2004 – Czech Republic joined EU

1. PoliticalEnvironmentDoc. Ing. MansoorMaitah Ph.D. et Ph.D. www.maitah.com maitah@pef.czu.cz • 2004 – Czech Republic joined EU • Fiscal and monetary policy aims to align its macroeconomic conditions with the rest of the EU. • The earliest date to join eurozne is unknown ...may be 2012

2. Macroenvironmentforces • Culturalenvironment • Demographicenvironment • Econmicenvironment • Naturalenvironment • Technologicalenvironment • PoliticalEnvironmnet

3. Politicalenvironment • Thepoliticalenvironmentincludesalllaws, governmentagencies, andlobbyinggroupsthat influence orrestrictindividuals in the society. Theinternational business isalsosubject to politicaldecreesmade by governmentboth in „home“ and „host“ countries. • Homegovernmentcanapplypresure not to dealwithdisapprovedparties……export licence…….withdrawalof export guaranteecover. • Host government my takemeasuresliketaxation, ownershipcontrols, operatingrestrictionsorexpropriation.

4. Resource Allocation Market Command CentrallyPlanned Capitalism Market Capitalism Private Resource Ownership Centrally Planned Socialism Market Socialism State Types of Economic Systems

5. The reasons of expansion • The factors that drive enterprises to seek business development and growth through international and global operations: • Market factors • Cost factors • Competitive factors • The international business environment

6. Entry modes • Exporting • Turnkey Projects • Licensing • Franchising • Joint Ventures • Wholly Owned Subsidiaries

7. Three Types of Political Risk • Ownership Risk • Exposes property and life • Operating Risk • Interference with the ongoing operations of a firm • Transfer Risk • Limitations on the outflow of funds

8. Economic Risk • Exchange controls may be levied • Tax policies may be used to control corporations and their capital • Price controls may employed to control prices of imported products or services

9. Managing the Risk • Demonstration of concern with host country’s society can be effective. • Firms can take out insurance to cover losses due to political and economic risk.

10. The Political and Economic Environment • One important aspect is the phenomenon of ethnicity • Driving force behind political instability • Firms must assess political risks • Government actions that could adversely affect the long-run profitability or value of a firm

11. Political Risk – 7 Typical risk events • Expropriation of corporate assets without prompt and adequate compensation • Forced sale of equity to host-country nationals, usually at or below depreciated book value • Discriminatory treatment against foreign firms in the application of regulations or laws • Barriers to repatriation of funds (profits or equity)

12. Managing Political Risk • Avoidance – either the avoidance or withdrawal of investment in a particular country • Adaptation – adjust to the political environment • Dependency – keeping the host nation dependent on the parent corporation • Hedging – minimizing the losses associated with political risk events

13. Whatispolitical risk?

14. Coordinate aspects of members’ economic and political systems Political Union Remove barriers to trade, labor, and capital; set a common trade policy against nonmembers; and coordinate members’ economic policies Economic Union Remove all barriers to trade, labor, and capital among members; and set a common trade policy against nonmembers Common Market Remove all barriers to trade among members, and set a common trade policy against nonmembers Customs Union Remove all barriers to trade among members, but each country has own policies for nonmembers Free-Trade Area Levels of Regional Integration

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