sppt chapter 006

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McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies Inc! "ll rights reser#e$!

The Political Environment:A Critical Concern

Chapter 6


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6-2

Learning Objectives

1What is the sovereignty( RULE,POWER) of nations meansand how it can aect the stability of government !olicies

2 "ow dierent governmental ty!es# !olitical !arties#nationalism# targeted fear$animosity# and trade dis!%tes canaect the environment for mar&eting in foreign co%ntries

3 The !olitical ris&s of global b%siness and the factors thataect stability

4 The im!ortance of the !olitical system to internationalmar&eting and its eect on foreign investments

5 The im!act of !olitical and social activists# violence# andterrorism on international b%siness

6 "ow to assess and red%ce the eect of !olitical v%lnerability'wea&ness)

7 "ow and why governments enco%rage foreign investment


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6-3

World Trade (oes ananas*

The anana wars and con+ict between the,-.- and E%ro!e started o%t as a sim!le taridis!%te between /rance and ,-.- com!anies

e0!orting bananas from Latin Americanco%ntries to /rance

/rance gave !referential 's!ecial) treatmentfor bananas coming from its former colonies in

the Caribbean and Africa The rest is history and !olitics# see more here:

1anana Wars2

http://news.bbc.co.uk/2/hi/business/8391752.stmhttp://news.bbc.co.uk/2/hi/business/8391752.stm


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Sovereignty o !ation"

# sovereign state is inde!endent and freefrom all e0ternal control• enjoys f%ll legal e3%ality with other states

•

governs its own territory• selects its own !olitical# economic# and social

systems and

• has the !ower to enter into agreements with

other nations- Sovereignty refers to both the !owers

e0ercised by a state in relation to otherco%ntries #!$ the s%!reme !owers

e0ercised over its own members


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.tability of (overnmentPolicies 4adical 'E""entia%& shifts in government

!hiloso!hy can occ%r when:• An o!!osing !olitical !arty ascends '4ise) to

!ower• Press%re from nationalist and self5interest

gro%!s

• Wea&ened economic conditions

•ias against foreign investment or con+ictsbetween governments


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6-6

6nstability of (overnments and Policies:Political 4easons

.ome forms of government seem to beinherently 'nat%ral) %nstable

Changes in !olitical !arties d%ring

elections can have major eects on tradeconditions

7ationalism

Animosity 'hostility) targeted towards!eci8c co%ntries

Trade dis!%te 'Clash)


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/orms of (overnment

1& $e'oray or 'ar)et*irete* govern'enti*eo%ogy

2& Co''+ni"tgovern'ent"

3& heorati Rep+-%i• ."%a'i La/ o+ntrie"

/here po%itia% partie"an e0i"t -+t have%itt%e po/er

• he re%igio+" %ea*erontro%" govern'entan* a%% govern'enta%

*ei"ion"


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Political Parties

e &nowledgeable abo%t the !hiloso!hiesof all major !olitical !arties and theirattit%des towards trade


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7ationalism

7ationalism refers to feelings of national !ride and %nity• /eelings of nationalism are manifested by:

• 9isaster 'e-g- $;;)

• War

• 4ecession

• Call to 1b%y o%r co%ntry


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Trade 9is!%tes 'Clashes):E0am!les ,nderval%ed '%nder!riced)Chinese

c%rrency 'ongoing !roblem)

an on beef im!orts into =a!an

Chinese s%bsidies in a!!arent violation ofWTO r%les

/arm s%bsidies in develo!ed co%ntries

A64,.>oeing battle over s%bsidies


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? Political 4is&s of (lobal %siness

Con8scation 'Elimination# Ta&ing away-)

• The most severe !olitical ris is the sei@ing of acom!any


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Economic 4is&s

6nternational 8rms face a variety of economic ris&s

(overnments can obligate restraints on b%siness activityto:• Protect national sec%rity

•Protect an infant ind%stry

• To !rotect ins%Bcient foreign e0change

• 4aise reven%e

• 4etaliate 'get revenge) against %nfair trade !ractices

E0change Controls

Local Content Laws

6m!ort 4estrictions

Ta0 Controls

Price Controls

Labor Problems


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Political sanction ' A!!rovalA%thori@ation ): E0am!les from the ,-.-

C+-an ri"i" o the 16" he .ranian revo%+tion in the

1"

he Per"ian +% War in the1"


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Political and .ocial Activists

The most entertaining!rotest techni3%e was!ioneered 'established) by/rench farmers- /rench

farmers li&e to throw theirfood- "ere they tossedtomatoes and s%ch atc9onald


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E0hibit D- ,-.- .tate 9e!artment Travel Warnings'in order of date of !osting# most recent 8rst)

.o%rce: htt!:$$travel-state-gov$travel$cisF!aFtw$tw$twF;GDH-html-6-15

http://travel.state.gov/travel/cis_pa_tw/tw/tw_1764.htmlhttp://travel.state.gov/travel/cis_pa_tw/tw/tw_1764.html


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Iiolence# Terrorism and War

Iiolence and terrorism may be closely related to!olitics

War5torn regions are areas of concern for foreignb%sinesses to o!erate in

Cyber terrorism is in its infancy

The 6nternet !rovides a vehicle for terrorist and criminal

attac&s 6nternet Iir%s attac&s can disr%!t b%sinesses

• 16 Love Jo%2

• elissa

• .lammer

• (oner Worm


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Assessing 'eval%ating) PoliticalI%lnerability 'Political wea&ness)

7o absol%te g%idelines 7o s!eci8c g%idelines to determine a

!rod%ct


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Politically .ensitive Prod%cts and6ss%es

Politically sensitive !rod%cts incl%de thosethat have an eect on:• the environment#•

e0change rates• national and economic sec%rity• !%blic health# e-g-# genetically modi8ed '()

foods


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orea"ting Po%itia% Ri")

9ecide if ris& ins%rance is necessary 9evise '!lan or develo!) an intelligence

networ& and an early warning system•

9evelo! contingency '%nforeseen event oremergency ) !lans for %nfavorable f%t%re!olitical events

• %ild a database of !ast !olitical events for %sein !redicting f%t%re !roblems

• 6nter!ret the data gathered by a com!any


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E0hibit D-H To! K .tates in 9anger of/ailing '4an&ed in order of .tate of

/A6L,4E or ecoming /ailing state))

.o%rce: /rom Foreign Policy, 1/ailed .tates 6nde0#2 ay$=%ne K;;# online-Co!yright K;; by /oreign Policy- 4e!rod%ced with !ermission of Foreign Policy via Co!yright ClearanceCenter-

6-20


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Lessening 'decreasing red%cing) PoliticalI%lnerability 'wea&ness)

4elations between governments

and 7Cs are generally !ositive ifthe investment:

im!roves the balance of!ayments by increasing

e0!orts or red%cing im!ortsthro%gh im!ort s%bstit%tion

%ses locally !rod%ced reso%rces

transfers ca!ital# technology#and$or s&ills

creates jobs# and$or

ma&es ta0 contrib%tions

6-21


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Lessening 'red%cing) PoliticalI%lnerability 'wea&ness)

7C


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(overnment Enco%ragement

(overnments can both enco%rage anddisco%rage foreign investment

The &ey reason to enco%rage foreign

investment is to ae%erate theo+ntry" eono'i gro/th

9%ring the recent economic downt%rn# the,-.- government has been !artic%larlycreative in hel!ing !romote Americane0!orts

sppt chapter 006

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