Page 58 - International Marketing

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60 International Marketing BRILLIANT'S

and economic infrastructures, foreign exchange policies are likely to change
on a regular if unpredictable basis. In 1998, instability has been seen
across the world due to the currency crisis in the Asian markets and the
consistent fall of the Japanese Yen.
Thus, in international marketing transactions take place invariably
between countries and so the exchange rates and currency movements
are an important aspect of international economic environment.
Political Environment
Politics is considered as the major factor in many international
business decisions, especially in terms of whether to invest and how to
develop markets. Politics is intrinsically linked to a government’s attitude
to business and the freedom with which it allows firms to operate. Unstable
political regimes expose foreign businesses to a variety of risks that they
would generally not face in the home market. The tendencies of
governments to change regulations can seriously affect an international
strategy providing both opportunity and threats. The type of actions that
governments may take which constitute potential political risks to firms
fall into 3 main areas:
1. Operational restrictions: There could be exchange controls,
employment policies, insistence on locally shared ownership and
particular product requirement.
2. Discriminatory restrictions: This is imposed on purely foreign
firms and sometimes, only firms from a particular country. It includes
special taxes and tariffs, compulsory sub contracting, loss of
financial freedom.
3. Physical actions: These actions are direct government
interventions such as confiscation without any payment of
indemnity, a forced takeover by the government, expropriation,
nationalization or even damage to property or personnel through
riots and war.
LDC’s and emerging markets pose high political risks. There is
existence of threats of civil disorder, creeping expropriation, mercurial
Government policies, civil unrest are the common features of the economy.
However, the recent trends of trade agreements, privatization and
market reforms are all working to remove trade barriers. The WTO has led
a series of worldwide agreements and introduces a number of innovative
measures to encourage trade amongst countries. An understanding of
these political issues is critical to the international marketing manager.