THE INTERNATIONAL POLITICAL LEGAL ENVIRONMENT

THE POLITICAL ENVIRONMENT

International marketing activities take place within the political environment of government institutions, political parties and organizations through which a country’s peoples and rulers exercise power. Each nation has its own political culture, which reflects the relative importance of the government and legal system and provides a context within which individuals and corporations undertake their businesses. Any company doing business outside its home country should carefully study the political culture in the target market. The political culture requires the firm to understand the following: 1. Political risk analysis 2. Indicators of political instability 3. Attitudes of nationals 4. Policies of the host government 5. Management and measurement of political risks

1) POLITICAL RISK ANALYSIS

International marketers face a number of political risks. The many risks posed by the host government might include: i) Confiscation ii) Expropriation iii) Nationalization iv) Domestication v) Creeping expropriation a. General instability risk b. Operation risk c. Transfer risk
Confiscation is the process of a government taking ownership of a property without compensation. For example the government of Zimbabwe recently confiscated the property of white farmers under the reign of President Mugabe without any compensation or room for legal redress.

Expropriation differs from confiscation in that there is some compensation. Often a company whose property is being expropriated agrees to sell its operations not by choice but rather because of some explicit or implied coercion.

Nationalization involves government ownership and it is the government that operates the business being taken over. Generally this action affects the