Page 75 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes The strength and the longevity of the coalition government depend largely on cooperation
of government allies. Usually, various opposing parties continuously challenge the
coalition government.
The countries operating with this type of system include Germany, France, Israel and
India. Present government in India has 18 coalition partners. This form of government is
often used by countries which are in early stages of development of a parliamentary
system.
The economy of a country depends upon the political stability of that country. Italy is
another politically unstable developed country. Democratic political system is a pre-
requisite for political stability also. Classification of government based on economic
system can be another basis of its types.

In the economic systems, the basis explains whether business is privately owned or
government owned or whether there is a combination of private and government
ownership.

3.7 Keywords

Communist Theory: This theory holds that all resources should be owned and shared by all the
people (not by profit seeking enterprises) for the benefit of the society.

Confiscation: It is the process of a government’s taking ownership of a property without
compensation.

General Instability Risk: It is related to the uncertainty about the future viability of a host
country’s political system.
Nationalisation: It involves government ownership and it is the government that operates the
business being taken over.
Political Risk: Political risk is the risk of loss that occurs as a direct result of the actions of a
government or changes in the political structure in a particular country.
Socialist Government: A socialist government owns and operates the basic major industries but
leaves small business to private ownership.

3.8 Review Questions

1. Explain the multiplicity of political environment. Distinguish between parliamentary
and absolutist governments.
2. Distinguish among the governments: two party, multi-party, single-party and dominating
one party.
3. Distinguish among the economic systems: communism, socialism and capitalism.
4. Explain confiscation, expropriation, nationalisation and domestication. What is creeping
expropriation and what is its economic impact on foreign investors?
5. How can a company do country risk analysis for investment purposes?

6. Explain the methods of political risk management: avoidance, insurance, negotiating the
environment and structuring the investment.

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