The document discusses the political environment as a critical concern for international business. It covers topics such as sovereignty of nations, stability of government policies, nationalism, political risks, assessing and reducing political vulnerability. Government philosophies and policies can shift with changes in government or pressure from groups. Nationalism may increase restrictions on imports and foreign investment. Businesses must consider risks like confiscation of assets, economic policy changes, and political and social activists when operating globally.

2. The Political Environment: A Critical Concern Chapter 6 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved. PowerPoint presentation prepared by: Professor Rajiv Mehta Associate Professor of Marketing New Jersey Institute of Technology Newark, N.J.

3. Chapter Learning Objectives 1. What does the sovereignty of nations mean and how can it affect the stability of government policies, political parties and nationalism. 2. The political risks of global business and the factors that affect stability 3. The importance of the political system to international marketing and its effect on foreign investments

4. Chapter Learning Objectives 4. The impact of political and social activists, violence and terrorism on international business 5. Assessing and reducing the effect of political vulnerability 6. How and why governments encourage foreign investment

15. Reducing Political Vulnerability Relations between governments and MNCs are generally positive if the investment: improves the balance of payments by increasing exports or reducing imports through import substitution uses locally produced resources transfers capital, technology, and/or skills creates jobs, and/or makes tax contributions

16. Reducing Political Vulnerability MNC’s can use the following strategies to minimize ­political vulnerability and risk: Joint Ventures Expanding the Investment Base Licensing Planned Domestication Political Payoffs