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International Business

notes can function under any type of government as long as there is some long-term predictability and
stability.

Political Parties
Particularly important to the marketer is the knowledge of all philosophies of all major political
parties within a country, since anyone might become dominant and alter prevailing attitudes. In
those countries where there are two strong political parties where usually one succeeds the other,
it is important to know the direction each of the parties is likely to take. Changes in direction a
country may take toward trade and related issues are caused not only by political parties but
also by politically strong interest groups and factions within different political parties, which
cooperate to affect trade policies.

5.1.2 types of Political systems

The following are the types of political systems:

Democracy

Democracy is for the people, by the people, and of the people, its similar to participative management,
in this system people are encouraged to participate in decision making, a peoples representative
can be selected by the people through a process of election, and the responsibility of leading the
nation is kept on the shoulders of the elected representative e.g, India.

Dictatorship

It is also called as authoritarianism, which is quite opposite to democracy, here the hole power
is in the hands of the leader, and people should follow the leader, all the policies related to
economy, business etc are governed by the leader e.g, Saudi Arabia.

5.1.3 Political risks of Global Business

Some of the political risks of global business are mentioned below:

Confiscation

The most severe political risk is confiscation, which is seizing of company’s assets without
payment.

expropriation

Which requires reimbursement, for the government seized investment.

Domestication

Domestication occurs when host country takes steps to transfer foreign investments to national
control and ownership through series of government decrees. A change in the government’s
attitudes, policies, economic plans and philosophies toward the role of foreign investment is the
reason behind the decision to confiscate, expropriate or domesticate existing foreign assets.

assessing Political vulnerability

Some products are more politically vulnerable than others, in that they receive more government
attention. This special attention may result in positive or negative actions towards the company.

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