Samstag, 4. August 2012

THE POLITICAL-LEGAL SYSTEM

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The political-legal system: Home & host country, political risk and international law

Another important factor, that international marketers just can't ignore is the political situation. It's not only about trade sanctions, barriers and opportunites or import and export controls but also about more fundamental questions. Are there any civil wars emerging? Does the government control the country? If not, you might want to double check, if expanding is the right choice. 

The political risk of operating in a foreign market consists basically of the fact, that a corporation might just lose their business - expropriation (takeover of foreign investment by host country), confiscation (same as expropriation but without compensation) and domestication (host country demands ownership). In order to strengthen local business, states might also impose a special tax on foreign goods, a tariff, or nontariff barriers such as a quota, that sets a limit to the amount of import of foreign goods.

The role of nationalism in a country is also really important. The state might consider some articles as harmful or misleading. National ideas may not be offended by a foreign product. When it comes to the international law, there are certain institutions that need to be respected: The International Monetary Fund (IMF), The World Bank, The General Agreement on Tariffs and Trade (GATT) and the World Trade Organisation (WTO). They regulate international business and cannot be ignored.

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