How Do Politics and Laws affect a Firm’s Market Strategy?
Form of organization - are there legal requirements?
Does your strategy need to be adapted to the country’s legal
system? E.g. local content, local labor laws
What laws affect your products and services? Your marketing mix?
Clearances and approvals?
How stable is the political system? Are the laws likely to
change as new parties come into power?
How politically risky is doing business in country X?
Is your firm, your strategy, your way of doing business, your products,
your marketing mix politically vulnerable?
Let’s look at our Case Examples
Can coffee, soft drinks, Internet use, shopping methods, food storage
wraps, or liquid soap be politically vulnerable products?
Is the product under debate within the country’s legal system? Do certain
parties have platforms related to your product?
Is the product under debate within the multinational market?
E.g. EU law
Is the product under debate within global organizations?
Suppose you are the marketing manager in charge of global operations?
How can you begin to answer these questions?
Governmental Effects on Global Business - chart discussed in class
Politics and Laws
First - investigate the governmental philosophy and its type of legal
system
High or low context interpretation?
Common, Code, Islamic, Socialist law?
What is the political mode of succession? democratic vote? elections?
monarchy? anarchy? overthrow?
Investigate the political parties - how many, what platforms, issues,
debates
World Factbook online, found at: http://www.odci.gov/cia/publications/factbook/index.html
Political Relationship with Home Country
Are there areas of disagreement with the home country? Within
the multinational market?
Are there military conflicts with other surrounding countries?
Are there military conflicts with countries who supply some raw material
or labor for your product?
Are there any sanctions and embargoes? see India and Pakistan
Political Risk Indicators
Political risk concerns the number and frequency of destabilizing events
taking place in a country
Shift in political parties? rise in feelings of nationalism?
change in form of government? civil war? riots?
Can we predict alternative scenarios if the political regime changes
suddenly?
What is their position relative to our business? Our products? Our
form of business?
Now suppose that your firm was considering doing business in Indonesia?
Use the web sites to look up the various types of events which have
taken place
How many political parties?
Are there any politically charged events?
Have there been peaceful elections in the past?
What would you recommend?
Politically Vulnerable Products
Can any product be vulnerable? How about soda?
Subject of political debates
Dependence on other industries
Socially, economically essential?
Essential to agriculture?
Related to national defense?
Local components?
Distribution and Purpose of Tariff and Nontariff barriers
Classifications of products
Special laws or clearances - for example, what regulations apply to
coffee? E.g. processing, packaging, nutritional claims?
Relation to costs for your product and method of market entry - are
there any restrictions?
BISNIS site
Legal System in Terms of Trade
Protectionist vs. cooperative
Are trade policies clearly spelled out? Do they change often?
Does the government try to protect certain industries which are growing
or declining?
Is trade used as an instrument of political conflict?
What are sources that provide us with reliable, accurate, and updated
overviews of trade law?
Laws must be considered from all points of view - Destination and
Home Country
Can we identify what the government is trying to accomplish - often
related to market entry
This site will take you to government, laws, and media from the country’s
point of view. Found at: http://www.politicalresources.net/
.Keep up to date on changes in tariffs and nontariff barriers.
Here’s one of the best sites to use from the Trade Information Center at
the U.S. Dept of Commerce. Tariff and Country Information sections
are informative: http://www.ita.doc.gov/td/tic/
Multinational Markets also maintain systems of laws
.The European Union, found at: http://www.europa.eu.int/
.NAFTA, the North American Free Trade Area, at: http://www.mac.doc.gov/nafta/menu1.htm
.CEFTA, the Central European Free Trade Area, at: http://www.cefta.org
.MERCOSUR, Southern Cone Free Trade Area: http://www.mercosur.com/
Other global organizations also have an impact
Keep up to date on the World Trade Organization (WTO): http://www.wto.org/
The International Trade Commission: http://www.usitc.gov/
The United Nations: http://www.un.org/
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