IMChap010
Chapter 10: Managing Political Risk, Government Relations, and Alliances
Learning Objectives and Chapter Summary
1.
EXAMINE how MNCs evaluate political risk.
Political risk is the likelihood that the foreign investment of a business will be constrained by a host government’s policies. In dealing with this risk, companies conduct both macro and micro political risk analyses. Specific consideration is given to changing host-government policies, expropriation, and operational profitability risk.
2.
PRESENT some common methods used for managing and reducing political risk.
MNCs attempt to manage their political risk in two basic ways. One is by developing a comprehensive framework for identifying and describing these risks. This includes consideration of political, operational, and ownership-control risks. A second is by quantifying the variables that help constitute the risk.
3.
DISCUSS strategies to mitigate political risk and develop productive relations with governments.
Common risk management strategies are the use of relative bargaining power, integrative, protective, and defensive techniques, and proactive political strategies.
4.
DESCRIBE challenges to and strategies for effectively manage alliances.
Effective alliance management includes careful selection of partners, defining the tasks and scope of the alliance, addressing cross-cultural differences, and responding to host-government requirements.
The World of International Management: Shell’s Russian Roulette
1.
Summary: In 2006 Royal Dutch Shell owned a majority stake in the Sakhalin0II energy project, the largest oil and gas project in the world. However, Russian took (at very discounted prices) half of that share for its Russian-based Gazprom, despite the fact that the country had depended on the foreign investment to get its production infrastructure up and running. The agreements in the 1990s had been fair and profitable for both sides until cost overruns soured the government. Shell was
Learning Objectives and Chapter Summary
1.
EXAMINE how MNCs evaluate political risk.
Political risk is the likelihood that the foreign investment of a business will be constrained by a host government’s policies. In dealing with this risk, companies conduct both macro and micro political risk analyses. Specific consideration is given to changing host-government policies, expropriation, and operational profitability risk.
2.
PRESENT some common methods used for managing and reducing political risk.
MNCs attempt to manage their political risk in two basic ways. One is by developing a comprehensive framework for identifying and describing these risks. This includes consideration of political, operational, and ownership-control risks. A second is by quantifying the variables that help constitute the risk.
3.
DISCUSS strategies to mitigate political risk and develop productive relations with governments.
Common risk management strategies are the use of relative bargaining power, integrative, protective, and defensive techniques, and proactive political strategies.
4.
DESCRIBE challenges to and strategies for effectively manage alliances.
Effective alliance management includes careful selection of partners, defining the tasks and scope of the alliance, addressing cross-cultural differences, and responding to host-government requirements.
The World of International Management: Shell’s Russian Roulette
1.
Summary: In 2006 Royal Dutch Shell owned a majority stake in the Sakhalin0II energy project, the largest oil and gas project in the world. However, Russian took (at very discounted prices) half of that share for its Russian-based Gazprom, despite the fact that the country had depended on the foreign investment to get its production infrastructure up and running. The agreements in the 1990s had been fair and profitable for both sides until cost overruns soured the government. Shell was