Including several investors and banks in fi nancing an investment in the host country is an other

strategy. This approach has the advantage of engaging the power of the banks when ever any kind of
government takeover or harassment is threatened. This strategy becomes especially powerful if the
banks have made loans to the host country; if the government threatens expropriation or other types of
takeover, the fi nancing bank has substantial power with the government. A strategy that some fi rms fi
nd eliminates almost all risks is to license technology for a fee. Licensing can be effective in situations in
which the technology is unique and the risk is high. Of course, there is some risk assumed, because the
licensee can refuse to pay the required fees while continuing to use the technology. In those cases in
which a host country is demanding local participation, the most effective long-range solution is planned
phasing out, that is, planned domestication. This method is not the preferred business practice, but the
alternative of government-initiated domes tication can be as disastrous as confi scation. As a
reasonable response to the potential of domestication, planned domestication can be profi table and
operationally expedient for the foreign investor. Planned domestication is, in essence, a gradual process
of participating with nationals in all phases of company operations. Multinational companies clearly
engage in lobbying and other sorts of political bargain ing to avoid potential political risks. 50 Mattel
issued an extraordinary apology to China over the recall of Chinese-made toys, saying the items were
defective because of Mattel’s design fl aws rather than faulty manufacturing. 51 In doing so, Mattel
was (1) protect ing the huge and all-important head of its value chain; (2) recognizing that it would be
easier to fi x its design and inspection routines than quickly affect manufacturing prac tices in China;
and (3) uniquely for an American fi rm, publicly admitting its own very real culpability. On the other side
of the Pacifi c, Toyota once considered raising prices of its cars in the American market to “help” its
ailing American competitors. 52 The Japa nese government has set quotas on auto exports in the past
as American car companies have struggled. And in the face of growing American and European criticism,
China has agreed to put quotas on its exports of textiles and to fl oat its currency. Now the ques tion
remains, when? Finally, a cynical way to look at the motivation behind corporate social responsibility in
general is its use as a bargaining chip with foreign publics and governments. 53 One approach to dealing
with political vulnerability is the political payoff—an attempt to lessen political risks by paying those in
power to intervene on behalf of the multina tional company. This choice is not an approach we
recommend in any way. However, your competitors may use such a tactic, so beware. Political payoffs,
or bribery, have been used to lessen the negative effects of a variety of problems. Paying heads of state
to avoid confi scatory taxes or expulsion, paying fees to agents to ensure the acceptance of sales
con tracts, and providing monetary encouragement to an assortment of people whose actions can
affect the effectiveness of a company’s programs are decisions that frequently confront multinational
managers and raise ethical questions. Bribery poses problems for the marketer at home and abroad,
because it is illegal for U.S. citizens to pay a bribe even if it is a common practice in the host country.
Political payoffs may offer short-term benefi ts, but in the long run, the risks are high, and bribery is an
untenable option. This issue is discussed in more detail in Chapters 5 and 7.