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Basics of Marketing - Kotler Philip

Politico-legal environment

Different countries differ sharply from each other and their political and legal environment. At the decision of a question on an establishment of business relations with this or that country it is necessary to consider at least four factors.

ATTITUDE TO PURCHASES FROM ABROAD . Some countries treat such purchases very favorably, even encouragingly, others - sharply negatively. As an example of a country with a benevolent attitude, one can name Mexico, which has attracted investments from abroad for a number of years, offering foreign investors incentives and services in choosing the location of enterprises. On the other hand, India requires exporters to comply with import quotas, blocks some currencies, sets the condition for the introduction of a large number of its citizens into the management of the created enterprises, etc. It is precisely because of such "zakavyv" they decided to leave the Indian market of the IBM Corporation and "Coca Cola".

POLITICAL STABILITY . Another problem is the country's stability in the future. Governments succeed each other, and sometimes the exchange rate turns out to be very sharp. But even without changing the government, the regime can decide to respond to the moods that have arisen in the country. They can confiscate the property of a foreign firm, block its foreign exchange reserves, introduce import quotas or impose new taxes. International marketing people, perhaps, will benefit from doing business even in a country with very shaky political stability. However, the current situation will certainly affect the nature of their approach to financial and business issues5.

FOREIGN EXCHANGE RESTRICTIONS . The third factor concerns restrictions or problems in connection with currency exchange. Sometimes governments block their own currency or prohibit its transfer to any other. Usually, the seller wants to receive income in a currency that he can use. At best, they can pay in the currency of his own country. If this is not possible, the seller will probably accept the blocked currency if it can purchase either goods that he needs, or goods that he can sell somewhere in another place at a convenient currency. In the worst case, a seller dealing with a blocked currency may have to take out his money from the country where his company is located, in the form of non-moving goods, which he will be able to sell elsewhere only at a loss to himself. In addition to currency restrictions, a large risk for the seller in foreign markets is also associated with fluctuations in foreign exchange rates.

THE STATE MACHINE . The fourth factor is the degree of effectiveness of the system of assistance to foreign companies on the part of the host country, that is, the availability of an effective customs service, rather complete market information and other factors that are conducive to entrepreneurial activity. Americans are usually amazed at how quickly the obstacles to trading activity disappear, if certain officials of the host country receive the appropriate bribe (bribe).