International Politcal-Legal Environment in Marketing Essay

2138 Words Feb 18th, 2015 9 Pages


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
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In domestication, foreign companies relinquish control and ownership either completely or partially to the nationals. The result is that private entities are allowed to operate the confiscated or expropriated properties. Domestication may be a voluntary act that takes place in the absence of confiscation or nationalization. Normally the causes of these actions are either poor economic performance or social pressures e.g. when situations worsened in South Africa and political pressure mounted during the apartheid period, Pepsi sold its South African bottling operations to local people.

Creeping expropriation refers to situations where the government poses the threat of regulating or not allowing an international firm to repatriate profits made in the host country to a foreign destination. It can take the form of; general instability risk, operation risk and transfer risk

a) General instability risk is related to the uncertainty about the future viability of a host country’s political system. In contrast, ownership/ controlled risk is related to the possibility that the host government might take action(expropriation) to restrict an investor’s ownership and control of a subsidiary in that host country. b) Operation risk - proceeds from the uncertainty that a host government might constrain the investor’s business operations in all areas including production, marketing and finance. c) Transfer risk

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