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In what manner do political system and economic factors influence international marketing?

In what manner do political system and economic factors influence international marketing?

Course: M.Com

1 Answer

Political system and economic factors influence international marketing in following manner:

Political System.

The political environment including the characteristics and policies of the political parties, the nature of the constitution and government system and the government environment encompassing the economic and business policies and regulations are among the factors of utmost importance in the market selection and business strategy formulation. These factors may vary very considerably between different nations.

While there are not radical differences in the philosophies of major political parties in sonic countries. the situation is quite different in some others. The government system in a number of countries, including several countries which are making rapid economic progress and having liberal polices towards foreign capital and technology, is not very democratic. That does not mean that they are not good to make business with. As a matter of fact, in several such countries the procedures are simpler and decisions are quicker than in some of the democratic countries.


Until the political and economic changes ushered in the late 1980s and in the early 1990s in the Eastern Europe, the erstwhile USSR, these countries were a separate block by themselves with several common characteristics, private enterprises were very limited and state trading, particularly counter trade, was the rule. There were a lot of restrictions on imports and foreign business. This did not, of course, mean that the communist system was insurmountable for multinationals or other foreign firms. Under such a system, in several instances, winning over the top brass of the party or government was a strategy to obtain business. It may be noted that although companies like Pepsico were kept out of India they were doing better with countries like USSR.

In the past, public sector was assigned a very important role in many non communist, particularly the developing countries too. In India, for example, before the policy changes of 1991, 17 of the most important industries were exclusively reserved for the public sector. In addition, the public sector was to play a leading role in another 12 important industries. Thus, the industrial policy of India which wanted the public sector to gain control over the commanding heights of the economy limited the scope of the private enterprise, both domestic and foreign. Even in areas where foreign capital was allowed, there was ceiling on the foreign equity participation. Even after the policy liberalization in India the foreign equity participation is normally restricted to 51 per cent as against 40 per cent in the

Economic Factors.

Economic factors also influence international marketing. The various economic factors affecting international marketing are general economic conditions, market conditions, industrial structure, competitors and nature of competition, economic system, fiscal and monetary policies, financial facilities and constraints, level of economic development. The major economic factors that need to be considered in context of international marketing are as under:

Demographic Characteristics: The size of the population of the foreign or host country. It includes like age, sex distribution, etc. GNP and distribution of income among people, high income population, medium income population, low income population, needs and wants of people, per capita income, etc.

Economic Structure: Industrial structure and stage of economic development, subsistence economy, under developed economy or developing economy. This may be reflected in number of automobiles, TVs, telephones, etc., per 1000 population.

Importing: Importing patterns of the foreign countries.
Nature of Competition: Nature of competition and major competitors, both international and indigenous existing presently and likely to emerge in near future. The risks involved should be considered thread-bare.

Infrastructure: Economic Infrastructure available in foreign country. Economic infrastructure refers to facilities, activities and services which support operation and development of other sectors of economy. They include

  • Source of energy, electricity, fuel, gas.
  • Transport services.
  • Communication facilities especially telephone facilities to take advantage of marketing opportunities.

Rural markets in under developed and developing countries cannot be reached due to lack of infrastructure.

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May 23, 2019