Types of political risk in international marketing. Dealing with risks in internationa business 2019-02-27

Types of political risk in international marketing Rating: 7,2/10 491 reviews

What can a multinational company do to minimize exposure to political risk?

types of political risk in international marketing

Some questions to keep in mind: Are there any important elections coming up soon? However, all of them are host countries. A new and hostile government may replace the friendly one, and hence expropriate foreign assets. Before expanding your company overseas, however, be aware of the additional risks of the foreign trade market. Differences between international and domestic marketing International marketing retains basis markets tenets of «satisfaction» and «exchange». When these types of events happen, they can wipe out your entire customer base in a country or halt their purchasing power for extended periods of time, drastically impacting your business. A perfect example of this is Canada; they have large French speaking populations around Montreal and Quebec that are culturally much different than the English speaking communities found throughout the rest of the country. Between January and July of 1998, the currencies of several East Asian countries lost between 35 and 70 percent of their value, leading to the collapse of national stock markets, deepening trade deficits, and suspension of normal business activity.

Next

Economic Risk Definition & Example

types of political risk in international marketing

Governments do these things as a way of making sure a larger percentage of income from sales stays in the home country. If a country makes the goods in their own country cheaper to buy than similar imported goods such as through tariffs and quotas , chances are you may have a hard time selling your goods in that country. Your government might increase taxes for some companies and lower it for others. There are other types of discrimination that impact marketing decisions too, such as price discrimination. For example, political decisions by a ruling party regarding taxes currency, trade tariffs, investment, labor laws, environmental regulations and development priorities have a major impact on the business conditions and profitability which thereby may affect the national economy. This is a government- to- government negotiation.

Next

Political Factors Affecting Business

types of political risk in international marketing

There were many businesses and business customer bases that became extinct almost overnight when war broke out in Libya. Some adjustments are necessary in international marketing context. Also, Western Union and Money Gram are specialized money transfer agencies, which enable fluidity in transactions. For example, a country may operate in a market economy where private individuals own most of the property and operate most of the businesses. Such challenges impede effective communication and cause misunderstandings. Meaning of political risk assessment and political risk management; Nature of micropolitical risks; Importance of local offices or partners in assessing micropolitical risks.

Next

International business risk

types of political risk in international marketing

First, risk managers must identify political risks -- whether they come in the form of higher taxes, terrorist activity or something else -- and determine how those issues might affect the company's ability to meet its business objectives. Is power concentrated in the hands of one person or one political party? Nike enjoyed changes in the political factors in many ways. The government introduced the Sarbanes-Oxley compliance regulations of 2002. Some governments will request additional funds or tariffs in exchange for the right to export items into their country. While that strategy can be effective for some companies, sometimes the prospect of entering a riskier country is so that it is worth taking a calculated risk.

Next

3. 4 Risks in International Business

types of political risk in international marketing

There are many external that can affect your business. Companies should be ready to deal with the local and international outcomes of politics. A nontariff trade barrier refers to a government policy, regulation, or procedure that impedes trade. A greater level of government spending often stimulates the economy. When translating from one language to another, it is often difficult to find words that convey the same meanings. In some case, people can combine many risks as means to operate. There are three types of such characteristics: ownership risks, operating risks, and transfer risks.

Next

Risks in International Trade

types of political risk in international marketing

So, information on the percentage of households in a market that own a particulars product, allow a further evaluation of market potential. When Frankfort, Michigan based fruit processor Graceland Fruit, Inc. Financial environment The international marketer should make a careful analysis of the financial environment, since this area faces several risks. It is true that the table did not take into account other political risks such as ownership, and transfer risks. Furthermore, if no compensation is paid, conflicts may erupt between the host country and the country of the expropriated firm. Then you will have the informed option to not set up operations in countries that are considered to be political risk hot spots. Is the country a democracy or dictatorship? Such institutions can be adapted to serve and protect African countries' interest.

Next

3. 4 Risks in International Business

types of political risk in international marketing

Economic risk can be mitigated by opting for international mutual because they provide instant , often investing in a variety of countries, instruments, currencies, or international industries. The policies maintained low-interest rates. In a foreign market, however, terminating business partners can prove costly due to regulations that protect local firms. As shown in the figure, it represents a huge segment of market, which any international marketer should take into account if his firm activities should encompass those sectors. You should understand that the political factors have the power to change results. There is a partial ownership transfer and companies are urged to prioritize local production and to retain a large share of the profit within the country. Some cultural components of the society may generate ethnocentrism, or lead directly to religious factions and nationalism.


Next

Political Factors Affecting Business

types of political risk in international marketing

Some industries are more vulnerable to confiscation than others because of their importance to the host countries and their lack of ability to shift operations. The population growth rate serves for estimation and active population is the main source of labor a company may need. Severe restrictions on import can be a motive for foreign corporate to shut down. Finally, firm may choose the geocentric approach, in which a firm analyses the needs of its customers worldwide and then adopts standardized operating practices for all markets. Duplication of such initiative is welcomed in Africa, because it builds trust and confidence, and increases foreign investments. There are no political activities. Formal trade barriers include tariffs, which are taxes on imports that help make domestic products more competitive, and product quotas that limit the number of products imported into the country.


Next