating the likelihood of Governmental Intervention • Utilizing Secondary Sources Who Provide Risk Indexes • BERI (Business Environment Risk Index) • Business International (BI) • Frost & Sullivan • PSSI (Political System Stability Index)

  9. Managing Political Risk Through Lobbying, Proactive Measures, and Insurance • Identify with the country - Don’t maintain a foreign image • Help the host country achieve its societal goals • Improve local management skills • Increase local productivity • Increase local employment

  10. Managing Political Risk Through Lobbying, Proactive Measures, and Insurance • Promote Vertical Integration by Linking Corporate Activities Across Countries • Stay Ahead of Intervention by Upgrading Bargaining Power • Keep introducing new products and technology • Increase exports

  11. Managing Political Risk Through Lobbying, Proactive Measures, and Insurance • Insure Against Political Risk • Overseas Private Investment Corporation (OPIC) • Foreign Credit Insurance Association (FCIA)

  12. Thank you!

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