Ch 6 Political Risks

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The Political Environment A Critical Concern
Chapter
6
Nationalism vs. Patriotism
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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

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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

6-3

• Violence and Terrorism
• Cyberterorism

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Assessing Political Vulnerability

• Government Attention
• Politically Sensitive Products Issues
  affects the environment, exchange rates,
  national and economic security, welfare of
  people, health, publicly visible. EX GM food
• Political Risk

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Protests in Barcelona
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Forecasting Political Risk

• 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 companys
  intelligence network in order to advise and
  forewarn corporate decision makers about
  political and economic situations

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Reducing Political Vulnerability

• Good corporate citizenship
• External affairs

6-9
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The MNCs Publics and Issues
Publics
Issues
Church Labor Suppliers Customers Competitors Press
ure groups Stockholders Academia General
public Minority groups Public media Governments
and agencies Conservationists Financial
community
Nationalism Industrial democracy Environment
protection Energy and raw materials Taxes Incentiv
es and restrictions Investment approvals and
permits Personal relations Attracting
personnel Mergers and acquisitions Money and
credit Legitimacy Prices and profits Image
(Company and product) Consumerism Womens
liberation Union relations Equal opportunities
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SOURCE Adapted from How Embattled MNCs Can
Devise Strategies for External Affairs,
Business International, December 12, 1975, p. 394.
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Reducing Political Vulnerability

• Good corporate citizenship
• External affairs

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• Strategies
• Joint Ventures
• Investment Base Expansion
• Marketing and Distribution
• Licensing
• Planned Domestication
• Political Payoffs

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