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©2004 Prentice Hall 3-1 Chapter 3: Legal, Technological, and Political Forces International Business, 4 th Edition Griffin & Pustay By Mahsina, SE., MSI By Mahsina, SE., MSI FB: mahsina se FB: mahsina se Follow me et: mahsina_se Follow me et: mahsina_se Email: Email: [email protected] [email protected] Download this file et: Download this file et: http://mahsina.wordpress.com http://mahsina.wordpress.com

Chapter 3: Legal, Technological, and Political Forces · 3-1 ©2004 Prentice Hall Chapter 3: Legal, Technological, and Political Forces International Business, 4th Edition Griffin

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©2004 Prentice Hall3-1

Chapter 3:Legal, Technological, and Political Forces

International Business, 4th EditionGriffin & Pustay

By Mahsina, SE., MSIBy Mahsina, SE., MSIFB: mahsina seFB: mahsina se

Follow me et: mahsina_seFollow me et: mahsina_seEmail: Email: [email protected][email protected]

Download this file et: Download this file et: http://mahsina.wordpress.comhttp://mahsina.wordpress.com

©2004 Prentice Hall3-2

Chapter Objectives_1

Describe the major types of legal systems confronting international businesses

Explain how domestic laws affect the ability of firms to conduct international business

List the ways firms can resolve international business disputes

©2004 Prentice Hall3-3

Chapter Objectives_2

Describe the impact of the host country’s technological environment on international business

Explain how firms can protect themselves from political risk

©2004 Prentice Hall3-4

The Legal Environment

Common Law Civil Law Religious Law Bureaucratic Law

©2004 Prentice Hall3-5

Common Law

Based on wisdom of judges decisions on individual cases through history

Cases create legal precedents

©2004 Prentice Hall3-6

Countries Using Common Law

United States Canada Australia India New Zealand

Barbados Saint Kitts Nevis Malaysia

©2004 Prentice Hall3-7

Civil Law

Based on codification of what is and is not permissible

Originated in biblical times with the Romans

Reinforced by French Napoleonic code Judge determines scope of evidence

collected and presented

©2004 Prentice Hall3-8

Egypt’s legal system is a blend

of English common law, the

French Napoleonic code, and Islamic Law

©2004 Prentice Hall3-9

Religious Law

Based on the officially established rules governing faith and practice of a particular religion

Theocracy: country that applies religious law to civil and criminal conduct

©2004 Prentice Hall3-10

Bureaucratic Law

Legal system in communist countries and in dictatorships

©2004 Prentice Hall3-11

Laws Affecting International Business Transactions

Sanctions Embargo Extraterritoriality

– Helms-Burton Act

©2004 Prentice Hall3-12

Laws Directed Against Foreign Firms

Nationalization Expropriation Confiscation Privatization

©2004 Prentice Hall3-13

Impacts of MNCs on Host Countries: Economic/Political

Advantages– Greater selection– Higher standards– Job creation– Tax benefits– Technology

transfers

Disadvantages– Competition– Job loss– Dependency on

economic health of MNC

– Political power

©2004 Prentice Hall3-14

Dispute Resolution

Which country’s law applies? In which country should the issue be

resolved? Which technique should be used to

resolve the conflict? How will the settlement be enforced?

©2004 Prentice Hall3-15

Conflict Resolution Techniques

Mediation

Litigation

Arbitration

Negotiation

©2004 Prentice Hall3-16

Principle of Comity

A country will honor and enforce within its own territory the judgments of foreign courts

Conditions of the principle:– Reciprocity is extended– Defendant is given proper notice– Judgment does not violate domestic statutes or

treaty obligations

©2004 Prentice Hall3-17

Joint venture between

Volkswagen and the Shanghai Automotive

Industry Group

©2004 Prentice Hall3-18

Intellectual Property

Patents Copyrights Trademarks Brandnames

Intellectual property often forms the basis of a firm’s competitive advantage!

©2004 Prentice Hall3-19

International Treaties Protecting Intellectual Property Rights

International Convention for the Protection of Industrial Property Rights (i.e., the Paris Convention)

Berne Convention for the Protection of Literary and Artistic Works

Universal Copyright Convention Trade-Related Intellectual Property Rights

agreement

©2004 Prentice Hall3-20

Figure 3.2 Software Revenue Lost to Piracy

©2004 Prentice Hall3-21

Political Risk

Ownership risk Operating risk Transfer risk

©2004 Prentice Hall3-22

Table 3.1 Examples of Political Risks

Expropriation Confiscation Campaigns against

foreign goods Mandatory labor

benefits legislation Civil wars Inflation

Kidnappings, terrorist threats, and other forms of violence

Repatriation Currency

devaluations Increased taxation

©2004 Prentice Hall3-23

Basic Country Knowledge

Is the country a democracy or dictatorship? Does country rely on free market or

government controls? Does government view foreign firms as

positive influence? Are firm’s customers private or public? Does government act arbitrarily? Is existing government stable?

©2004 Prentice Hall3-24

Insurance against Political Risks

Overseas Private Investment Corporation (OPIC)

Multilateral Investment Guarantee Agency (MIGA)

©2004 Prentice Hall3-25

Map 3.2 Countries’ Relative Political Riskiness, 2002