Download - Political and Regulatory Climate
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4Political and Regulatory Climate
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Learning Objectives
• List and explain the political motivations behind government actions that promote or restrict international marketing. Identify pressure groups that affect international marketing.
• Discuss specific government actions salient to international marketing, such as boycotts and takeovers.
• List and compare the four basic legal traditions that marketers encounter worldwide.
• Cite examples illustrating how national laws can vary and change.
• Differentiate between the steps involved in managing political risk and those involved in planning for regulatory change.
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Chapter Overview
• Host country political climate
• Host government actions
• Home country political forces
• Legal environments
• National regulatory environments
• Managing political risk
• Global marketing and terrorism
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• Self-preservation
• Security
• Prosperity
• Prestige
• Ideology
• Cultural identity
Political Motivations of Host Countries
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Host Country Actions
• Government subsidies
• Ownership restrictions
• Operating conditions– Work permits– Local content requirements
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Takeovers
• Takeovers = Host-government actions that result in a firm’s loss of ownership or direct control
• An expropriation is a formal seizure of an operation
• A confiscation is an expropriation without compensation
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Home Country Actions
• Guided by the same six interests as host countries– U.S. embargo of Cuba– U.S. anti-Arab boycott legislation
• Often home countries seek multilateral actions to increase their bargaining power
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Legal Evolution
• Product liability
• Bankruptcy
• Regulating cyberspace
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Human Nature Orientation (HNO)
• Positive HNO – assume people can be trusted to obey the rules
• Negative HNO – assume people cannot be trusted to obey the rules
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Attitudes Toward Rules
• Attitudes toward rules are affected by two criteria:1. Level of power distance
2. Type of human nature orientation
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Managing Regulatory Change
• AlterBargain to get government to change regulations
• AvoidMove to bypass the impact of the regulation
• AccedeComply
• AllyAvoid some risks by seeking strategic alliances
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Political Risk
Political risk is the possibility that an unexpected and drastic change due to political forces will result in adverse circumstance for business operations
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Regulatory Change Versus Political Risk
• Regulatory Change– More moderate and predictable changes in
the business environment
• Political risk– More unexpected and drastic changes
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Managing Political Risk
• Fighting the battle on two fronts:1. Perfect intelligence systems to avoid being
caught unaware when changes disrupt operations
2. Develop risk-reducing strategies that help limit their exposure, or the losses they would sustain, should a sudden change occur
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Terrorism Affects International Marketing
• Starbucks pulled out of Israel because they feared a terrorist attack
• GE criticized by a senator for taking “blood money” from a state that supports terrorism (Iran)
• Global tourism and education are affected
– Americans spend more on domestic and nearby tourism; less spent on overseas tourism. Fewer Middle Easterners are visiting America.
– Tighter visa controls in America have created an opportunity for non-U.S. countries to increase their share of international students
• Governments and companies spend lots of money to protect infrastructure, plant, equipment, and people