Introduction to International Marketing

Author: Xia Zhengrong
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Features:
Chapter 3: Political Environment in International Marketing
● International marketing involves conducting marketing activities in other sovereign countries, with the authority to permit such activities controlled by the host government. Assessing and analyzing a country's political climate is a highly critical issue for businesses engaged in international marketing.
● International marketing is influenced by various political factors, such as the role of the government, a country's political system and party ideology, political stability, nationalism, and international relations.
● International marketers must be aware of various forms of political intervention and politically sensitive issues.
● International marketing involves political risks, where risk is an uncertain factor. Marketers should adopt various measures to manage and control risks, forming a political risk avoidance system.
Political Factors Affecting Marketing
1. The Role of Government in the Economy
In today's world, governments play a significant role in economic affairs, acting to varying degrees as both participants and regulators.
1.1. Participant
The government directly participates in commercial activities, primarily manifested as:
- Government monopoly over the operation of certain products within its own country;
- Government conducting direct purchasing activities;
- Government becoming a co-operator with non-governmental economic organizations.
To protect a particular product or industry, the government may implement monopoly or semi-monopoly operations to limit competition from foreign counterparts. Additionally, government monopoly is also reflected in the government being the sole buyer, such as in many countries where the government controls the supply of medicines, railway construction, etc. When a business faces a government monopoly, its market power is significantly weakened.
Government procurement is another form of government participation in commercial activities. In many countries, the government is the largest buyer of goods and services. Government spending accounts for a considerable proportion of a nation's Gross National Product (GNP). According to the World Bank's 1985 World Development Report, government spending in 35 low-income countries accounted for 1/6 of GNP; in 59 middle-income countries, it accounted for 1/4 of GNP; and in 19 industrialized countries, it accounted for 30.96% of GNP. Japan and Switzerland had government spending at 19% of GNP, the U.S. at 25%, Denmark and Sweden at 45%, while Belgium and the Netherlands were as high as 58%. If a company establishes a subsidiary in a country, and the host government requires joint ventures while private enterprises are insufficient, the government may be the only suitable co-operator. The advantage of co-operating with the government is lower risk, but the company's marketing activities will be constrained, and the controllability of marketing mix factors will be reduced.
1.2. Regulator
The government is also the legislator of economic regulations. The government's monetary and fiscal policies are often implemented through legislation, thereby affecting the pricing and use of credit instruments in corporate marketing. Some government regulations also more directly and specifically specify the operational methods and scope of businesses, thereby limiting the use of product, distribution, promotion, and pricing factors in the marketing mix. International marketers must not only be aware of the differences in laws and regulations across countries but also pay attention to discriminatory applications of these laws and regulations against foreign businesses.
2. Political System and Party Ideology
The government's methods and extent of intervention in the economy depend, to some extent, on the economic system, as well as