Political and Regulatory Climate

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4

• Political 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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Political Motivations of Host Countries

• Self-preservation
• Security
• Prosperity
• Prestige
• Ideology
• Cultural identity

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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 firms 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
• Level of power distance
• Type of human nature orientation

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Managing Regulatory Change

• Alter
• Bargain to get government to change regulations
• Avoid
• Move to bypass the impact of the regulation
• Accede
• Comply
• Ally
• Avoid 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
• Perfect intelligence systems to avoid being
  caught unaware when changes disrupt operations
• 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