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CH 05

This document provides an overview of the political and legal environment faced by international marketers. It discusses how individual government policies can impact business and examines international agreements, laws, and issues that transcend national boundaries like intellectual property protection and anti-corruption regulations. The political and legal climates are interrelated since laws stem from a country's political processes. International marketers must navigate this complex environment across many jurisdictions.

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Deepanshu Saraswat
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© © All Rights Reserved
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Download as PPT, PDF, TXT or read online on Scribd
27 views

CH 05

This document provides an overview of the political and legal environment faced by international marketers. It discusses how individual government policies can impact business and examines international agreements, laws, and issues that transcend national boundaries like intellectual property protection and anti-corruption regulations. The political and legal climates are interrelated since laws stem from a country's political processes. International marketers must navigate this complex environment across many jurisdictions.

Uploaded by

Deepanshu Saraswat
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 25

1

Chapter 5
Political/Legal
Environment
Chapter Overview
2

1. Political Environment--Individual
Governments
2. Political Environment--Social Pressures
and Political Risk
3. Terrorism and the World Economy
4. International Agreements
5. International Law and Local Legal
Environment
6. Issues Transcending National
Boundaries
Introduction
3

 International marketers should be aware that


the economic interests of their companies can
differ widely from those of the countries in
which they do business.
 International marketers must abide by various
international agreements, treaties and laws.
 Political and legal climates are inherently
related and inseparable because laws are
generally a manifestation of a country’s
political processes.
1. Political Environment -
Individual Governments
4

 Government affects almost every aspect


of business life in a country.
 National politics affect business
environment directly, through changes in
policies, regulations, and laws.
 The political stability and mood in a
country affect the actions a government
will take.
 Home Country versus Host Country.
1. Political Environment -
Individual Governments
5
 Structure of Government
 Ideology
 Communism
 Capitalism
 Socialism
 Political Parties
 Single-party-dominant country
 Dual-party system
 Multi-party system
 Government Policies and Regulations
It is the role of government to promote a country’s
interests in the international arena for various reasons
and objectives such as: national security, developing
new industries, and protecting declining industries.
Government Policies and
Regulations
6

 It is the role of government to promote a


country’s interests in the international
arena for various reasons and objectives.
 Some governments actively invest in
certain industries that are considered
important to national interests.
 Other governments protect fledgling
industries in order to allow them to gain
the experience and size necessary to
compete internationally.
Government Policies and
Regulations
7

 In general, reasons for wanting to block or


restrict trade are as follows:
1. National security
 Ability to produce goods necessary to remain

independent (e.g., self-sufficiency)


 Not exporting goods that will help enemies

or unfriendly nations
 2. Developing new industries

 Idea of nurturing nascent industries to

strength in a protected market


Government Policies and
Regulations
8

3. Protecting declining industries


 To maintain domestic employment for

political stability
For example, Japan’s active industrial policy
by the Ministry of International Trade and
Industry (MITI) in the 1960s and 1970s is
well known for its past success and has also
been adopted by newly industrialized
countries (NICs), such as Singapore, South
Korea, and Malaysia.
Government Policies and
Regulations
9

Governments use a variety of laws, policies, and


programs to pursue their economic interests. More
recently, the Baltic States of Estonia, Latvia, and
Lithuania, controlled by the Soviet regime until the
late 1980s, have liberalized their economies
significantly by opening up their economies to
international trade and foreign direct investment as
well as treating foreign companies no differently than
domestic companies.
As a result of their rapid transition to open market
economies they were formally inducted into the
European Union in 2004
1. Political Environment -
Individual Governments
10

 Incentives and Government Programs


 Government Procurement
 Trade Laws
 Tariff and Nontariff Barriers
 Embargoes and Sanctions
 Export License Requirements
 Investment Regulations (ownership and financial
controls)
 Macroeconomic Policies (governments’ monetary
and fiscal policies such as the cost of capital, level
of economic growth, rates of inflation and
international exchange rates)
Tariff and Nontariff Barriers
11
2. Political Environment - Social
Pressures and Political Risk
12

 Social Pressures and Special Interests


Foreign companies also have to consider
social factors as part of the political
environment of host countries, e.g., feelings
of nationalistic sentiment.
 Managing the Political Environment
 Expropriation
 Confiscation
 Nationalization
 Domestication Policy/Phase-Out Policy
 Countertrade
Government Policy Areas and
Instruments
13
Country Risk Assessment Criteria
14
3. Terrorism and the World
Economy
15

 According to an IMF study, the September 11,


2001 terrorist attacks in New York and
Washington D.C. resulted in major losses for
the U.S. economy.
 The short-term lost economic output was
estimated as $47 billion.
 The stock market lost $1.7 trillion. In
addition, 125,000 workers were laid off for 30
days.
 Terrorist activities disrupt international
movement of supplies and merchandise and
financial flows.
4. International Agreements
16

 G7 (Group of Seven) is an economic policy


coordination group made up of political
leaders from Canada, England, France,
Germany, Italy, Japan, and the United States.
 G8 (Group of Eight) consists of G7 and
Russia.
 COCOM (The Coordinating Committee for
Multilateral Controls) was founded in 1949
to stop the flow of Western technology to the
former Soviet Union; members countries
include Australia, Japan and the NATO
countries except Iceland.
5. International Law and
Local Legal Environment
17

 International Law (the law of nations)


comes from three main sources:
 Customs
 International treaties
 Court decisions
5. International Law and Local
Legal Environments
18

 Local Legal Systems and Laws


 Business Practices and the Legal Systems
5. International Law and
Local Legal Environments
19

 Regulations on e-Commerce - privacy


issues
 Types of Legal Systems
 Common Law
 Code (written) Law
 Islamic Law
 Socialist Laws
 Civil Law
 Commercial Law
5. International Law and
Local Legal Environment
20

 Cultural Values and Legal Systems


 Japan’s population of lawyers is low.

 In the U.S., emphasis is on explicit contracts

and a reliance on the legal system is high.


 In China, relationships (guanxi) and verbal

contracts are important.


 In Brazil, Jeitinho is used to find solutions

outside the legal system.


 Planning Ahead
 Arbitration and Enforcement
6. Issues Transcending National
Boundaries
21

 ISO 9000 certification has become an


essential marketing tool for firms.
 ISO 14000 is based on the principle of self
–regulation, thereby minimizing
surveillance and sanctions.
 Intellectual Property Protection
 TRIPs (Trade-Related Aspects of Intellectual
Property Rights)
 Patent (first-to-file & first-to-invent
principles)
6. Issues Transcending National
Boundaries
22

 Copyright
 The
Digital Millennium Copyright Act
(DMCA)
 Trademark (prior-use, first-to-use & first-to-
file principles)
 Trade Secret
 Paris Convention
 Patent Cooperation Treaty
 Patent Law Treaty
6. Issues Transcending National
Boundaries
23

 European Patent Convention


 Berne Convention
 Antitrust Laws of the United States
 The Sherman Act
 The Clayton Act
 Extraterritorial application of U.S. antitrust
laws
 Export Trading Company (ETC) Act of 1982
6. Issues Transcending National
Boundaries
24

 Antitrust Laws of the European Union


 Foreign Corrupt Practices Act (FCPA)
of 1977
 The FCPA was designed to prohibit the
payment of any money or anything of value
to a foreign official, foreign political party,
or any candidate for foreign political office
for purposes of obtaining, retaining, or
directing business.
6. Issues Transcending National
Boundaries
25

 The FCPA does not prohibit so-called


facilitating or grease payments.
 Small payments to lower level officials are
allowed to expedite the process.
 FCPA does not prohibit bribery payments to
nongovernmental personnel.

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