Page 60 - DMGT547_INTERNATIONAL_MARKETING

Unit 3: Political Environment of International Marketing

Self Assessment Notes

Fill in the blanks:
1. The degree of ............................ control under socialism is somewhat less than under
communism.

2. In a dominated ............................ system, the dominant party does not allow any opposition
resulting in no alternative for the people.
3. Majority of the MNCs have to face complex political ............................ problems because
they must cope with the politics of more than one nation.

Caselet Political System

he biggest threat that India is facing today is the slow economic growth because of
two great factors. First, terrorism from across the border in Jammu and Kashmir
Tand other parts of the country which is dissuading the MNCs for foreign direct
investment into the country. Second, poor labour legislation. Unless higher and fire system
in the labour legislation is brought, foreign companies will not like to come to India for
investments. The greatest risk that any foreign company faces today is the instability of a
government due to terrorism in the country. Though the government is stable in the
country and is running smoothly and efficiently, however, the threat of terrorism is
making the MNCs to avoid investing in a big way. It is, therefore, essential that terrorism
is curbed at all levels for which the government must go all out to ensure the safety and
integrity of the people and the property of the country.
India, after 1990, opened its economy to international institutions through modernization,
privatization and globalisation. There is hope now that the economic growth of the country
will touch 6.5 % of GDP as envisaged by the Reserve Bank of India Annual Report for the
year 2003-04.
Source: P. K. Vasudeva, International Marketing, Excel Books.

3.3 Political Risk Analysis

There are a number of political risks which are to be faced by international marketers. The risks,
which the marketers face from the host government, are – confiscation, expropriation,
nationalisation, domestication and creeping expropriation. Such actions are more likely to be
levied against foreign investments though local firms are not totally immune.

Example: Charles de Gaulle nationalised France’s three largest banks in 1945 and more
nationalisation occurred in 1982 under the French socialists.
Confiscation is the process of a government’s taking ownership of a property without
compensation.

Example: The Chinese government seized American property after the Chinese
communists took power in 1949. Occidental Petroleum Company, wanted the United States to
review Venezuela’s GSP eligibility after the country confiscated the company’s assets without
compensation.

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