1. POLITICAL ENVIRONMENT Chapter 3

2. INTRODUCTION Politics play an important role in shaping business worldwide Manager need to know how to interact between business and government and to know how to react to in interests conflict WHY ? The political LEARDERSHIP in each country CONTROLS whether how international business will occur in that country So !!

4. THE ROLE & FUNCTION OF POLITICAL SYSTEM To integrate society The way to conduct society The way to choose or to have a government to manage a country For policy making Its depends on the political ideologies

5. WHY POLITICAL ENVIRONMENT IS IMPORTANT TO MANAGERS? To be successful, managers must learn to deal with public institutions and non public institutions in addition to market forces Managers must learn to cope with varying degrees of governmental intervention in economic decisions, depending on the countries in which a company is doing business The political impact on IB activities is relatively complex because the domestic political process is subject to various influences & managers must deal with different political process in different countries

6. THE AFFECTS OF POLITICAL SYSTEM ON BUSINESS The political process affect IB through law that regulate business activity at both domestic and international level Government may deal with transaction on a unilateral basis or through treaties and conventions An MNC must be concerned with the laws in its home country that regulate cross-border transactions Understand legal requirement in each country in which its operate

7. STEPS TO ESTABLISH AN APPROPRIATE POLITICAL STRATEGIES IDENTIFY THE ISSUE : What is the specific issue facing a firm – protectionism, environmental standards, workers right, terrorism and etc. DEFINE THE NATURE: Define the nature of the politics issue ASSESS THE POTENTIAL POLITICAL ACTION of other companies and of special interest groups who are the parties that are affected and able to generate political pressure? What are their strategies to be?

8. STEPS TO ESTABLISH AN APPROPRIATE POLITICAL STRATEGIES IDENTIFY IMPORTANT INSTITUTIONS & KEY INDIVIDUALS : Legislatures, regulatory agencies, courts, important personalities FORMULATE STRATEGIES: What are the key objective, the major alternatives, and likely effectiveness of alternative strategy DETERMINE THE IMPACT OF IMPLEMENTATION: What will the public relations fallout in the home & host countries if the action taken is unpopular? SELECT: The most appropriate strategy & implement!

9. POLITICAL RISKS Definition: Any change in the political environment that can adversely affect the value of the firm’s business Examples of political risks include expropriation, confiscation, campaign against foreign goods, mandatory lanour benefits legislations, kidnapping, terrorist threats, other forms of violence, civil wars and etc.

10. POLITICAL RISKS Divided into 3 categories: 1. Ownership risk, in which the property of a firm is threatened through confiscation or expropriation 2. Operating Risk, in which the ongoing operations of a firm and or the safety of its employees are threatened through changes in laws, environmental standards, tax codes, terrorism, armed insurrection and etc. 3. Transfer Risks, in which the government interferes with a firm’s ability to shift funds into and out of the country

11. AFFECTS OF POLITICAL RISKS MACROPOLITICAL RISKS - will affects all firms in a country - Ex: Civil wars that occurs between Serbia, Bosnia and Corsova 2. MICROPOLITICAL RISKS - will affects only on specific firms or firms within a specific industry - Disneyland Paris and Mc Donald’s have been the target of numerous symbolic protests by French farmers, who view them as a convenient target for venting their unhappiness with the U.S. international agriculture policies.

12. POLITICAL SYSTEM TOTALITARIANISM Authoritarian Fascism Communism Theocratic Religion Secular DEMOCRACY Conservative* Liberal*

13. POLITICAL IDEOLOGIES ANARCHISM FASCISM PLURALISM

14. Assignment Compare democratic & totalitarian political acquires and briefly discuss how they can influence management decisions. Date to submit: 14