Technological Environment refers to the status of the countries technological advances, such as highways, communications systems, waterworks, labor, and natural resources like oil and natural gasses. Some countries are blessed with resources like diamonds and oil which they can exploit for their economic gain; and, other countries have resources such as cheap-labor, these types of countries can mass produce labor intensive products cheaply. Countries can also alter their technological environment by transferring technology from one country to another. Many US companies have labor intensive manufacturing factories in developing countries where labor is cheap.
The Political Environment:.
Political risk assessment thoroughly analyzes the political risks of foreign countries that international businesses may encounter. Political risks include any type of alteration to the political environment of a country that may negatively impact a business" value. Most political risks can be divided into three categories:.
• Ownership risk, in which the property of a firm is threatened through confiscation or expropriation.
• Operating risk, in which the ongoing operations of a firm and/or the safety of its employees are threatened through changes in laws, environmental standards, tax codes, terrorism, armed insurrection, and so forth.
• Transfer risk, in which the government interferes with a firm's ability to shift funds into and out of the country.
Also, macro political risks apply to all businesses in a county, such as civil wars. A smaller scale risk is the micro political risk, which applies to only a specific company or industry, such as the nationalization of the oil industry in Saudi Arabia.
The types of investments that are most vulnerable to political risk are the direct foreign investments made in countries that are politically and economically unstable.