Flashcards in L3: International MR (politics) Deck (47)
Advantages of Tariff and Non-tariff
+ Tariff: simple, straightforward, easy to administer due to a visible and known quantity.
+ Non-tariff: more elusive, easily disguised, unknown quantity and less predictable
VER (voluntary export restraint) definition (Hollensen, 2013)
- An export quota usually imposed at the request of another nation. It is in response to the threat of an import quota or total ban on the product by an importing nation.
- Ex: Japanese gov and its car makers imposed VER headed for US after the close of US car makers in the US.
Three steps in the political risk analysis procedure (Hollensen, 2013)
1. Issues of relevance to the firm - Determine and assess critical economic issues relevant to the firm.
2. Potential political events - Determine relevant political events in terms of probability of occurring, cause-&-effect relationships, and gov's ability and willingness to respond.
3. Probable impacts and responses - Determine: initial impact, possible responses to impacts; and initial and ultimate political risk.
Address the political risks by building relationships with stakeholders (Hollensen, 2013)
1) Gov: lobbying; bribery and corruption
2) Customers: desirable products and service
3) Employees: protectors of company
4) Local community: "good local citizen"
Lobbying definition (Hollensen, 2013)
It is the policy of hiring people to represent a company’s view on political matters. They influence their position by describing the benefits of company to local economy, natural environment, workforce and infrastructure.
Political vulnerability (Cateora et al., 2012)
Some firms are more politically vulnerable due to political philosophies, economic variations and cultural differences. They receive special gov attention.
- Political sensitive products and issues.
How to lessen political vulnerability (Cateora et al., 2012)
Firms must manage external affairs to ensure that host gov and the public are aware of their contributions to the economic, social, and human development of the country.
5 ways to improve relationship between MNCs and gov (Cateora et al., 2012)
(1) improve the balance of payments by increasing exports or reducing imports (2) import substitution (3) transfer capital, technology, or skills; (4) create jobs; (5) pay tax.
=> Accelerate the economic development of host country.
Strategies for MNCs to gain gov encouragement (Cateora et al., 2012)
Joint ventures, expanding the investment base, licensing, planned domestication, political bargaining, and political payoff.
Five main factors of instability in government policies (Catereora et al., 2012)
1) Forms of government: monarchy, aristocracy and democracy. ex: Haiti backslide to autocracy.
2) Political parties: (philosophies/direction and attitudes) ex: UK's Labour Party has limited international trade than Conservative Party.
3) Nationalism. ex: buy country’s product, restrictive tariffs.
4) Targeted fear and/or Animosity: towards a particular country. ex: US' fear of Japan => sales of JP cars decline in US.
5) Trade disputes: ex: ban on beef imports into Japan
Overall market opportunity index OMOI (Mullen and Sheng, 2007) - Market attractiveness
1) Market size: total urban population
2) Economic intensity: GPD adjusted PPP, energy and electric consumption
3) Future market potential: GDP growth, 2nd enrollment
4) Commercial infrastructure (Physical and Telecommunication)
5) Political Freedom and Risk
6) Economic freedom
Overall market opportunity index OMOI (Mullen and Sheng, 2007) - Market accessibility
1) Total imports: total import % of GDP
2) Geographical distance
Benefits of OMOI (Mullen and Sheng, 2007)
- Valid tool for preliminary analysis of market opportunity and identify the right foreign market to enter
- The ‘‘short list’’ helps firms focus scarce resources and avoid wasting time and money on low prospect markets or overlooking less visible high potential markets.
VUCA environment (Bennett and Lemoine, 2014)
- Volatility: predictable, available knowledge. Ex: Price fluctuation after a natural disaster.
- Uncertainty: unpredictable, available knowledge. Ex: Competitors launch new products.
- Complexity: predictable, unavailable knowledge: Ex: different tariff and cultural values in different countries
- Ambiguity: unpredictable, unavailable knowledge. Ex: launch products outside the company's competency.
VUCA response to VUCA environment
Barriers to international MR
- Lack of sensitivity to differences in customer needs, tastes and preferences
- Limited appreciation of differences in mkt environments across countries
- Lack of familiarity with international data sources
- Reluctance to spend on Global MR due to cost
- Doubts about the competence and reliability of foreign MR agencies