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International Marketing MKTG 630

International Marketing MKTG 630. Dr. Frank Tian Xie Drexel University. Political and Regulatory. Topics covered…. Host & home countries Political climate Government actions International legal issues Forecasting and managing regulatory change Managing political risk

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International Marketing MKTG 630

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  1. International MarketingMKTG 630 Dr. Frank Tian Xie Drexel University L3-Political and Regulatory

  2. Political and Regulatory L3-Political and Regulatory

  3. Topics covered… • Host & home countries • Political climate • Government actions • International legal issues • Forecasting and managing regulatory change • Managing political risk • Risk reduction strategies L3-Political and Regulatory

  4. Host Country A host country is any country that contains an operational unit (marketing, sales, manufacturing, R&D) of an international company. Home country L3-Political and Regulatory

  5. Forms of Government • Greeks (500 B.C.): three forms of government: • Rule by one (monarchy) • Rule by few (aristocracy) • Rule by many (democracy) • Collapse of Communism circa 1990 (Russia/East Europe) • Free-enterprise democracy was the best solution • Collapse of Communism in China, North Korea, and Cuba? • 9-Commentaries of Communist Party • http://ninecommentaries.com/ • 200 sovereign states on the planet: almost all have at least nominally representative governments • In about 10% of the states voting is required, in the rest it is voluntary L3-Political and Regulatory

  6. A Sampling of Government Types L3-Political and Regulatory

  7. Political Motivations of Host Countries • Self-preservation • Security • Prosperity • Prestige • Ideology • Cultural identity L3-Political and Regulatory

  8. Self - Preservation • Sovereignty concerns • Restricted markets • Media • Airspace and landing rights L3-Political and Regulatory

  9. National Security • Defense industry • Telecommunications L3-Political and Regulatory

  10. Fostering National Prosperity • Employment • Exports L3-Political and Regulatory

  11. Promoting Ideology • Self-reliance • “Juche” • Non-alignment • Communism in China - threatened by market liberalization? L3-Political and Regulatory

  12. Protecting Cultural Identity • Resisting foreign brand names • Protecting cultural content in movies and TV programming L3-Political and Regulatory

  13. Export Control • U.S. export control systems • Export Administration Act (Commerce Department) • Munitions Control Act (State Department) • Determinants for export controls • National security, foreign policy, short supply, nuclear nonproliferation. • Dual-Use Items • Goods used for both military and civilian purposes. • Controlled for other purposes. • Export license L3-Political and Regulatory

  14. Import Controls • Tariffs • Voluntary restraint agreements • Quota systems • Administrative problems • Monetary and social costs to consumers while benefiting protected groups. • Downstream change in the composition of imports to circumvent narrowly defined protectionist measures. • The failure of protected firms to become more efficient and competitive. L3-Political and Regulatory

  15. Host Country Pressure Groups • Labor unions • Political parties • Environmental groups • Local business community L3-Political and Regulatory

  16. Host Country Actions • Government subsidies • Ownership restrictions • Operating conditions • Work permits • Local content requirements L3-Political and Regulatory

  17. Boycotts of Firms • Government boycotts • Arab Boycott of Israel • Ad-hoc consumer boycotts • The new Arab Boycott of U.S. products • American boycott? • French wines and French Fries L3-Political and Regulatory

  18. 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 confiscationis an expropriation without compensation L3-Political and Regulatory

  19. Home Country Actions • Guided by the same six interests as host countries • Embargoes and sanctions • “…government actions to distort the free flow of trade in goods, services, or ideas for adversarial and political purposes • U.S. embargo of Cuba • U.S. anti-Arab Boycott legislation • Often home countries seek multilateral actions to increase their bargaining power L3-Political and Regulatory

  20. Home Country Pressure Groups • Firms come under pressure at home for their • Choice of markets • Methods of doing business • Heinz switches to dolphin-safe tuna L3-Political and Regulatory

  21. International Legal Tradition • Common law • Based on tradition and less dependent on statutes and codes than on precedent and custom • Civil (or code) law • Based on a comprehensive set of written statutes that spell out legal rules explicitly • Islamic law • Socialist law L3-Political and Regulatory

  22. International Law • No enforceable body of international law exists. Firms are subject to home and host-country laws • Areas of cooperation among nations • bilateral treaties guaranteeing fair treatment • patent and trademark protection L3-Political and Regulatory

  23. Attitudes Toward Rules High Power Distance Low Power Distance HNO- HNO- negative Society positive Society L3-Political and Regulatory

  24. Piracy Rates for Computer Software L3-Political and Regulatory

  25. Legal Evolution • Product liability • Bankruptcy • Regulating cyberspace • The case of e-commerce L3-Political and Regulatory

  26. Regulatory Change v. Political Risk • Regulatory Change • More moderate & predictable changes in the business environment • Political risk • More unexpected and drastic changes L3-Political and Regulatory

  27. Forecasting Regulatory & Political Changes • Analyze economic bases of changes • Listen for signals • Berlin Wall • 9-Commentaries on CCP L3-Political and Regulatory

  28. Responding to Adverse Changes • 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 L3-Political and Regulatory

  29. Political Risk Assessment • Who do you ask? • Corporate staff/mangers • Country specialists • Political risk monitors L3-Political and Regulatory

  30. Politically Risky Not RiskyModerateRisky USA Poland Afghanistan UK Hungary Iraq Switzerland China Congo Canada Tunisia Sudan Germany Mexico Georgia France Egypt Cuba Sweden Thailand Armenia Japan India Russia Singapore Turkey L3-Political and Regulatory

  31. Risk Reduction Strategies • Choose local partners? • Minimize assets at risk • Buy political risk insurance L3-Political and Regulatory

  32. U.S. State Department Travel Warnings L3-Political and Regulatory

  33. Agencies that provide assistance to U.S. companies • Export-Import Bank (Ex-Im Bank) • Foreign Credit Insurance Association (FCIA) • The Agency for International Development (AID) • The Overseas Private Investment Corporation (OPIC) L3-Political and Regulatory

  34. Summary • Host country political climate • Host government actions • Home country political forces • Export and Import Controls • International legal traditions • Forecasting and managing change • Managing political risk • Risk reduction strategies L3-Political and Regulatory

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