Page 55 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes
Example: The citizens of many nations pressurise the companies of their countries not to
invest in South Africa because of that country’s apartheid policy. Arabian countries, even now,
do not participate in joint ventures in Israel because of their anti-Muslim policies.
Regardless of whether the politics is foreign, domestic or international, the companies should
keep in mind that political climate does not remain stationary.

Example: There had been a hostile climate in America against China in 1980s but now
the reverse has happened.

After decades as bitter enemies, both countries became very much interested in improving their
political and economic ties so as to dilute the power of the erstwhile Soviet Union. Right from
the partition between India and Pakistan, both the countries have fought three wars and the
relations are strained to the extent of even using nuclear power in case of extreme emergencies.
Now, with the movement of Bus from Delhi to Lahore and back in which both the prime
ministers will be travelling, the tension seems to have been reduced and there is likelihood that
both the countries will have a common nuclear programme and also sign a no-war pact in the
near future.
Companies can derive positive economic benefits when the relationship between two countries
improves or when the host government adopts a new investment policy. As in the case of India,
the country was a highly regulated, closed economy, which discouraged foreign direct investment.
It was only in 1991 that a new government began the reform programme, which could transform
India into one of the world’s most dynamic economies.

On the other hand, serious problems can develop when the political condition deteriorates.
A favourable investment climate can disappear overnight.

Example: The United States withdrew Chile’s duty free trade status because of Chile’s
failure to take “steps to afford internationally recognised worker rights”. Chile, thus, joined
Romania, Nicaragua and Paraguay being suspended from the Generalised System of Preferences
(GSP).

The economic sanctions imposed by America, Japan and other European countries on India and
Pakistan after they had exploded the nuclear devices are again unjustifiable. Prior to the
explosions, both the countries, especially Pakistan, had very cordial economic and military
relations with USA. Pakistan’s economy is at the lowest ebb under the present sanctions.

3.2 Types of Government

There are two types of government system as follows:

3.2.1 Political Systems

In order to appraise the political environment of a country, the knowledge of the form of
government of that country is essential. Basically, the government can be classified into two
categories – parliamentary (open) or absolutist (closed). In the parliamentary form of government,
the citizens are supposed to be consulted from time to time for learning about their opinions
and preferences. In this type of government the policies are thus intended to reflect the desire of
the majority segment of society. Most of the industrialised nations and democratic countries can
be classified as parliamentary.

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