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The Political Environment: A Critical Concern - Coggle Diagram
The Political Environment: A Critical Concern
The Sovereignty of Nations
A sovereign state is ind. from all external control
Sovereignty refers to a state's authority over other countries and its supreme authority over its citizens.
Multinational firms look for political climate stability
Stability of Government Policies
A stable, supportive government is the perfect political setting for a multinational company.
Issue: the stability or instability of current government policies
companies can adapt to any type of gov
Political Risks of Global Business
Confiscation, Expropriation, and Domestication
Economic risks are an important part of the political env. that few international companies can avoid
Local-Content Laws
Import Restrictions
Price Controls
Tax Controls
Labor Problems
Assessing Political Vulnerability
Qualitative measures to analyze political vulnerability
Attempts to foresee political instability to assist management in identifying political events and their possible impact on current and future int. business decisions.
Risk assessment is used to measure the level of risk that a firm assumes when making an investment
Lessening Political Vulnerability
Strategies to minimize political vulnerability and risk
Joint ventures can be formed with locals or with global corporations from other countries
Expanding the Investment Base
Licensing & Planned Domestication
Political bargaining & Payoffs
Government Encouragement
The reason to encourage foreign investment is to accelerate the development of an economy
Multinational corporations are expected to create local employment, transfer technology, generate export sales, etc
The U.S gov is motivated both economically and politically to encourage US enterprises to seek business opportunities INT.