international business

1. POLITICAL ENVIRONMENT AND
INTERNATIONAL BUSINESS

2. POLITICAL ENVIRONMENT
• The political environment that MNCs face is a
complex one because they must cope with the politics
of more than one nation.
• That complexity forces MNCs to consider the three
different types of political environment: FOREIGN,
DOMESTIC, AND INTERNATIONAL
• Example-:The political relationship between USA
and a long-time adversary, China.

3. Political Systems
• SYSTEM Includes the structures, processes, and
activities by which a nation governs itself.
• Another way to classify governments is by the number
of political parties: Two-party (USA and UK)
Multiparty, Single-party, and Dominated one-party.
Parliamentary
(Open) or Absolutist
(Closed).

4. Political Risk
• For multinational companies, political risk
refers to the risk that a host country will make
political decisions that will prove to have
adverse effects on the multinational's profits
and/or goals.
Macro
Political
Risk
Micro
Political
Risk

5. TYPES OF POLITICAL RISK

6. INDICATORS
OF POLITICAL
RISK
Social Unrest
Attitudes of
Nationals
Political
repression
Policies of the
host
government
Economic
performance
Internal
diversity and
incongruent
interests
Political stability
and the stability
of government
policies.

7. Measures
to Minimize
Political
Risk
Avoiding
investment
Adaptation
Threat
Minimizing
fixed
investments
Local
borrowing
Vertical
integration
Political risk
insurance
Terrorism
Consultants
Invaluable
Status
Lobbying