InternationaltradeRisk.ppt

Click to edit Master title style,Click to edit Master text styles,Second Level,Third Level,Fourth Level,Fifth Level,*,“Avoiding pitfalls and market risk Factors”,Different Types of National Governments,Parliamentary governments,Policies are intended to reflect the desires of the majority,Absolutist governments,dictate government policy without considering citizens needs or opinions,Other governments,Most governments fall between the above extremes,Role of Government in the Economy,Participator,commercial activities undertaken by government to some degree,Facilitator,overseas governments may attract new foreign investment and technology,Regulator,Regulation may be thru taxes;embargoes;boycotts;import/export controls;and joint venture law,Political Approaches in International Marketing,The marketing function varies according to the ideological environment,Marketing is affected by nationalism,where nationalism is high,foreign firms tend to be regarded with suspicion and their products discriminated against,Sources of Political Instability,Degree of social unrest,Frequency of changes in the regime,Extent to which the country is divided culturally and/or ethnically,Religious division,Linguistic diversity,Assessing political stability,Sources of Political Instability,Political sovereignty,involves a nations desire to exert control over,foreign-owned enterprises operating within its boundaries,Political conflict,can be categorised as turmoil,internal war and conspiracy,Political intervention,Expropriation,Domestication,Nature of Political Risk,General instability risk,Ownership risk,Operating risk,Transfer risk,Risk arising from actions of other home country companies,Assessment,Four methods for determining political risk,(Jain,1996),:,The grand tour,The old hand,The Delphi technique,Quantitative methods,A firms exposure to political risk should at least cover:,Product related factors,External factors,Company factors,Company Behaviour,Political neutrality,Companies should be conscious of which political labels are acceptable and which are not,Combination investment/civic projects,Contributions to local infrastructure development are likely to benefit not only the community but also the company,Political risk in home country vs foreign country(e.g.sanctions),Lobbying to influence political decisions,Awareness of impact of a firms operations on alternative governments policies,Contribution to the Host Country,The linking of a firms commercial activities to the host nations economic interests and planned developments,for example:,buying local products whenever possible,forming alliances or joint ventures with local firms,establishing training programs for local employees,demonstrably upgrading technology levels,using the operation to generate exports,recruiting locals to occupy senior management positions,Localisation of Operations,Four alternative courses of action for disengagement,(Encarnation and Vachani,1985),:,Leave the country altogether,Totally indigenise operations to become a local company,Negotiate an arrangement under the new law,Take pre-emptive action in advance of announced changes,Generate sizable exports for the country to step up the host government dependency on the operation,Political Risk Insurance,Can be undertaken through private insurers,the main agency in Australia is the government-operated Export Finance Insurance Corporation,Premiums for political risk will vary according to,the country concerned,whether the company insures all its overseas transactions with EFIC as opposed to only the risky ones,A range of politically induced risks can be insured against,Marketing Implications-Political,What is the history of host government intervention in foreign business activities?,What is the form of government intervention?,Political risk analysis should cover:,Form of government,Stability,Competence in economic management,Frequency of changes in policy towards foreign investment,Nature of the relationship between the government and its people.,Legal Systems,Common law,based on tradition,past practices,legal precedent,and interpretation via court decision,Code law,based on an all-inclusive system of written rules of law,Islamic law,based on the Koran,and applied by Islamic countries,Other legal codes,include tribal(or indigenous)law,and socialist laws,International Law,Implies a desire to lessen differences in the way countries treat legal problems,Reflected in the determinations of multilateral bodies,Harmonisation of international trade laws,United Nations Commission on International Trade Law,Determinations of regional bodies have led to the creation of laws applied on a regional basis.,Implementation of law will often vary widely between signatories,Legal Jurisdiction,Which countrys laws apply in the event of a dispute?,Decided according to the country/state nominated in the jurisdictional clause in the contract;or where the contract was entered into;or where the provisions of the contract are to be carried out.,Further complications occur when different sets of law allegedly apply,Multiple sets of law may be in operation,Federal,state and municipal laws and regulations may overlap,Product,Physical and chemical aspects are affected by laws,Standards may be prescribed for purity,safety and performance,Packaging requirements may be imposed,Controls may be set for quarantine reasons,Labelling regulations differ markedly between countries and even within countries,Price,Government price controls,often motivated by a desire to protect consumers interests or control inflation,a desire to ensure price competition in the market,Pricing is often affected by,Dumping,Transfer pricing,Size of the profit margin included in the price,Taxes,Distribution (Place),Laws in most countries cover:,Shipping,Regulation of airline services,Rights of carriage by air and sea,Liabilities for loss and damage to cargo,Channel activities,Foreign/local agency termination arrangements,Promotion,Frequent areas of regulation are:,trade descriptions,prohibitions on advertising certain products,prohibitions on using certain words and expressions,limitation on extent of promotional expenditure,content and style of advertisement,other promotional elements,Environment,Increasing attention on environmental consciousness,Environmental problems cross national boundaries,Environmental laws apply to:,Packaging,Visual pollution,Noise pollution,Collection and recycling,Human Resources,Conforming to labour laws of the overseas country,Accepting different employment conditions,employment of expatriate staff,conditions under which they can enter the country,length of time they can remain,training locals to replace expatriate managers,