International Business: An Asia Pacific Perspective, Second Edition

3. The Political Environment

The word “politics” almost never fails to inspire debate. Politics is a sensitive issue with many individuals. The political environment is an equally sensitive issue to a company. Like the cultural environment, the political environment will vary considerably across nations. This variance creates uncertainty when a firm is entering a new host country market and when it is operating in a host country.

To maximize the chances of making a successful and profitable entry in a foreign country, a firm’s managers must be able to both measure and manage the political environment.¹ The political environment can inject uncertainty into a firm’s operations.² To identify the extent of uncertainty, a firm’s managers can turn ...