International Marketing

The political environment: a critical concern

1. Define: Sovereignty, confiscation, nationalism, domestication, expropriation,

Political and Social Activists “PSAs”, Non-governmental Organizations “NOGs”.
 a. Sovereignty: it is the powers exercised by a state in relation to other countries,
as well as the supreme powers of a state as exercised over its own inhabitants.
b. Confiscation: is the seizing of a company’s assets without payment. Prominent
examples involving U.S. companies occurred in Cuba and Iran.
c. Nationalism: it is an intense feeling of national pride and unity or it can be
described as an awakening of a nation’s people to pride in their country. Nationalism
can take on an anti-foreign business bias.
d. Domestication: it is a process by which a host country gradually transfers foreign
investments to national control and ownership through a series of government
decrees mandating local ownership and greater national involvement in company
management.
e. Expropriation: it is the seizure of an investment by a government in which some
reimbursement is made to the investment owner. Often, the seized investment
becomes nationalized.
f. Political and Social Activists “PSAs”: PSAs are individuals who participate in efforts
to change the practices and behaviors of corporations and governments, with tactics
that can range from peaceful protest to terrorism.
G: Non-governmental Organizations “NGOs”: it is a large advocacy organization,
usually not for profit, often multinational, and run by citizens rather than companies
or governments. Prominent examples are Green Peace, Amnesty International and
the Red Cross.

2. Why would a country rather domesticate than expropriate?

 A country would rather domesticate than expropriate because expropriation can
create conflicts with other governments and could potentially take investors away
from them. Moreover, if a country domesticates rather than expropriate, the
country can achieve almost all of the benefits of expropriate and avoid issues
with some other countries. More benefits are supposed to come, and many
problems could be avoided due to domestication.

3. What are the main factors to consider in assessing the dominant political climate
within a country?
 The factors to consider in assessing the dominant political climate within a
country are:
a. Current form of government
b. Current political party systems
c. Stability and permanency of government policy
d. Risks or encouragements of foreign business resulting from political activity
Issues of sovereignty, differing political philosophies, and nationalism. The costliest
actions result in transfer of equity from the company to the government, with or without
adequate compensation.
4. How can a change in the political party in power affect an investor? Discuss and
give examples.
 Particularly important to the marketer is knowledge of the philosophies of all
major political parties within a country, since any one of them might become
dominant and alter prevailing attitudes. In those countries where there are two
strong political parties that typically succeed one another in control of the
government, it is important to know the direction each party is likely to take. In
Great Britain for examples, the labour party traditionally has tended to be more
restrictive regarding foreign trade than the conservative party.