Environmentsaffecting

affectingIntl
Intl
Environments
Marketing
Marketing
Political & Legal Environment
Socio cultural Environment
Technological Environment
Demographic Environment
Economic Environment
Global Environment

POLITICAL Environment
Political Interventions
Expropriation- seizure of property, in public interest, with compensation
Confiscation- seizure of property, in public interest, without
compensation

Domestication- transfer control of foreign company to locals

Nationalization- transfer ownership of entire industry from Private to
Public

Exchange Control- restrictions in forex

Import Restrictions Tariff and Non-tariff barriers, quotas
Market Control- restrictions in area of operation, product, market,
pricing, acquisitions

Tax

excessive and non-traditional taxes and import tariff

 Political Risks
Govt. policy based risks

Discriminatory regulations
Creeping expropriation
Breach of contract
Mass Nationalisation
Currency inconvertibility
Regulatory changes

- Political instability risks

Sabotage
Civil and labour unrest
Anti globalisation movement
Firm specific boycotts
Extortion by Govt.
Internal conflicts in parties

METHODS
METHODS of
of
Political
Political Risk
Risk Assessment
Assessment
(PRA)
(PRA)with Govt.,
1. Team visit, meetings
businessmen etc.
2. the old hand- hiring educators,
diplomats, politicians
3. Delphi technique sharing opinions of
experts
4. Quantitative methods- correlation, trend

LEGAL ENVIRONMENT
Common law
Code law
Jurisdiction of law

LEGAL BARRIERS
Tariff Barriers govt. levies
Reasons :
o protect home industry
o forex control
o Discourage low cost imports
o Equalize cost of production
o Protect wages and employment
o Impliment anti dumping measures
o Bargaining and retaliation
TYPES :
1. Unilinear tariff
2. Conventional tariff - MFN
3. Special duty tax permit
4. Ad-valorem duty value based
5. Countervailing duty antidumping

NTBs
NTBs(Non
(NonTariff
TariffBarriers)
Barriers)

Specific limitations on trade

Customs and Entry Procedures

Standards

Anti Dumping laws

Import Licensing

Specific Limitations on Trade:

Quotas
Import Licensing requirements
Proportion restrictions of foreign to domestic goods (local
content requirements)
Minimum import price limits
Embargoes
Customs and Administrative Entry Procedures:
Valuation systems
Antidumping practices
Tariff classifications
Documentation requirements
Fees
Standards:
Standard disparities
Intergovernmental acceptances of testing methods and
standards
Packaging, labeling, and marking

Examples of Non-Tariff Barriers to Trade

Import bans
General or product-specific quotas
Rules of Origin
Quality conditions imposed by the importing country on the
exporting countries
Sanitary and phyto-sanitary conditions
Packaging conditions
Labeling conditions
Product standards

Government Participation in Trade:

Government procurement policies
Export subsidies
Countervailing duties
Domestic assistance programs

Charges on imports:
Prior import deposit subsidies
Administrative fees
Special supplementary duties
Import credit discriminations
Variable levies
Border taxes
Others:
Voluntary export restraints
Orderly marketing agreements Complex regulatory

environment
Fixation of a minimum import price

How to manage Political &

Legal Risk

Proactive environmental monitoring and

Scanning
Allying with local partners
JV, Licensing, Franchising etc.
Protection through legal contracts
Conciliation / mediation
Arbitration
Litigation
Safeguarding IPR
Strict adherence to Ethical Standards
CSR activities

CULTURAL
CULTURAL ENVIRONMENT
ENVIRONMENT

 CONCEPT
Definition
It is the way of life of people,including their
attitudes, values, beliefs, arts, modes of
perception and habits of thought and
activity.
collective programming of mind, which
distinguishes the members of one group or
category from those of another. - Hofstede

Diff. bet.
Human Nature Universal, Biological
Culture Specific to groups, Learned
Personality Specific to individuals,
inherited

 CONSTITUENTS
Value System

Shared assumptions within group

What is Good or Bad, Right or Wrong, imp or unimportant
US are achievement , competition & profit oriented
Japanese on size & growth of organization. e.g. no theft after tsunami
Indians moral orientation, organizational compliance & competence.
China respect & value for experience and age

Norms
Guidelines or Social rules of behaviour in a situation
Japan aggressive selling or persuation - not percieved good.
(benefits, price reduction etc. will work)
Indians & south asian use hands or spoons of diff sizes.
Japanese/Chinese use chopstics for precut food.
Europeans use knife & forks

Norms 2/2
Cultural imperatives
Norms which MUST be followed or avoided
E.g. prolonged eye contact good in Gulf & Latin
America, bad in Japan & Arab women.

Cultural Exclusives
Social customs EXCLUSIVELY for natives and not for
foreigners
E.g. avoid local politics, social gatherings in
Islamic countries.

Cultural Adiaphora
A social custom in which a foreigner MAY or MAY
NOT participate
Bowing to a Japanese (not expected of a
foreigner in Japan)

 Aesthetics
Ideas and Perceptions about Beauty and Good
Taste that group upholds
E.g.Colours
Blue is corporate colour in US but evil in
Africa
Red is lucky in China but means
death/witchcraft in Africa
Black spells death in US and EU while White is
death in Asian countries, Purple in Latin
America.

Traditions & Customs

Language
Meaning changes with places
Reflects the culture expressions
Used for advertising (colgate means go to your funeral in Spanish; table
the report different in USA and UK)
Perception of nationals differ

Process of Environment Analysis

BERI - Business Environment Risk
Index
AlsocalledtheBERI.Anindexthatmeasuresrisk
tobusinessinaspecificcountry.TheBERIisintendedtohelpcompaniesweighther
iskversusthepotentialreturnofexpandingtheiroperationsabroad.

PCI - PerenClement index

Is a method ofcountry-specific riskanalysisfor businesses
engaged ininternational tradeanddirect investment

SCANNING

collecting raw data (ambiguous,

incomplete, unconnected information)

MONITORING

observe trend of activities in

segments

FORECASTING

Projections based on trends

How to manage Cultural

Risk
Acquire factual & interpretive
knowledge