International Marketing Study Set 9

Business

Quiz 6 :
The Political Environment

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Quiz 6 :
The Political Environment

Definition of various terms including sovereignty, nationalism, confiscation, expropriation, domestication, political and social activists (PSAs), and nongovernmental organizations are given below: Sovereignty: It refers to the powers that a state exercises over its own members as well as the other countries. A sovereign state could not be controlled by the external bodies. It has the power to govern its own territories. Furthermore, it regulates it own social, economic and political systems. Nationalism: It refers to the feeling of pride and unity of an individual towards his/her nation. Nationalism plays a vital role in international marketing. For example, this feeling might influence the residents of a country for buying the products of local companies. Furthermore, it might also influence them to boycott the products manufactured by foreign companies. Confiscation: It is one of the severe political risks faced by a company. In confiscation, a company's assets are seized by the government without any reimbursement. Expropriation: It is another political risk faced by the companies, in which the government seizes their investments. However, in this case, partial reimbursement for the assets is provided by the government, unlike confiscation where no reimbursement is allowed. In expropriation, the privately-run companies are transformed into government-run entities. Domestication: Besides confiscation and expropriation, the companies face another political risk namely domestication. In domestication, the foreign investors are forced by the government to increase their ownership in the domestic firms. Government of a country uses this technique to promote local ownership among the foreign investors. Political and social activists (PSAs): The political and social activists includes the group of people who strive for making changes in the existing social, political, and economic environment. PSAs are not sanctioned by the government officially; however they play a crucial role in interrupting the trade flow within and outside a country. Nongovernmental organizations (NGOs): NGOs are the groups or organizations who greatly influence the policy decisions taken by the governments. NGOs use different techniques like lobbying, protests, as well as government association for influencing the political decisions taken by the companies.

Expropriate means taking money or property of the owner for public welfare or for personal use, illegally without paying a single penny to the owner. Taking full control of the business of foreign investors forcefully is known as expropriating. A multi general relationship in which one group takes care of another group to secure supply of resources from that second group. Helping the foreign investors or companies in the setup of their in business in our country and takes care of their needs is known as domesticate. Being domesticate a country should achieve all whatever it wants or need for the welfare of the people of the country. On the other end, being expropriated will not help the country to achieve its goals. Instead creates problems and keep away the potential investors from the country. It also builds a bad image in front of the other countries.

A government of a country has made policies which are in benefit or welfare of their people. Each government has its own rules and regulations, which vary from country to country. Before doing the business in the foreign country, companies are required to study the policies of that country in depth. It is difficult for a company to examine, comprehend and evaluate the future and present policies of the government of any country. For doing business in a foreign country, one has to study the laws and regulations of that country in depth and follow them as well. If you are agreeing to do so and then you are permitted to run the business in a foreign country. Also, one has to first convince the government that the business is beneficial for their country in terms of economic development. This helps to examine the attitude of government towards foreign business. The government keeps an eye on the activities of these companies and when they found anything wrong like product contrary by country people, ethical standards are not followed by the company, etc. in such cases, the government asks the company to shut down its activities and the country.