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Unit 5: Political and Economic Environment

Unfortunately there are no absolute guidelines for marketer’s to follow whether the product will notes
receive government attention or not.

Politically sensitive Products

There are some generalizations that help to identify the tendency for products to be politically
sensitive. Products that have an effect upon the environment exchange rates, national and
economic security, and the welfare of the people are more apt to be politically sensitive. For
products judged non essential the risk would be greater, but for those thought to be making an
important contribution, encouragement and special considerations could be available.

forecasting Political risks

A number of firms are employing systematic methods of measuring political risk. Political risk
assessment can:
1. help managers decide if risk insurance is needed,
2. devise and intelligence network and an early warning system;
3. help managers develop a contingency plan;
4. Build a database of past political events for use by corporate management; and
5. Interpret the data gathered and getting forewarnings about political and economic
situations.

reducing Political vulnerability

Even though the company cannot directly control or alter the political environment, there are
measures with which it can lessen the susceptibility of a specific business venture.

Good corporate citizenship

A company can reduce its political vulnerability by being a corporate citizen and remembering:

1. It is a guest in the country and should act accordingly.
2. The profits are not it’s solely, the local employees and the economy of the nation should
also benefit.

3. It is not wise to try and win over new customers by totally Americanizing them.
4. A fluency in the local language helps making sales and cementing good public
relationships.
5. It should train its executives to act appropriately in the foreign environment.

strategies to lessen Political risks

MNCs can use other strategies to minimize political risks and vulnerability.

They are:
1. Joint ventures,
2. Expanding the investment base,
3. Marketing and distribution,
4. Licensing,

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