Political environment

1
Political environment

• Session 12

2
Gurkenhobel Ossies v/s Wessies

• The cucumber slicer that slices, dices and
  creates a rift between Eastern and Western Germans

Source NY Times
3
Beijing vs. CSFB

• CSFB hosts overseas conferences officials from
  Taiwan participate
• Repercussions
• CSFB dropped from underwriting role in offerings
  from China Unicom and China Aluminium
• Beijing enforcing politically correct behavior
• Matsushitas mobile phones
• Morgan Stanleys experience with China Telecom HK
  Ltd.s listing

Source Wall Street Journal, Financial Times
4
Political environment and implications

• Malaysia
• Mahathirs main opponent in jail
• Capital controls on the ringgitt, high corporate
  tax rate
• Drop off in foreign investment
• Indonesia
• Corruption, legal environment, militarys impact
  on national politics
• Japan
• Koizumis ability to push through structural
  reforms

Source Barrons, New York Times Far
Eastern Economic Review
5
Dealing with political risk

• Africa profile of a continent mired in civil
  strife, political turmoil
• Only 6 of Africas 54 countries are embroiled in
  military conflicts
• African Trade Insurance Agency established to
  provide political risk insurance

Source African Business
6

• Outsourcing offshore can lead to savings of
  20-40
• Email response, telemarketing
• Serving new segments in domestic markets
• Downside
• Quality
• Political environment complex bureaucracy,
  instability, threat of war - India

Source Call Center Magazine
7
Taiwans electronics industry

• Forging ahead with investment plans in China
• Islands continuing tensions with the mainland
• Mutual commercial benefits override the
  possibility of war

Source EBN
8
The frozen north

• North Korea welcomes foreign trade except
• American imperialists, their South Korean
  puppets, unfriendly Japanese, Britain, France and
  other NATO countries
• Plagued by food and fuel shortages, failing
  transport system, closing factories, little
  foreign exchange, no internal market and no
  reliable business laws
• Dear leader Kim
• Interest in control and ideology

Source Barrons
9
American interests in the Middle East

• KFC outlet in Tripoli, Lebanon
• Implications for U.S. food service companies
• Boycotts and safety concerns lead to sales
  decline
• Local franchisees

Source Nations Restaurant News
10
Political risk analysis

• Examine the evolution of political risk analysis
  over the years
• Evaluate the methods used to create measures that
  reflect political risk
• Why has the political risk analysis industry
  declined? Discuss some of the alternative methods
  used by firms to address the issue of political
  risk
• Suggest extensions to ideas raised regarding
  analysis of the political environment.

11
Standards
Standards are like a house we raise over our
heads. They protect us. Without them civilized
life is not possible. We live by the standards
we set and we dismantle them at our peril
- Arthur Levitt, Chairman SEC
12
Standard setting by NGOs

• Shell Oils plan to abandon offshore Brent Spar
  oil platform in the Atlantic
• Indonesian government and Freeport Mcmorans
  attempts to ward off environmentalist attacks on
  Irian Jaya
• Chinas revision of plans for the Three Gorges
  Dam
• India Sardar Sarovar Dam

13
Analyzing the political environment

• Make a broad map of countrys political landscape
• Superimpose it on firms commercial interests
• Favorable, unfavorable or uncertain

14
Assessment of the environment

• Favorable
• Lenzings investment in Indonesia in 1978
• Unfavorable
• Toys R Us in Japan
• Rupert Murdoch in the British broadcasting market
• Uncertain
• Conocos investment in the Russian oil market

Source HBS