Factors Impacting an International Marketing Plan

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How Political, Legal, Economic and Technological Systems Affect International Business

Political-Legal Environment

Political Considerations

Perhaps the most important considerations for global business firms are the political and legal forces operative in the countries in which they plan to conduct business. Some foreign governments are unstable, that is, there may be frequent, dramatic and unpredictable regime changes and/or political unrest. When this occurs industries may be nationalized; private property may be seized or destroyed; normal business operations may be suspended, the workforce may go on strike. For example, during the recent unrest in Venezuela banks were shut down for months, workers were on strike, rioting broke out, food stuffs were seized from private companies. Even within relatively stable governments, as different administrations come to power different business regulations and attitudes may be adopted.

Legal Considerations - Local

Firms involved in global business must be familiar with and obey the laws of their home country, the local laws of each country in which they do business, and international laws.. For example, countries may well have different laws covering employees such as minimum wages, overtime, insurances, maximum work weeks, and so on. There are also often differing rules regarding product testing and safety. Business practices which are common in one country may be illegal in another, for example, the bribing of public officials.
Some specific examples of differing local laws which can have a major impact on international business are as follows.

• Local content: It is not unusual to face with local laws that stipulate that a certain amount of a good or service is supposed to be supplied by local producers, this is referred to as local content requirement. Under such laws, companies are required to use locally available raw materials, local labor resources, or purchase parts from local suppliers. The purpose of such a measure is to foster greater local economic activities that spur more jobs for the citizens of the host country. However, among many complexities that may arise, multinational firms need to watch for two potential problems in adhering to local content rule.
o The quality of local raw materials: A lot of companies rely on the quality of their products in order to retain the loyalty of their customer base or maintain or increase market share. With that said, it is imperative to obtain quality parts and quality raw materials to use in assembling a final product to satisfy customers. Consider, for instance, the dififculty a company such as Toyota could face. Customers purchase Toyota models because of their renowned quality. If they start to experience a denigration in quality with a model due to some required local low-quality parts, they may stay away from that model. Hence,if the ...