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Chp 10 slides 11-1 - Chapter 10 Managing Political Risk...

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Chapter 10 Managing Political Risk, Government Relations and Alliances
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IKEA’s Russian Roulette u Corruption Ambiguous laws, weak judicial system and corrupt bureaucracy u Obstacles Verbal agreement, bribery u Lessons from Russia Tied to investments 54 different procedures and 704 days to obtain permits to open business
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Political Risk: Likelihood that a business’s foreign investment will be constrained by a host government’s policy In the past, risk stemmed from expropriation of foreign operations by the host government Today, governments of struggling economies may make policy decisions that adversely affect MNCs Political Risk
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Political Risk Macro Level u Purpose: To review the major political decisions that affect all business conducted in a country (broad) Examples u tightening controls on flow of foreign currency; bureaucratic legal systems; requiring foreign investors to establish joint ventures with local partners Micro Level u Purpose:
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