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Political and Regulatory Climate - PowerPoint PPT Presentation

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4. Political and Regulatory Climate. Learning Objectives. List and explain the political motivations behind government actions that promote or restrict international marketing. Identify pressure groups that affect international marketing.

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Political and Regulatory Climate

Learning objectives
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.

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

Chapter Overview






Cultural identity

Political Motivations of Host Countries

Host country actions
Host Country Actions

Government subsidies

Ownership restrictions

Operating conditions

Work permits

Local content requirements


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 confiscation is an expropriation without compensation

Home country actions
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

Legal evolution
Legal Evolution

Product liability


Regulating cyberspace

Human nature orientation hno
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

Attitudes toward rules
Attitudes Toward Rules

Attitudes toward rules are affected by two criteria:

Level of power distance

Type of human nature orientation

Managing regulatory change
Managing Regulatory Change


Bargain to get government to change regulations


Move to bypass the impact of the regulation




Avoid some risks by seeking strategic alliances

Political risk
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

Regulatory change versus political risk
Regulatory Change Versus Political Risk

Regulatory Change

More moderate and predictable changes in the business environment

Political risk

More unexpected and drastic changes

Managing political risk
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

Terrorism affects international marketing
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