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Political Environment:
Trade
Agreements
Economic System:
The type of economic system a country builds is
a political choice. Foreign countries often will have
different economic systems from your domestic
market and adjustments often need to be made to
take these differences into account.
•Market Economy
•Socialist Economy
•Communistic Economic System
•Mixed Economies
Common Political Factors
Governmental System
Businesses also must often contend
with different governmental
systems. Some governments are
easier to work with than others.
•Democracies
•Authoritarian Governments
•Monarchies
Common Political Factors
Trade Agreements
Countries often enter into trade agreements to
help facilitate trade between them. If your country
has entered into a trade agreement with another
country, conducting business in that country will
usually be easier and less risky because the trade
agreement will provide some predictability and
protection.
What is Political Risks?
Political Risks:
•
Classification based on
the characteristics of
political risks
•
Classification based on
host country actions
Tra
nsf
e r ri Ow
sk Op ner
era s hip
t
risk ing risk
Tra
n sfe
r ri
sk Transfer risk:
Transfer risk applies to any future acts by a
host government that might constrain the
ability of a subsidiary to transfer payments,
capital, or profit out of the host country back
to the parent firm.
Classification based on the characteristics of political risks
Op
er atin
g ri
sk Operating risk:
Operation risk proceeds from the uncertainty
that a host government might constrain the
investor’s business operations in all areas,
including production, marketing, and finance.
Classification based on the characteristics of political risks
Ow
n ers
h ip r
isk Ownership risk:
Ownership risk is related to the possibility that
a host government might take action to restrict
an investor’s ownership and control of a
subsidiary in that host country.
Classification based o host country actions
Political Political
risk out risk
of induced
governm by
ent
control: govern
Wars, ment:
Revolution,
Terrorism, •Confiscati
Strikes, on
Extortion, •Expropria
tion
and •Domestica
Kidnapping tion
s
Political risk induced by government
These risks constitute some laws directed against foreign firms.
Policies of the
Host
Social Government
Unrest
Attitude
of
Nationals
Management of Political Risk
To manage political risk , an MNC can pursue a strategy of either
avoidance or insurance.
Avoidance means
Insurance is a
screening out
strategy to shift the
political uncertain
risk to other parties
countries
Conclusion
Export Import
Exports S$518.922 billion Imports S$463.779 billion
Major Export Partners: Major Import Partners
1. Malaysia 12.2% 1. China 11.7%
2. China 11.8%
2. Malaysia 10.9%
3. Hong Kong 11.2%
3. United States 10.4%
4. Indonesia 9.9%
4. South Korea 6.4%
5. United States 5.8%
5. Japan 5.5%
6. Japan 4.3%
7. South Korea 4.1% 6. Indonesia 5.2%
Other Petroleum Oils and Oils Obtained From bituminous Minerals etc.
Light Oils And Preparations
Nickel, Not Alloyed
Other Vessels, Fire Floats etc.
Articles Of Other Precious Metal
Aero planes And Other Aircraft
Tugs And Pusher Craft
Other Vessels For Transport Of The Goods And Other Vessels For The
Transport Of Both Persons And Goods
Diamonds
Semi/Wholly Milled Rice W/N Polished/Glazed
These products constitute 75.28% of Indian total exports to
Singapore
Major items of India’s imports from
Singapore during 2015-16
Styrene
Digital Processing Units
Light Oils and Preparations
Other Polymers of Ethylene in Primary Forms
Non-Industrial Diamonds
Vinyl Acetate
P-Xylene
Toluene
These products constitute 35.43% Indian total
imports from Singapore